Friday, November 21, 2008
Markets, Obama, goose, gander
I do not think much of the idea that the stock market decline of more than 20% since November 4 has to do with the election of Barack Obama. It might also have happened if McCain had won, and in any case investors must have taken into account the possibility of Obama's election well in advance of election day.
Of course, that makes me think that this claim from MSNBC, that the stock market rallied today because President-elect Obama selected NY Fed President Tim Geithner as his Secretary of the Treasury, is ridiculous. Or, if you believe in the "Geithner rally," how can you not also believe in the Obama swoon?
13 Comments:
By 
Dawnfire82, at
Fri Nov 21, 11:03:00 PM:
"I do not think much of the idea that the stock market decline of more than 20% since November 4"
The very fact that it started (and with force) the day after the election is a strong indicator that it had to do with the result of the election.
"It might also have happened if McCain had won"
Ignoring that this is simply speculation, if it didn't make any difference which candidate won then why would the slide have occurred *exactly* on the day after and not, say, the day of? Or two days after? Or the week before?
That it was the largest post-election dropoff in history is also suspicious.
Don't the markets usually rise after presidential elections because an element of uncertainty is gone?
"In a study of election-time stock behavior since 1900, they found that the market usually rises in the days just after the presidential voting. Their explanation: the uncertainty of the campaign is over. "
By TigerHawk, at
Fri Nov 21, 11:06:00 PM:
Yeah, but the macro uncertainty that faces the financial markets right now totally overwhelms the usual little signals. The "little" uncertainty of an unfinished presidential campaign is trivial compared to the massive uncertainty dominating trading now.
By 
, at
Fri Nov 21, 11:30:00 PM:
Right. Horrifying jobs reports, consumer confidence, consumer spending, etc had nothing to do with the market's continued downturn; it was the speculation regarding the notoriously vague president elect.
As for the Geithner rally: the choice does drop a huge amount of perceived uncertainty off the table.
By Purple Avenger, at
Sat Nov 22, 12:04:00 AM:
I'd thought the markets had already preloaded the effects of a possible Obama win too.
Maybe it was the "holy crap, it really happened" factor?
By TigerHawk, at
Sat Nov 22, 07:22:00 AM:
So, Eric da Red, I trust you agree that it was asinine for MSNBC to suggest that yesterday's rally was because of the Geithner nomination?
By JPMcT, at
Sat Nov 22, 08:24:00 AM:
I think political factors had everthing to do with the market decline, but not just Obama.
The election of a man who promises to raise corporate and capital gains taxes AS well as Medicare and Income Taxes and has an energy policy that could best be described as "wistful" was an undeniable factor. Good Lord...how could it NOT be a factor!!
But thrown in there is a healthy dose of "no confidence" for the Congressional incompetence and meddling in economic affairs.
Very much like Joe Biden's classic comments on gool ol' FDR going on TV to save us from the Depression...ignorance of history will curse us to repeat it as the government does all it can to turn a recession into a depression.
Perhaps the realization that Paulson will NOT be held over as an emergency measure after Jan 20th was a small shot in the arm...but in the end run, I, like most investors, have little or no confidence that the government will do anything but foul things up.
Sell and Store...
By , at
Sat Nov 22, 09:57:00 AM:
I'm fine with yesterday's rally being attributed to the announcement of Geithner's nomination. How do you think the market would have responded had Obama picked some one, as we fully expected, like Paul Krugman or Noam Chomsky?
In fact, Obama's nominations so far, if accurate, don't seem too bad. It all depends on how one defines "change." I suspect the Kosidiots are not happy with the way Obama has defined it so far.
By TigerHawk, at
Sat Nov 22, 10:06:00 AM:
I also rather like Obama's appointments to date. Not all of them, but Treasury and State seem pretty good (as I have said before, Hillary passes the "Putin test"), and if he retains Gates in Defense we have a pretty good foreign policy team (Treasury being increasingly a foreign policy position).
By , at
Sat Nov 22, 11:02:00 AM:
I think the market rallied because of the Sarah Palin Turkey Day edition. That woman continues to amaze with her down home style, and we have more redstate comedians with that turkey bleeder behind Gov Palin during the interview.
And maybe someday MSLSD will hire manly reporters, and not those pansies they have on now. What's gonna be on their tables on Thanksgiving? Tofu Turkey?
By , at
Sat Nov 22, 12:44:00 PM:
@ TH: I personally think that if the nomination played a role, it played a very small one. However, I also think it more credible to say that there wasn't much happening yesterday that could be a reasonable cause, while we have had tectonic shifts in major indicators for weeks that are more adequate explanations for the weeks of market downturn. Exhibit A:
http://online.wsj.com/article/SB122731266659249473.html
Also, it wasn't just MSNBC that tied the nomination tot he rally, the journal did to. So much for it being the liberal media.
By Counter Trey, at
Sat Nov 22, 06:08:00 PM:
Between September 5 and September 11 the RCP poll average had McCain in the lead. The S&P 500 was up slightly (from 9/5) on 9/12, the day the last major poll reported McCain in the lead.
Polls that ended on September 13, which would have been reported on Sunday, September 14, showed that Obama took the lead. The bankruptcy of Lehman was announced on September 15. The market plunged 4.71% on September 15. So, which cause for the market plunge was most important, Obama’s lead in the polls or Lehman’s bankruptcy? Many media sources tell us without question that the market collapse killed McCain’s campaign. They have concluded that Lehman’s bankruptcy caused the market collapse and it was the beginning of the end for McCain.
But wait: Major polls that ended on 9/17 and 9/18 showed McCain had come back to tie Obama. By Friday, 9/19, a day that news would have been known, the market had recouped all of the “Lehman losses” and actually closed higher than it closed on 9/12.
Virtually all of the horrific financial and economic news was out by 9/19—the housing collapse and high mortgage delinquencies and foreclosures had been known for over a year, the Bear Stearns bankruptcy had been known for six months, the forced mergers of Merrill and Wachovia with other banks, etc. were all known; Lehman was allowed to fail, and almost every prognosticator told us to expect the worst economy since the great Depression—and the market was still higher on 9/19 than it was on 9/5. The one major piece of news we did not know was who would be our next President. It appeared to be a tie as late as that date.
But, those 9/17 and 9/18 polls were the last major ones that showed McCain leading or tied. All of the polls after that showed Obama pulling away and many showed Obama with double digit leads. Since 9/19, the last day that it appeared that McCain could win, the market dropped 36.3%.
I know that Popper was right; that the social sciences are not sciences at all because social science hypotheses cannot be falsified, but it seems odd to me that the media never contemplated that causation went the other way: That the market crashed because the Peggy the Moochers started to outnumber the Joe the Plumbers on 9/19 and investors understood what that would mean for American business and their portfolios.
Since 9/19 only one or two guests on CNBC’s Squawk Box raised the issue that Obama’s lead could be causing the market jitters; that maybe investors fear higher marginal tax rates on the economy’s best producers, higher taxes on capital, and the end of free trade. They were greeted by guffaws as if they were proposing that we all wear tin hats to prevent the aliens from hearing our thoughts. Funny, but no one contemplated that idea out loud on that show again.
By Andrew X, at
Sat Nov 22, 07:57:00 PM:
You even miss half the story here. I came across MSNBC while surfing, (though I am beginning to tune in to them more often for cheap laughs), and the banner at the bottom read (from memory here): 'Stock Market Rallies After NBC News Reports that Geithner has Been Picked for Treasury'....
So in their own words, MSNBC is literally crediting themselves for the rally. It may be oblique, but these are people whose business is words and communication.
As Nelson and Drake weep in Valhalla at the sorry state of the British Navy, alongside them in tears are Edward Murrow and John Chancellor looking down on NBC. (OK, Murrow was CBS, but still.)
It is difficult not to be sick at heart over the spectacle.
By , at
Sun Nov 23, 12:30:00 PM:
Some food for thought about end of year trading:
http://online.wsj.com/article/SB122714126820842751.html
Its headline is: Ignore the Martket until February".
YMMV
