The president assures us help is on the way. I hope he’s right, but clearly the stock market doesn’t agree. I seem to recall an old adage that says that the stock market is one of the best indicators of where the economy will be 6 months down the road.
Well, I certainly hope that’s not true. We just closed the worst February in stock market history since 1933 and as I write this, the Dow has slipped below 6900! Unfortunately, it’s virtually impossible to find anyone who says otherwise.
Here is a story from Saturday’s Kansas City Star, which I think hits the nail on the head:
Obama’s Blizzard of Big-Spending Proposals Snowing Under Economic Hope
By E. THOMAS Mcclanahan
Since the beginning of the year, the stock market has fallen about 20 percent – about half that drop coming since the inauguration of President Barack Obama.
Yes, the economy is in a mess and the market’s queasiness reflects that. But the Obama administration has contributed greatly to falling share prices. Virtually every time an Obama administration official speaks, the market drops again – a vote of no confidence in the profusion of new programs and the prospect of ever-higher spending.
The Dow Jones industrial average dropped more than 381 points last month when Treasury Secretary Tim Geithner revealed that despite eager expectations, the administration had only vague plans for dealing with the banking crisis.
Some people I’ve talked to seem to think the stock market’s behavior is of minimal significance. But even if you don’t invest, the market is an important leading economic indicator.
The prices it discovers every day are a collective judgment of the future value of the nation’s stock of capital, and traders most definitely don’t like what they see.
The Dow dropped nearly 300 points when Obama signed the stimulus bill, which was largely devoid of any significant measure to encourage increased investment.
Indeed, the bill’s stimulative effect will be very weak. It’s loaded with political pork for Democratic constituencies, including tens of billions of dollars in new spending on means-tested social programs that will be nearly impossible to cut when the federal money runs out.
Congress is likely to continue much of this spending, building those amounts into the budget baseline and permanently expanding the size of government. This gives the lie to Obama’s pledge to push through major cuts in the deficit.
For example, states will sign up new recipients for an expansion of Medicaid. In two years that money will go poof. Will politicians then say to recipients, “Sorry, you’re on your own?” Not likely.
A recent paper by the non-partisan Tax Policy Center paints a grim picture of the government’s future financial position.
“In 2009, the federal deficit will be larger as a share of the economy than at any time since World War II,” write the authors, Alan Auerbach and William Gale. “What is more troubling is that, under what we view as optimistic assumptions, the deficit is projected to average at least $1 trillion per year for the 10 years after 2009, even if the economy returns to full employment and the stimulus package is allowed to expire in two years.”
So much for Obama’s talk of reducing the red ink to $533 billion by the end of his term.
The constant eruptions of new spending have sent tremors through the bond market. The financial ground has shifted to the point that Secretary of State Hillary Clinton, during her recent Asian trip, was reduced to pleading with the Chinese government to keep up its purchases of U.S. Treasuries.
Obama isn’t content to concentrate his efforts on major crises of the day – housing, the auto industry, the credit markets and the economy in general.
No, he has decided that his administration must also forge ahead on major health care reform, an education initiative, the transformation to a “green” energy economy and even a cure for cancer.
It’s an agenda of staggering proportions. Whatever the next few months bring, it’s now clear that this president is no centrist.
Fighting What Seems Like the Inevitable
In the face of all of this doom and gloom comes this week’s guest on The Career Mechanic show, Gary McGrath. Gary is just a regular guy. He has four kids, two in college and one about to start, a mortgage, car payments, all the usual.
Gary McGrath
Gary has been a salesman all of his life. About five years ago, he found the job he loves. Unfortunately, his sales territory includes large financial institutions like A.I.G.
In the summer of 2008, Gary was planning his sales campaign for the end of the year, just as the economic meltdown hit. Did he read the newspaper and give up? No way, he focused, focused, focused, and turned the 4th quarter of 2008 into the best sales quarter in his career.
Gary made serendipity happen.
If you’d like to hear how Gary did this, check out this week’s Career Mechanic Radio Show.
Lesson learned here is to go after what you need in spite of the circumstances. I’m sure many people are out there right now doing something about this economic nightmare and not waiting for government or anybody to give it to them. Or, at least the smart people are! Funny, that’s how Gary snagged his wife and you know what they say, “behind every successful man…”