Politics and the Market

Republican investors have four days before they need to decide whether to bail out of the stock market because of their fear of another 4 years of Obama.  Next Wednesday is their last day of hope, the day when Barack and Mitt go head to head in the first debate.  All summer the vibes out of Fox, CNBC, and the WSJ have been driven by a strong feeling that the Republicans are going to win back the White House and take us back to 1980 again.  They might still, but the chances are wavering.

What I would say here is that with the benefit of hind sight I would like to weigh in on what has gone right for the past four years and what should have been done differently.

1. First on what has gone right, no question that the saving of the auto industry and the enactment of ObamaCare have been the two stunning achievements.  And, Dodd – Frank and other strengthened regulations have been a major move in the right direction.

2.  My political posts of the past four years if you want to go back and review them, have pointed out that Obama had two big problems, a large group of Blue Dog Democrats ( who hopefully will be voted out of office) who kept him from getting more aggressive bills on stimulus enacted and the Republicans in Congress who added to this negativity by doing nothing for the whole period (hopefully enough of them will be voted out also).

3.  As to what I would have done differently if I were Obama, I would have been much more aggressive in my approach towards Congress and the Fed.  A lot more stimulus should have been applied in 2009, at least three times more than used, a lot for infrastructure rebuilding, and the Fed should have been told to leave hands off once the bottom was made in March of 2009.  The economy and the market would have figured things out and got the job done.  The way things have turned out is that the markets have become like addicts waiting for the next shot.  Nothing good will come out of this.  Bottomline, between the Blue Dog Democrats and all the Republicans, the stimulus was too timid and all the pressure was put on a weak spined Fed.

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