The near 400 point drop in the DJIA yesterday speaks volumes about Wall Street's attitude toward Obama, Geithner, and their recent press conferences. Personally, I thought Obama's press conference last night was the first intelligent interactive dialogue between the press and a sitting U.S. President in just about 8 years. I also very much liked what I heard - that the American economy is going to be transparently managed in order to strengthen the middle class as opposed to the most wealthy, as has been the case. A most welcome change as one only has to look at history to see what happens to countries when all the wealth is held in the hands of a very few. In that case, the outcome inevitably ain't pretty.
With respect to Geithner, I also liked what I heard. The Treasury Department is now going to be transparent about who gets the money and what they do with it. A governmental website is being designed to show Americans just how their tax-dollars are being spent. What a refreshing change after the $700 billion that Paulson gave to corporate executives which was mainly, from what I can tell, used as bonuses and vacation resort slush fund money as a reward for bankrupting their companies and pulling down the entire U.S. financial system. The money spent certainly didn't make any impact on the ability for consumers and small businesses to obtain credit, and the Bush administration seemed to be very indignant if anyone even had the unmitigated audacity to ask, "hey, where did the money go?".
However, apparently the "market" and talking heads on CNBC didn't like what they heard and disagree with me (no surprise there). Larry Kudlow simply repeated his now very boring mantra for yet more tax cuts (surprise surprise!) for the wealthy despite the fact that the 8 year verdict on this idiotic "policy" is in: it has been an unmitigated disaster both for the U.S. economy and the U.S. equity markets. The boys on Wall Street appear to be disappointed in any policy other than "just print money and give it to us with no strings attached".
Besides, say all the pundits who by-the-way supported all the policies over the last 8 years that put the economy where it is today, "there were no details". This amuses me to no end as these are the same chaps that supported Paulson's request for $700 billion dollars that he asked for in a one page written memo on the back of a napkin! At least Obama's stimulus bill has been debated in the House and Senate. What a concept! After all, this is how U.S. tax-payer money is supposed to be legislated and spent.
As long as these attitudes prevail on Wall Street and in the U.S. media, and as long as the Republicans continue to play partisan politics with the dire economic situation they themselves created, the outlook for "U.S. capitalism" is bleak. Republicans, though they wave the flag of "free market capitalism" have, over the last 8 years, contributed to the biggest move in governmental control of the U.S. economy (I refer to this as fascism) in the over 200 year history of the country. They complain about a $20 million (with an "m") item in Obama's stimulus plan, yet a few months back when Paulson wanted $700 billion (with a "b") no strings attached they pounded the table that it must be done! Now, after 8 years in which the Republicans doubled the fiscal debt (and that is before the bailout money!), now they have the audacity to criticize Obama's stimulus plan as "too much spending". It's a surreal Orwellian experience which the U.S. press and financial media are all too happy to play along with.
What does this mean for U.S. investors? Stay out of S&P500 broad market investments. Stick to energy stocks that pay dividends, gold, and I-bonds. Wall Street won't be happy until Obama writes them a blank check. Obama, to his credit, is simply not going to give it to them. In the long run, the U.S. will be better off. In the short term, the powers on Wall Street will pout about it. Perhaps that is because they know they don't have the skills to make money any other way but to steal it from the U.S. middle class taxpayer.
Hopefully, that era of U.S. government is at an end. Time will tell.