The banking “plan” is killing the stock market
Here’s the beginning of an AP story about the dreadful performance of the stock market, which has dropped by half in little more than a year, and by almost 5000 points since it became likely that Obama would be elected President.
Wall Street has turned the clock back to 1997. Investors unable to extinguish their worries about a recession that has no end in sight dumped stocks again Monday. The Dow Jones industrial average tumbled 251 points to its lowest close since Oct. 28, 1997, while the Standard & Poor’s 500 index logged its lowest finish since April 11, 1997. All the major indexes slid more than 3 percent. The Dow is just over 100 points from 7,000. “People left and right are throwing in the towel,” said Keith Springer, president of Capital Financial Advisory Services.
The story the AP is telling is that it is the recession’s fault that the market is as low as it is. That is incorrect, in our opinion. The AP gets closer to the truth further down in the story: “Although the government has said it doesn’t want to nationalize banks, many investors are clearly still concerned that this could be a possibility as banks continue to suffer severe losses because of the recession.” Blaming the precipitous declines on the “severe losses because of the recession” is nonsense; the nationalization fear alone is the culprit.
It is the incredible ineptitude of the Obama administration in failing to deliver a timely and clear plan to underpin the financial system without destroying the value of most financial companies that is at fault in this precipitous market decline. So far the administration looks poised to realize our worst fears by its foolhardy approach. Nationalizing the banks (or doing something similar that will wipe out shareholders) will sequentially destroy many of the biggest banks, the biggest insurance companies, and the biggest industrials with large finance subsidiaries — don’t say it won’t happen: it’s already happening, and it’s easy as pie to do so. The only good news is this: the administration’s current approach has been so unclear, and its communications strategy so inept, that if it announced a good plan and stuck to it, it could actually turn things around. Stay tuned.
February 24th, 2009 at 8:41 am
It appears to me that the 0bama administration simply doesn’t know what to do and they realize they don’t know what to do. They seem to fear making decisions because those decisions could make things worse so they keep applying bandages. Perhaps I am way off base, but that is the impression I have.
February 24th, 2009 at 10:07 am
It’s what you get from a team of glorified clerks, Yale/Harvard system gamers. They’ve grade grubbed, networked, sniffed their way to the top and now out in front, in the clear and separated from their elderly, formal mandarin institutions are clueless.
They’ll listen to anyone now. What ever, at the moment, sounds good. They’ll do what they have done all their lives. Tell people what they want, or what they think they want to hear.
That doesn’t work in the real world. Not that any of them, not one, have ever so much as run a shopping mall kiosk. At least Yon Forbes Kerry had a muffin shop for a few months until he found being a gigolo profitable.
February 24th, 2009 at 4:13 pm
At this rate the Dow will be at zero in seven months. Should I liquidate my 401K and buy Christmas presents early this year? Such ineptitude has seldom been seen.
February 25th, 2009 at 4:57 am
For what it’s worth, the spread between T-bills and interbank loans continues to indicate a fragile financial system rather than a collapsing one. (Or it indicates that the government is little better a risk than the banks!)
After the market tanked yesterday, I read the weekly insider-tracking newsletter to which I’ve subscribed for ~20 years. Insiders remain bullish and become more so as the market declines.
Go figure.
February 25th, 2009 at 6:06 pm
I don’t believe anyone could be so naive or so incredibly stupid not to realize the effect that Obamie’s policies would have on the economy. I believe he and his lemmings understand what they are doing and are willing wrecking the economy.
We won’t see 9,000 again till there is a change in regimes. Confidence has been destroyed and we see deficit spending as far as the eye can see. If the military taes additional cuts as proposed by Field Marshall Frank I can see a major crisis in the next decade as we see the military again hallowed out.
Every people gets the government it deserves, and are we getting it good.