Tuesday, March 03, 2009

Dow Recovery? Maybe in 2012...

Why are the valuations of companies in the Dow - and in the broader stock market in general - dropping like stones in a still lake? When investors project "Obamanomics" into the future, this is what they see:

-higher taxes on corporations will lower profits
-the "cap-and-trade" emissions proposal will curtail profits, and add an invisible "energy tax" to every product purchased or created.
-higher prices will make it harder for consumers to purchase goods and services, thus lowering demand.
-higher taxes on those making over $200K - who account for the largets majority of this nation's disposable income - will force them to cut back on spending, thus again reducing demand.
-eventually Obama will have to tax the middle class to pay for his entitlements and health care "reform", thus further lowering discretionary spending.

So why would the Dow go up, when the government is waging war on business and confiscating their earnings to redistribute to the non-private sector economy? Don't look now, but the Dow 7000 may be "the good old days".

Dick Morris vindicates me here:

President Lyndon John son's administration was known for his War on Poverty. President Obama's will become notable for his War on Prosperity.

Obama must realize that his tax hikes will dampen investment and consumer spending and prolong and deepen the economy's woes - this is presumably why he's postponing most tax hikes until 2011. But taxpayers, particularly wealthy taxpayers, are not dumb: They'll know what's coming, and look to secure the hatches in advance by sitting on their money.
But then, Obama must also realize that his stimulus package, with its massive growth of government, is going to kindle huge inflation in coming years. And he surely realizes that he can't expand government health insurance as massively as he intends introducing rationing of medical services.

He must know, but not care.

More vindication from Rich Lowery:

The past few weeks should have cleared away the debate over Obama's intentions - is he a pragmatist or an ideologue? Obama is a pragmatist in pursuit of an ideological prize - willing to zig and zag so long as his lodestar of expanded government is ahead of him

Obama's critics who accused him of "socialism" during the presidential campaign were roundly ridiculed. What rank name-calling! The charge didn't have much resonance because the best (not particularly convincing) evidence for it was Obama's proposed tax credit for workers who don't pay the income tax. But Obama's opponents read him well. He has the heart, if not the affect, of an ideologue.

For him, above all else, the spending is the thing.

And so the battle is joined. And with almost certain defeat looming (unless enough "Blue Dogs" revolt), the end of America as we know it is upon us...

1 comment:

Jim - PRS said...

"He must know, but not care."

I have tried very hard to come up with a different conclusion, but I cannot. Frightens hell out of me.