Thursday, November 6, 2008
The Obama Economy
As I mentioned below, now that the election is over, the Dow is casting it's vote and it's off 10% or roughly 1,000 points since the election.
Lots of alternative theories, but we've been getting bad news on a near daily basis now since March. We saw a 1,200 point run-up before the election in spite of bad news as well.
In fact, this is the largest post-election Dow drop in history!
I've gotten into countless arguments with people who don't understand what the impact will be of higher (nearly double or more) capital gains for the "richest Americans."
There is a lot of big money in the market that now has one, maybe two tax years to escape without paying higher capital gains. The net result, as I predict, will be a slow unwinding in the markets, instead of a strong uptick once the current economic crisis is over. Obama's tax plans will punish investors for taking risk rather than rewarding them as the Bush tax cuts did after dot-com.
To put it another way; the market has to "price-in" an Obama Presidency.
Many are blind to this risk because "Obama promised my taxes won't go up" since I make less than $250,000. But in a market, we are all related in some way, shape, or form. Billions in private wealth leaving the equities markets (profit taking) to avoid being penalized for being successful is going to have an impact.
Sure, the little guy's income is safe, per Obama, but his 401k will be at risk when all the boats in the market sink together (how's that for a play?).
The Obama tax policy, as presented in his campaign, will not help our markets, but rather hurt them and the economy--hope the little guy catches on and positions himself accordingly.