DJIA Presidential Poll and the Discounting of Obama
So much for that stock market rally last Monday. For the markets, the financial meltdown is all old news. And, unless McCain shows some real fireworks tonight, so is the election.
The stock market will have its ups and downs. The market had many a rally all during the Great Depression; in fact it rallied right after Black Thursday. But, what is really happening is that the market is now adjusting to the Obama/Ried/Pelosi troika that will likely rule the roost come next January. The market has settled to a new equilibrium between 8000 and 9000. I suspect it will slowly dwindle to 7000 over the next two years. I don’t know if it has already accounted for the possibility of a filibuster-proof Senate. If not, the markets will sink even lower.
What the markets have discounted is a high tax, high inflation, high regulation environment that will come with the new year. We can look forward to massive income transfers from the private sector to the public sector in the form of cap and trade and some sort of attempt at socialized medicine.
Economic policy for Obama and his fellow travelers is taking from your enemies and rewarding your friends. What is coming is a group of self-made philosopher kings that represent the Democratic party leadership who will, al la F. A. Hayek, be picking and choosing favored groups that deserve more of whatever “good” that a society may have and gives that “good” to that group; having taken it from those groups determined to be less “deserving.”
Or, to put it another way, we’re going to have Chicago Machine patronage style economic policy. That is, a parasitic economic policy that feeds off the productive elements of society to generate favors for favored constituent groups. Economic restraint in this circumstance is the maintenance of a symbiotic host/parasite relationship so as not to kill off the host. This is the state of affairs in such places as New York or California. States that lurch from one fiscal crisis to the next with each annual budget mark up. Places no longer known from economic dynamism or growth. Places like upstate New York that were the economic powerhouses of Westinghouse, Kodak, Corning and Xerox are a distant memory. In fact, states like California or New York no longer fall into the Red State/Blue State paradigm. Rather, they fall into the Black Hole State category where all economic “light” is sucked into a vortex of taxing and spending as these states lurch from fiscal year to fiscal year trying to scrape enough cash to support what has degenerated into a social services economy.
People like the Ohio plumber who’s wealth Obama wanted to “spread around” are the true face of small business and very likely one of those $250,000 plus plutocrats (probably kulak in Obama’s socialist lexicon) that need to be slapped down for being too successful. This seemingly “insignificant” small business can easily capitalize into over a million dollars per year. These mom-and-pop business may not look like much, but their appearance can greatly belie the extent of wealth creation and economic growth they truly represent. This plumber could eventually have all kinds of money tied up in tools, inventory, an office, shop and possibly a warehouse. But, instead of being on the forefront of creating new jobs, this guy is going to be cutting back on new hires and capital improvements. His money is going to be sucked away to pay for Obama’s new spending initiatives. He’s going to be contending with all sorts of new health care insurance mandates. And, unless he’s in cozy with the powers that be, under the new cap and trade mandates he not going to expand his business because his carbon footprint will be determined to be bigger than Hill’s thighs and Gore’s butt put together. He may even have to worry about the his safety, and that of his family, when union thugs come by to card check his workers.
The Dow fell about 700 points today and the DJIA now sits at about 8600 points. This is the new equilibrium for an economy resigned to the Obama Chicago Machine patronage economic management.