The Radio Equalizer: Brian Maloney

13 November 2008

Obama Election Crushes Stock Market, Threatens Global Economy


Talkers Vindicated: Obama's Election Panics Wall Street


The concept couldn't be simpler: an already-weakened economy is dealt a punishing body-blow by the election of America's first seemingly- socialist president. Faced with business conditions that are likely to deteriorate much further than expected, Wall Street throws in the towel and global markets collapse.

This is no mere economic theory, however: it's become reality, as investors ponder what higher taxes, increased regulation and unchecked labor union power will mean to suffering financial markets.

Call it Obama's market wipeout: since election day, the Dow Jones Industrial Average is down almost 1600 points. Your Radio Equalizer previously covered it here and here.

Based on the historical record, it's the worst post-election performance ever.

And while talk hosts such as Rush Limbaugh and Sean Hannity have recently taken heat for revealing the real cause of Wall Street's collapse (with the mainstream media firmly defending Obama), a new Wall Street Journal editorial backs up their point:

The substance of what Mr. Obama has promised for the economy is bearish for stocks. The threat of higher tax rates, especially on capital gains and dividends, now may be getting priced into the market. Add that to investor doubts about Democratic policies on unions, health care and trade -- and no wonder stocks are falling. Lower stock prices in turn reduce household net worth, thus slamming consumer confidence and contributing to what appears to be a consumer spending strike.

If Mr. Obama wants to reassure markets, he could announce that he won't be raising taxes for the foreseeable future. Unlike hundreds of billions in new government spending or more taxpayer cash for Detroit auto companies, this no-tax-hike declaration is a "stimulus" that would cost the U.S. Treasury nothing. In the current market, there won't be many capital gains and few companies will have surplus earnings to pay out in dividends. A higher tax rate on zero gains yields zero revenue, so what's the point of raising rates?

What markets want to see from Mr. Obama is a sense that the seriousness of this downturn is causing him to rethink the worst of his antigrowth policies.

In the week prior to the election, stocks surged, partly in the mistaken belief the polls were wrong regarding Obama's lead. Now, his election has taken away America's hope for a prosperous economic future. As a result, Wall Street no longer seems to know where the bottom may lie, with 8000 providing only a shaky Dow support level.

At US News & World Report, columnist James Pethokoukis believes Obama may very well turn into a one-term president, especially given his doomed economic policies:

Obama's election is often compared to that of Ronald Reagan's in 1980. Both gentlemen were voted in to fix an ailing economy. But the 1982 recession took a huge chunk out of the Gipper's popularity. He had just a 35 percent job approval rating at the start of 1983, just two months after Republicans lost 27 seats in the House in the midterm elections. But Reagan's presidency was saved by an amazing economic rebound. The economy surged at a 4.5 percent pace in 1983 and at a mind-blowing 7.2 percent clip in 1984 as unemployment dropped from a high of 10.8 percent in December 1982 to 7.2 percent in November 1984. The Long Boom was underway.

Reagan worked his magic with tax cuts. Obama is trying to do the same with government spending. But stimulus packages are only supposed to keep the recession from getting worse or morphing into a mini-depression. I don't think anyone expects that $500 billion in hot money to return America to prosperity. Only time (and the private sector) can do that, especially with a downturn caused by a credit crisisa and deflating asset bubble. And four years may not be enough time for the Obama presidency to traverse that long road or complete that steep climb.

It has taken over a week, but finally there are signs that elements of the media are willing to tell the truth about the market's recent brutal sell-off.

But don't expect the Obama-fanatical NBC or other partisan defenders to suddenly come clean on this point. They've just spent two years conditioning Americans to believe in Obama's empty promises and aren't about to accept such a major credibility hit so soon after the election.

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  • of course Maloney takes a wing nut, invalid opinion. The market is crashing, we had the worst retail month EVER in the history of America

    nothing to do with OBama, all to do with people having no money to buy anything, thanks to 27 years of re-distribution of wealth from the Middle Class to the ultra-rich

    nobody is taking the right seriously anymore

    the market went down big when Bush was selected president, nobody blamed Bush. Wall Street saw the retail numbers, they were made official today.

    worst in American history, worst retail numbers EVER

    27 years of tax cuts for the rich officialyl destroyed the Middle class

    it started with Carter, went into overdrive during Reagan, picked up steam during clinton and went over bosrd during Bush

    Reaganomics after 27 years did working America in ... but good

    and all the radical right can do is project their failure on to a president elect

    nobody on Wall Street is thinking about "Obama" raising taxes 2% on the rich. You are a joke, Brian

    you just do not gewt it

    you are an embarrassment to fine Irishmen everywhere
    , who voted Democratic in record numbers

    Keep reciting your marching orders, the country has abandoned the right

    and 2012 will be even worse

    America has rejected Ronald Reagan forever

    tax cuts for the rich failed

    the entire nation gets it, except the traitorous right

    We have a mandate

    the GOP will not win an election for the next 50 years

    Get a new gimmick Maloney.

    By Anonymous Anonymous, at 14 November, 2008 12:52  

  • So before the election the market was still at 12,000??

    before the election everything was booming, right?

    only a ditto-head would buy this theory, but than again ditto-heads worship a bloated bi-sexual junkie

    By Anonymous Anonymous, at 14 November, 2008 12:54  

  • The market has more problems than OB or any other president.

    First problem was gas prices.

    Second people with too much mortgage could not make payments with higher gas prices.

    Freddie and Fannie had problems because housing market collapse.

    Instead of fixing the problems at Freddie and Fannie congress with support of the President threw money at it. Printing money is not a solution.

    After all this, investors are getting out of the market before taxes on capital gains and dividends go up. Today you can take out dollar for dollar after OB tax plan take out seventy cents for a dollar.

    Its not OB fault, but he does not have the answer to pull the country out of a recession. What one needs to worry about is that his plan will push the country into a depression.

    People like to make perditions here mine. If OB’s taxes make it into law the US and most of the rest of the world will be in a depression in two to four years.

    Investors are waiting on the side lines for the government to get out of the market and let the pieces fall were they may.

    The three big car manufactures don’t need to be bailed out by the tax payers. Let them go into bankruptcy. They will be stronger in the long run. If not they will be back with their hand out in a few years.

    Stop the welfare checks to big business. Stop the welfare checks to everyone. Stop giving our money away.

    By Blogger pf1, at 15 November, 2008 05:23  

  • RWHTOB needs to review the predictions from the financial experts and the Wall Street Journal.

    For the past 6 months there have been predictions of the huge negative market impact caused by an Obama election.

    And this was before the democratic Fannie Mae housing mortgage disaster.

    It will be much worse with a 60 seat Democrat veto proof Senate. That is why there is so much concern about the Franken cheating going on in Minnestoa.

    The state governments have seen the greenlight to start raising taxes with the election results.

    Buckle your seatbelts. It is going to be a bumpy ride.

    By Blogger The Benson Report, at 15 November, 2008 11:34  

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