Bowyer: Cheering Crowds And Plunging Markets
The investor class was not nearly as impressed by yesterday’s inauguration as the political class.
Inauguration day 2009 was the biggest stock sell off in the history of inaugurations.
Look at financials in particular. I see at least one index down 10%, others dropped even more. I know the drop started before he spoke, but the speech had only one reference to the financial sector and it was a reference to ‘greed’ (at least he used the word ‘some’).
I’m pulling for him; I’m praying for him. But the investor class can’t afford to have anything other than a clear eye unencumbered by gauzy hype.
- Obama Summons Economic Team On First Full Day
Here’s the line which I think failed to inspire financial confidence:
“Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.”
Note the swipe taken at the ‘ways we use energy’. Not the way we produce it; its our consumption. No wonder transports were down almost 4% at midday.
I woke up this morning thinking about another line from the speech. It reminded me of something which I just couldn’t seem to put my finger on until this morning.
“Now, there are some who question the scale of our ambitions - who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.”
I slept on it and then it came to me.
Robert Rubin’s memoir of his White House days, reports a conversation that Rubin had with then Treasury man Lloyd Bentsen. The two concluded that the first Clinton years were too ambitious, that the political process could only digest one big project at a time and couldn’t handle a stimulus package, a tax hike and national health care at the same time. Team Obama has closely studied the Clinton playbook, not as a positive example, but as an example of what not to do.
Obama sent a message to the Rubins and other Clinton people about his conclusion. Clinton was too timid. Obama will be bold.
Jerry Bowyer is chief economist at Benchmark Financial Network, is a member of the Kudlow Caucus, and makes regular appearances on CNBC. He also writes extensively on finance and history for the National Review, The Pittsburgh Post Gazette, Crosswalk.com, and The New York Sun. He can be emailed at email@example.com.