Monday, March 16, 2009

The Hot Potato

As predicted, President Obama now owns the economic contraction. A cycle that commenced in 1982, rolled over in 1999/2000, now is owned by the current president, his administration, and his party. The mob wants the "hot potato" to land in someone's hands. I elaborated on this process in The Blame Game and Be Careful What You Wish For. I also provided a very insightful summary from Robert Prechter in The Presidential Hopes. Here's what Bloomberg has recently concluded:

‘Obama Bear Market’ Punishes
By Eric Martin
March 6 (Bloomberg) -- President Barack Obama now has the distinction of presiding over his own bear market. The Dow Jones Industrial Average fell 20 percent since Inauguration Day, the fastest drop under a newly elected president in at least 90 years, according to data compiled by Bloomberg. The gauge has lost 53 percent from its October 2007 record of 14,164.53, slipping 4.1 percent to 6,594.44 yesterday.

More than $1.6 trillion has been erased from U.S. equities since Jan. 20 as mounting bank losses and rising unemployment convinced investors the recession is getting worse. The president is in danger of breaking a pattern in which the Dow rallied 9.8 percent on average in the 12 months after a Democrat captured the White House, according to data compiled by Bloomberg.

“People thought there would be a brief Obama rally, and that hasn’t happened,” said Uri Landesman, who oversees about $2.5 billion at ING Groep NV’s asset management unit in New York. “It speaks to the carnage that’s in the economy and the lack of confidence in the measures that have been announced.”

A bear market is defined as a decline of 20 percent or more. Buying shares “is a potentially good deal” for long-term investors, Obama said March 3. He compared daily fluctuations to a tracking poll in politics and said he wouldn’t adjust his policies just to meet market expectations.

Congress last month enacted Obama’s $787 billion package of tax cuts and spending on roads, bridges and public buildings. His 2010 budget indicated the government’s financial rescue may need another $750 billion after an initial $700 billion.

The backlash has just begun and will escalate to levels not seen since the 60's. The "teaparties" being held around the nation are the lighter version of what is to come. Police, assemble your riot gear.

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