How Low Can it Go?

**FRISKY** · 03-03-2009, 11:40 AM

REVIEW & OUTLOOK MARCH 3, 2009, 12:06 A.M. ET
The Obama Economy

As the Dow keeps dropping, the President is running out of people to blame.

As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama's policies have become part of the economy's problem.

Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth.

The Democrats who now run Washington don't want to hear this, because they benefit from blaming all bad economic news on President Bush. And Mr. Obama has inherited an unusual recession deepened by credit problems, both of which will take time to climb out of. But it's also true that the economy has fallen far enough, and long enough, that much of the excess that led to recession is being worked off. Already 15 months old, the current recession will soon match the average length -- and average job loss -- of the last three postwar downturns. What goes down will come up -- unless destructive policies interfere with the sources of potential recovery.

And those sources have been forming for some time. The price of oil and other commodities have fallen by two-thirds since their 2008 summer peak, which has the effect of a major tax cut. The world is awash in liquidity, thanks to monetary ease by the Federal Reserve and other central banks. Monetary policy operates with a lag, but last year's easing will eventually stir economic activity.

Housing prices have fallen 27% from their Case-Shiller peak, or some two-thirds of the way back to their historical trend. While still high, credit spreads are far from their peaks during the panic, and corporate borrowers are again able to tap the credit markets. As equities were signaling with their late 2008 rally and January top, growth should under normal circumstances begin to appear in the second half of this year.

So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year's fourth quarter.

What is new is the unveiling of Mr. Obama's agenda and his approach to governance. Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.

His Treasury has been making a similar mistake with its financial bailout plans. The banking system needs to work through its losses, and one necessary use of public capital is to assist in burning down those bad assets as fast as possible. Yet most of Team Obama's ministrations so far have gone toward triage and life support, rather than repair and recovery.

AIG yesterday received its fourth "rescue," including $70 billion in Troubled Asset Relief Program cash, without any clear business direction. (See here.) Citigroup's restructuring last week added not a dollar of new capital, and also no clear direction. Perhaps the imminent Treasury "stress tests" will clear the decks, but until they do the banks are all living in fear of becoming the next AIG. All of this squanders public money that could better go toward burning down bank debt.

The market has notably plunged since Mr. Obama introduced his budget last week, and that should be no surprise. The document was a declaration of hostility toward capitalists across the economy. Health-care stocks have dived on fears of new government mandates and price controls. Private lenders to students have been told they're no longer wanted. Anyone who uses carbon energy has been warned to expect a huge tax increase from cap and trade. And every risk-taker and investor now knows that another tax increase will slam the economy in 2011, unless Mr. Obama lets Speaker Nancy Pelosi impose one even earlier.

Meanwhile, Congress demands more bank lending even as it assails lenders and threatens to let judges rewrite mortgage contracts. The powers in Congress -- unrebuked by Mr. Obama -- are ridiculing and punishing the very capitalists who are essential to a sustainable recovery. The result has been a capital strike, and the return of the fear from last year that we could face a far deeper downturn. This is no way to nurture a wounded economy back to health.

Listening to Mr. Obama and his chief of staff, Rahm Emanuel, on the weekend, we couldn't help but wonder if they appreciate any of this. They seem preoccupied with going to the barricades against Republicans who wield little power, or picking a fight with Rush Limbaugh, as if this is the kind of economic leadership Americans want.

Perhaps they're reading the polls and figure they have two or three years before voters stop blaming Republicans and Mr. Bush for the economy. Even if that's right in the long run, in the meantime their assault on business and investors is delaying a recovery and ensuring that the expansion will be weaker than it should be when it finally does arrive.

SOURCE

**bluedogok** · 03-03-2009, 11:44 AM

Originally Posted by flintysooner

Harry Dent predicts DOW to bottom about 3800 this year or in 2010.
He is not the most pessimistic. Roubini is saying U shaped or maybe L shaped
Recession and very possibly depression.

I fully expect it do go down, the market has been overinflated for a long, long time. In fact, where it is right now (around 7,000) is probably where it should be, anything over about 9K and it could "bust" at any time. The biggest problem with the markets is there are too many "profit takers" and not enough "investors" and that has made the markets look more like Las Vegas, which right now might have better odds.

Originally Posted by flintysooner

Nothing has been done so far to make business
People confident enough to contemplate new projects.
In fact it us just the opposite so far. There likely is nothing
The government can do to turn it around.

I know plenty of developers wanting to do projects, the banks not loaning money are the ones standing in their way. This isn't just affecting developers, the lack of credit is hurting everyone and the cause of that is one segment of the business world is holding up everyone else. We will never get into a "recovery" if they don't make credit available.

It is amazing how reactionary the financial world is, for years you could take an idea in on a napkin and get a few million, now you can't take an established person with a solid plan and get a dollar. They (the Fed and the financial world) created the mess with easy credit and they are going to take it down with hard credit.

**flintysooner** · 03-03-2009, 12:38 PM

Originally Posted by bluedogok

I fully expect it do go down, the market has been overinflated for a long, long time. In fact, where it is right now (around 7,000) is probably where it should be, anything over about 9K and it could "bust" at any time. The biggest problem with the markets is there are too many "profit takers" and not enough "investors" and that has made the markets look more like Las Vegas, which right now might have better odds.

I know plenty of developers wanting to do projects, the banks not loaning money are the ones standing in their way. This isn't just affecting developers, the lack of credit is hurting everyone and the cause of that is one segment of the business world is holding up everyone else. We will never get into a "recovery" if they don't make credit available.

It is amazing how reactionary the financial world is, for years you could take an idea in on a napkin and get a few million, now you can't take an established person with a solid plan and get a dollar. They (the Fed and the financial world) created the mess with easy credit and they are going to take it down with hard credit.

Harry Dent is the guy that believes that demographics is the driving force on the economy and wrote the book The Coming Depression.... So he predicts an upturn in the stock market sometime this year perhaps to a 9000 DOW level. Then at some point, probably due to some inflation evidence, the fed will tighten again and a relatively long deflationary period will begin. That's when he thinks the DOW will bottom out at about 3800. He sees the retraction lasting until sometime in 2012 and unemployment hitting 15% at the peak.

He sees no real turn around for Europe though.

It is an interesting book and he is a good speaker as well.

Even those who have viable projects that can be financed are questioning whether they should proceed or not. I really have never seen this level of pessimism.

Commercial real estate is just beginning to be afflicted. The Circuit City closing put nearly 18 million square feet on the market. Some are predicting another 200,000+ stores to close in 2009 and 2010 that will further increase the inventory of unoccupied property.

I personally think until the oversupply of housing and credit and cars and retailers and most everything else is worked out that there can be no recovery. Credit is working itself out. Housing is just going to take some time. The car companies are going to have to change to a lesser demand business model. So is most everyone else.

**fire121** · 03-03-2009, 01:47 PM

Originally Posted by Bostonfan

Unbelievable. This administration has been in office for 6 weeks!!!!!!!!!!! Yet most of you feel you know more about what is going on then they do. Also, where was all this ranting while boy george was in office for 8 years? This goof and his administration stood by and did NOTHING. You think all this happened in 6 weeks? Funny how the republicans are ok with sending billions to help Iraq, but when it comes to spending billions here to help OUR economy, it's wrong, wrong, wrong. Wake up people. I don't think Oklahoman's quite understand just how bad things are and have been for quite some time.

6 weeks and you want to blame Obama for losing your money. My God, this blows my mind!!!!!!!

Sorry for the rant

A combination of factors contributed to our current situation. Was Bush involved, yes of course. But to lay all the blame squarely in his hands is juvenile and without substance. He, or is associates repeatedly made statements in writing or testifying before congress warning of the impending collapse and bankruptcy of Fannie Mae and Freddie Mac, Dodd and Frank ignored these warnings, it's a fact. Remember, democrats took control of congress in 2006. This is an excellent article from the Guardian than sheds some light on many of the individuals involved and how they contributed. Twenty-five people at the heart of the meltdown ... | Business | The Guardian
I agree with Midtowner's post, as well.
The stock market direction reflects traders and investor's predictions or anticipation for future economic growth or retraction. The stock market started trending down when Obama won the nomination from Hillary in June 2008. Why? You have to live in a cave or be a completely clueless dimwit to believe Obama was going to be friendly to business or capitalism in general.
Labor unions, environmentalist, and trial lawyers among others paid for this mans election. The market is well aware of his intentions.
Check out his labor secretary and her far left anti-business agenda.
Hilda Solis FrontPage Magazine

He supports Cap and Trade. This will cripple business.

Obama's $646 Billion Cap-And-Trade Green Tax - Capital Commerce (usnews.com)

His tax policy will punish the very people who own businesses, hire employees and spend money. The Bush tax cuts will end in 2010 which will also have an adverse effect on families and business.

Pelosi: I am going to raise your taxes on The Patriot Room

Pajamas Media » Obama’s Taxes: A $2 Trillion Trip Back to the 70s

There's more but I am out of time.

Blame Bush all you want, reality does not support your view.

**fire121** · 03-03-2009, 01:57 PM

The Cloward-Pivin Strategy

http://www.discoverthenetworks.org/g...asp?grpid=6967

* Strategy for forcing political change through orchestrated crisis

Interesting article.

**Edmond_Outsider** · 03-03-2009, 02:07 PM

Originally Posted by bretthexum

Thank god someone understands this.

Watch the CNBC specials - American Greed and House of Cards. Quite the eye opener.

Plus - if you are more than 10 years from retirement - this is not the time to bail on the market. This is the time to buy more. Double up if you are able (your 401k or IRA contribution). And ECO - everyone is down this year. Even the great Warren Buffett lost billions. No one ever made a dime by panicking.

This is good advice.

I would add, nobody ever made a dime by blaming refusing to take responsiblity. ECO, you remember responsiblity, right? All those diatribes about the things that everybody lacks but you?

ECO, its time to stop being a parasite and start pulling yourself up by your bootstraps. Stop expecting that the world owes you anything.

I know this is harsh, but somebody has to start ending the entitlement mentalilty everybody seems to have.

**PennyQuilts** · 03-03-2009, 02:17 PM

Originally Posted by Edmond_Outsider

ECO, its time to stop being a parasite and start pulling yourself up by your bootstraps. Stop expecting that the world owes you anything.

Excuse me? What are you talking about? Where have I asked anyone for anything? How am I being a parasite? Explain. You threw it out there, now back it up.

**TaoMaas** · 03-03-2009, 02:35 PM

Originally Posted by East Coast Okie

You threw it out there, now back it up.

I don't think it was a toss...it was more like a cast, trying to see what he catches, if ya know what I mean.

**PennyQuilts** · 03-03-2009, 02:39 PM

Originally Posted by TaoMaas

I don't think it was a toss...it was more like a cast, trying to see what he catches, if ya know what I mean.

Well, it looks like evidence of mental illness, frankly. I'm beginning to think he is hot for me if he has to post something like that to get attention. I am not into pedophilia. Stop it, EO. That is just creepy.

**fire121** · 03-03-2009, 02:43 PM

Originally Posted by Edmond_Outsider

This is good advice.

I would add, nobody ever made a dime by blaming refusing to take responsiblity. ECO, you remember responsiblity, right? All those diatribes about the things that everybody lacks but you?

ECO, its time to stop being a parasite and start pulling yourself up by your bootstraps. Stop expecting that the world owes you anything.

I know this is harsh, but somebody has to start ending the entitlement mentalilty everybody seems to have.

What??

Usually when a person wants to prove a point using humor or being sarcastic, it helps the whole "bit" if there is at least a small amount of truth or logic involved.

**PennyQuilts** · 03-03-2009, 02:45 PM

I am married, EO, and it would never work, anyway. Give it up. Find someone else.

**Edmond_Outsider** · 03-03-2009, 02:53 PM

Don't tell me that I am being selfish or heartless. The selfish and heartless person is this parasite. And others like her.

I was just using your rhetoric to describe your the result of your poor choices and inability to take responsibility for it. It reminded me so much of the people you are constantly putting down and talking trash about.

By blaming all your financial woes on the President, you are by implication expecting him to do something for you when we all know nobody has ever helped you but you.

Grab ahold of those boot straps and PULL.

You seem to think the president can perform miracles. I think that's the kind of magical thinking that makes people play the lottery.

Try learning something about the money. Take responsibility for your finances. Take responsibility for your mistakes instead of blaming the president who's only been in office for 6 weeks.

Some of us have been through some economic downturns and understand how to profit from them. Like buying at a time when the ignorant are panicking.

**Edmond_Outsider** · 03-03-2009, 02:58 PM

Oh that's rich sweetheart. If if makes you feel better, spin some more fantasy.

Just so you don't get any ideas, I'm not into cynical, bitter, poor women.

Sorry.

**PennyQuilts** · 03-03-2009, 03:07 PM

Originally Posted by Edmond_Outsider

I was just using your rhetoric to describe your the result of your poor choices and inability to take responsibility for it. It reminded me so much of the people you are constantly putting down and talking trash about.

By blaming all your financial woes on the President, you are by implication expecting him to do something for you when we all know nobody has ever helped you but you.

Grab ahold of those boot straps and PULL.

You seem to think the president can perform miracles. I think that's the kind of magical thinking that makes people play the lottery.

Try learning something about the money. Take responsibility for your finances. Take responsibility for your mistakes instead of blaming the president who's only been in office for 6 weeks.

Some of us have been through some economic downturns and understand how to profit from them. Like buying at a time when the ignorant are panicking.

EO - all that is absurd. Bad choices? Which ones? Refusal to take responsibility for them? Explain. Blaming financial woes? No, what I said was that there were no guarantees in the SM and that when his adminstration behaves this way, many people like me will pull out - I also said that I'd get back in if it looked like he was going to be more business friendly - anything strange about that? I specifically said I was not looking for a soft landing or asking anything from anyone. I am completely taking responsibility for my finances. Think the president can perform miracles? For heaven's sake, go back and READ the thread. I think I discussed that this was not his fault - but I take issue with how he is handling it. That does not rise to the level of expecting him to perform miracles.

This is a just a tortured attempt on your part to insert yourself into a discussion and try to hijack it in a direction that makes no sense. I understand that you don't agree with quite a bit of what I believe but this last little bit of posting is just strange. You'll have other opportunities to argue with me. This strikes me as a peculiar one to try to pick a fight or prove a point.

**Bostonfan** · 03-03-2009, 03:42 PM

President Obama and his administration was referred to 10 times in the opening rant. That should tell you something..

Basically what we have here is a lesson. GREED + No REGULATION FOR A NUMBER OF YEARS = BIG MESS

I said this a couple of years ago: "Just wait. This country is getting out of control with greed and no regulation (nothing to stop it) and will crash. A democrat (at the time wasn't sure which one) will be voted in and he/she and their administration will have to implement radical measures to stop it and get it back going again. In the meantime, they will get blamed for "the mess" created by the incompetence of this (Bush) administration."

WOW, was I right or what? Just so happens I thought this would be the case 6 months into the new adminstration, not 6 weeks!! Guess I gave people the benefit of the doubt, but looks like they want a 6 week miracle....

**fire121** · 03-03-2009, 04:15 PM

Bush was the king of new regulations.

Bush's Regulatory Kiss-Off: Obama's assertions to the contrary, the 43rd president was the biggest regulator since Nixon. - Reason Magazine

**fire121** · 03-03-2009, 06:08 PM

Originally Posted by Edmond_Outsider

I was just using your rhetoric to describe your the result of your poor choices and inability to take responsibility for it. It reminded me so much of the people you are constantly putting down and talking trash about.

By blaming all your financial woes on the President, you are by implication expecting him to do something for you when we all know nobody has ever helped you but you.

Grab ahold of those boot straps and PULL.

You seem to think the president can perform miracles. I think that's the kind of magical thinking that makes people play the lottery.

Try learning something about the money. Take responsibility for your finances. Take responsibility for your mistakes instead of blaming the president who's only been in office for 6 weeks.

Some of us have been through some economic downturns and understand how to profit from them. Like buying at a time when the ignorant are panicking.

Jim Cramer host of Mad Money on CNBC.

Cramer on Obama: 'It's Amateur Hour at Our Darkest Moment' | NewsBusters.org

More good analysis of our current economic condition.

IBDeditorials.com: Editorials, Political Cartoons, and Polls from Investor's Business Daily -- Capital On Strike

What stocks or funds have you been successful with?
Are you a broker?
Just curious.
What is your secret?

**Edmond_Outsider** · 03-03-2009, 06:50 PM

FIre, you are quoting Cramer. I'm sorry, but it's hard to take you seriously after that.

No, I am not a broker. I am an investor. I've been in the game long enough to know only idiots get out when the market is at a low point.

I'm taking losses like everybody else. But if you don't have the courage to last out the low points, you should be hiding your cash under the mattress.

I am buying--a lot--and I'm not giving you any tips. Sorry. LIsten to cramer. I'm sure you'll get rich that way.

**PennyQuilts** · 03-03-2009, 06:56 PM

Originally Posted by Edmond_Outsider

No, I am not a broker. I am an investor. I've been in the game long enough to know only idiots get out when the market is at a low point.

I'm taking losses like everybody else. But if you don't have the courage to last out the low points, you should be hiding your cash under the mattress.

I am buying--a lot--and I'm not giving you any tips.

My, my. What a charmer even when he doesn't need to be.

**Edmond_Outsider** · 03-03-2009, 07:02 PM

ECO, Are you expecting pity? You are close to the least empathetic and most judgemental person on this forum and I'm supposed to feel sorry because you've made a serious of bad decisions.

I'm supposed to feel sorry for you because the new president who has not had enough time to actually implement any of his policies has made you broke just by being in office?

The number of absurdities in the 9 separate examples of how Obama has wronged you are mind blowingly naive.

Then, you seem to ascribe both magical powers and project all the faults of our last president on the current one.

I suggest you take a class in reality and perhaps you can see the world more clearly.

Suck it up. That's what grown ups do.

**PennyQuilts** · 03-03-2009, 07:08 PM

Originally Posted by Edmond_Outsider

ECO, Are you expecting pity? You are close to the least empathetic and most judgemental person on this forum and I'm supposed to feel sorry because you've made a serious of bad decisions.

I'm supposed to feel sorry for you because the new president who has not had enough time to actually implement any of his policies has made you broke just by being in office?

The number of absurdities in the 9 separate examples of how Obama has wronged you are mind blowingly naive.

Then, you seem to ascribe both magical powers and project all the faults of our last president on the current one.

I suggest you take a class in reality and perhaps you can see the world more clearly.

Suck it up. That's what grown ups do.

Honestly, EO, I think you have flipped out. Bad decisions? Seeking pity? Magical powers? You need to get a grip. I don't know what your problem is but this is a MESSAGE BOARD. You are really spinning out, here. If you are going to play, read the posts. If you are just going to make things up because you are angry and emotionally involved, there is no point in even trying to have a discussion.

**ronronnie1** · 03-03-2009, 07:24 PM

"And as for President Bush, I would have felt the same way had the market tanked on his watch. It didn't. Because it climbed up, I kept investing. Duh. "

1) the "mess" started around Sept '08. Mcain was ahead in polls up until the "mess." Hence why Obama won. Go back and look.

2) "Because it climbed up, I kept investing" That was your first mistake. Anyone with a basic understanding of economics and finance could have seen this coming. Perhaps you should invest in low risk mutual funds and leave the risky stuff to the experts. Just a thought.

3) Obama is going to be president for at LEAST 3 and a half more years. I suggest yoga to clear your mind and help you cope.

**Edmond_Outsider** · 03-03-2009, 09:02 PM

Honestly ECO, I read the 9 times you blamed Obama for your the bad choices you made while George Bush was president. Your blaming Obama for being personally responsible for the results of these choices is at best magical thinking and a worst deranged.

However, this isn't anger, it's amusement. I hate to admit that because it's not admirable to laugh at other's misfortune. However, in your case, I'm inclined to make an exception.

For somebody who is so consistently judgmental of everybody else's shortcomings, you seem to have awfully thin skin.

There must be a large streak of narcissism as well considering you thought I was hitting on you. I won't feel bad about finding that funny.

**fire121** · 03-03-2009, 09:48 PM

Another stake into the heart of Capitalism. Stock market will fall again tomorrow.

President Tells Unions Organizing Act Will Pass - WSJ.com

He is bleeding us out.

**andy157** · 03-03-2009, 11:00 PM

Originally Posted by fire121

Another stake into the heart of Capitalism. Stock market will fall again tomorrow.

President Tells Unions Organizing Act Will Pass - WSJ.com

He is bleeding us out.

Sorry Fire121, I've ask this before, but I've got to ask again. How can you post stuff like this will proclaiming to be a good Union Firefighter, and a proud Union member? It's mindboggling.

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