Obama and the Surge

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Does Europe love us again? Are America's deep cultural and racial divisions healed yet? Would there be, as the Los Angeles Times headlined, "an Obama surge on Wall Street, and beyond?" A few economic stories that caught my eye, arguing that an Obama victory might spark a rally in the stock market:

Toronto Globe & Mail:

So, if investors have woken up this morning to find Mr. Obama is president-elect, good for investors; history suggests it's a sign that things are looking up. Then again, they were probably bound to get better anyway.

The Washington Post:

Stocks staged the largest Election Day rally in history yesterday, bucking tradition and casting aside growing evidence that the country is slipping into a recession.

The end of the presidential contest between Sen. John McCain (R-Ariz.) and Sen. Barack Obama (D-Ill.) eliminates some uncertainty at a time when traders are searching for an end to the recent market volatility and trying to grasp the breadth of a recession that many assume has already begun, analysts said.

CNN/Money predicted a market surge today, writing that "analysts" were confident that "stocks will likely get a boost regardless of who wins…" Andrew Young predicted that "There would be a boost of 1,000 points on the stock market the first week after he's elected." The Telegraph wondered if a "Barack Obama victory [will] boost shares."

But the Dow took a dive today, dropping 5 percent—almost 500 points—by close. The Guardian was surprised that the "historic election win failed to spark a worldwide stockmarket rally today." The Daily Mail was puzzled that the "Obama Bounce prove[d] elusive." The market slide can most assuredly not be attributed solely to the election of Barack Obama (though the Hannitys of the world will doubtless try). After all, we have been seeing this sort of market schizophrenia for the past few months. But to all of those who saw in Obama's victory some sort of economic panacea—and believe me, I have spoken to plenty of people who, like Andrew Young, believed an immediate market recovery would follow the rejection of the Republican Party—I'm here to remind you that it ain't going to be that easy.

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  1. All those investors are down because Barr didn’t win. They thought that despite the nationalization of banks and relentless growth of the state that libertarianism was on the march and would save the day. The election of a liberal Democrat came as a shock. Barr himself is probably in denial.

  2. When I see things like “the DOW rallied on peace talks” or some such tie in to a completely unrelated world event, I wonder if the writers were laughing when they put it to press. I would really prefer that to earnest stupidity.

  3. “I won”t have to worry about paying my broker. I won’t have to worry about realizing capital gains.”

  4. Corporate bonds people! I only own a few but damn have they paid off so far this year!

  5. Buy on the rumor (Tuesday)

    Sell on the news (Wednesday)

  6. Does Europe love us again?

    No. Europe won’t “love us again” (actually, they never did) until we are just like them and following their lead on everything.

    Are America’s deep cultural and racial divisions healed yet?

    No. I think the racial divisions are less than many would have you believe, and will be lessened very little by the Obama administration, unless he takes a completely unprecedented stand against those of his followers who will play the race card to advance his agenda.

    Would there be, as the Los Angeles Times headlined, “an Obama surge on Wall Street, and beyond?

    I think, if anything, we will see a sell-off, as people dump shares before capital gains tax increases (promised by Obama, lets not forget) are put in place by the Unified Dem Government next year.

  7. It shows how totally clueless many wall street armchair analysts are that they think the market’s based entirely on the power of positive thinking and good feelings.

  8. First, as MAX HATS notes, writing headlines based on day-to-day stock market moves is stupid.

    But second, since everyone had a pretty good idea who was going to win before last night, one would expect the market to go down today. The Obamabump was already priced into the market. Instead, today you saw experts take profits and fleece the amateurs who mistakenly thought the Obamabump would happen only after the election.

  9. Max Hats,

    I was just commenting on this recently.

    The news is: Dow (up/down) by (x) points.

    But, for some reaso, financial reporters feel the need to read the monkey innards and add a “on (peace talks, rumors over fed raising/lower, etc…)” to their sentence.

    I have spoken to plenty of people who, like Andrew Young, believed an immediate market recovery would follow the rejection of the Republican Party-I’m here to remind you that it ain’t going to be that easy.

    Plenty of people?
    Really?

    I don’t believe you.

  10. Neu Mejican,

    2 words for why. Job security. I probably know as much about the market as most financial reporters and I don’t know enough about today to make predictions about tomorrow.

  11. Recession.
    ri-?se-sh?n
    We are in the beginning of one. Hope and change aren’t going to be the silver bullets that slay the business cycle. I’m guessing this one will last through the midterms (hope I’m wrong) and Obama will gert more blame than he deserves just as Clinton got more credit than he deserved.

    Now repeat after me, boys and girls
    Recession.
    ri-?se-sh?n

  12. J sub D,

    Gonna be rough up there where you’re at too. I’m gonna be envious if you get your own kingdom before me.

  13. But second, since everyone had a pretty good idea who was going to win before last night, one would expect the market to go down today. The Obamabump was already priced into the market. Instead, today you saw experts take profits and fleece the amateurs who mistakenly thought the Obamabump would happen only after the election.

    Good point. It also occurred to me that if the markets were waiting for information as to future fiscal policies, etc., the election may not have provided a strong enough signal to calm volatility. After all, *nobody knows* really whether Obama will be a free-trader or protectionist, inflation-hawk or not, and so forth, since he has been pretty vague and/or contradictory on these signals.

    I think you’ll see a more definitive bump/slide on the announcement of his appointment for SecTres.

  14. Elemenope,

    I’ll give you props to your post. Clinton, ironically, was a big proponent of free trade despite the Democratic mantra that free trade was “unfair”.

  15. J sub D,

    Gonna be rough up there where you’re at too. I’m gonna be envious if you get your own kingdom before me.

    I’m retired, pretty much recession proof. It sucks for the people I know and won’t make the city a happy place to be. When America gets a cold, Michigan gets pneumonia. And we’re already sick.

  16. Elemenope,

    You’re right. People don’t know what Hopey McChange (or is it Changey McHope? I never can tell…) really will do.

    I can’t but hope that Obama realizes that he has the political capital to be a moderate — that shaking off the policies of the Bush Administration empowered by a drunken Congress means returning to the long national nightmare of peace and prosperity that we had under Clinton.

    Similarly, the presidency was Gore’s for the taking in 2000 and Clinton’s for the taking in 2008 if either had but said, “I will govern like Bill Clinton.” Obama now has the chance to do just that.

  17. J sub D,

    Ah. I knew you were retired but for some reason assumed you were on a fixed income. LOL.

  18. Ah. I knew you were retired but for some reason assumed you were on a fixed income. LOL.

    Some very conservative investments. I’m not in my 20s or 30s anymore,* no time to recover from fuckups.

    * If I was, I’d wait about 6 months before investing in the market. DJIA isn’t close to bottom.**

    ** Like I know more than anybody else about this crap. 😉

  19. I probably know as much about the market as most financial reporters and I don’t know enough about today to make predictions about tomorrow.

    The reporters don’t predict, they get others to predict. “Joe Blow of Crony Capital will be here to give us his thoughts on the short-time future of the market. The reporters describe what happened, then add a (usually arbitrary) “reason” for what happened.

    Market up tomorrow, absent dramatic macroeconomic news: “Traders today settled in more to the Obama presidency as some of their fears started to be allayed”

    Market down tomorrow, absent dramatic macroeconomic news: “Traders are still unsure about the new administration, and it may take some time for their fears to be allayed”

  20. Do the financial reporters have a special 8-ball to shake to determine what to add on?

    Yes, I stole this from fark oil headlines.

  21. At first it seems a little surprising they hadn’t fully priced in an Obama victory in the huge market drop of the past few months, but remember based on Intrade the markets still saw some small chance of a McCain win. Today was just that last little hope of a less socialist economic policy dying.

  22. Anyways, I’ll expect this time next year we’ll all be having a good chuckle over that promise to give everyone under $250K a tax cut.

  23. Dow plunges by 5%. I guess Obama is not the Messiah after all. I’m stunned.

  24. I have spoken to plenty of people who, like Andrew Young, believed an immediate market recovery would follow the rejection of the Republican Party-I’m here to remind you that it ain’t going to be that easy.

    Plenty of people?
    Really?

    I don’t believe you.

    He provided 6 links supporting his point….but yeah don’t believe him.

    Idiot.

  25. TallDave,
    How dare you question the messiah! Recant or we will be forced to charge you with heresy!

  26. Lord Xenu XXV has appointed himself high priest of the Obama. The spiritual cleansing of the masses shall begin shortly.

  27. Grapes tasting pretty darn sour, aren’t they people?

    Perhaps if you suck them long and hard first.

  28. In any case, I can testify, as a french citizen, that here in France the overwhelming majority of our journalists creamed themselves the moment the US presidential election results were in.

    And it’s already very visible that they’ll remain glued that way for a moment.

    “Grapes tasting pretty darn sour, aren’t they people?”

    Every election, every crowning, every celebration of Power is a bitter reminder of how crappy this world is. We just never get used to it and accept it as it is, is all.

  29. Despite Obama’s victory, daylight is expected to continue to be shorter and shorter until December 21st. Upon news that he will, in fact, be innaugarated, the Sun is expected to rally soon thereafter and give us more and more daylight each day.

  30. Lefiti, on November 5, 2008 @ 6:03pm stated my answer before I could comment.

    h/t

  31. Every election, every crowning, every celebration of Power is a bitter reminder of how crappy this world is. We just never get used to it and accept it as it is, is all.

    That’s awesome. I can picture those two sentences, in subtitles, as a Jean-Luc Godard character chats with the camera.

    There’s lots to love about France and the French!

  32. BTW, as of right now, DJIA is down another 2%.

    Apparently yesterday’s loss wasn’t an odd anomaly. Of course, the market could be up 20% by evening.

    With this kind of volatility, day-trading may become popular again as it was during the Clinton years.

  33. Similarly, the presidency was Gore’s for the taking in 2000 and Clinton’s for the taking in 2008 if either had but said, “I will govern like Bill Clinton.” Obama now has the chance to do just that.

    Running against NAFTA was not, to me, the way for Sen. Obama to say “I will govern like Bill Clinton.”

  34. Running against NAFTA was not, to me, the way for Sen. Obama to say “I will govern like Bill Clinton.”

    Running against it when talking to his leftie and union supporters, while leaking that he wouldn’t really change it, was a perfect way for him to hint, “I will be a lot more like Bill Clinton than anyone thinks…”

  35. BTW I wonder if Obama had a slave next to him in his limo, repeating “All Glory is Fleeting” as he rode away from his acceptance speech.

    He should have.

  36. When I was in b-school, a couple of my finance professors* would frequently make fun of the financial press. They would say, “Keep in mind these guys are journalism majors whose only interaction with financial markets are what people tell them and their 401Ks.”

    My Fixed Income professor was convinced that they always put the parenthetical “bond prices move in the opposite direction of yield” to remind themselves of the fact, not to inform the reader that likely already knows that.

    * Who had real jobs as officers of large corporations prior to teaching

  37. “The Daily Mail was puzzled that the “Obama Bounce prove[d] elusive”

    Ha Ha Ha!

    There wasn’t and won’t be any Obama “bounce”.

    Part of the slide before the election was a discounting of the expected Obama victory and it’s continued decline after the election is being exacerbated by more discounting of the upcoming abject failures of his economic meddlings.

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