Is the Market Really Like a Political Tracking Poll?

President Obama is definitely trying very hard to boost the nation’s confidence. After his massive economic stimulus plan failed to impress investors about the prospective of a speedy recovery, the President himself came out Wednesday to suggest that stocks at the current level are cheap enough such that “buying stocks is a potentially good deal” ((AP)).

And once again, stocks fell, though moderately comparing to Monday’s huge sell off, with the S&P 500 index at its lowest level in more than 12 years. In fact, stocks dropped more than 30% since Obama won the election (US News & World Report), including the worst performance ever of the Dow on the day after the election and the inauguration day. Now I wonder how much confidence investors have in Obama and his plan.

By the way, Tuesday Obama connected the daily fluctuation of the stock market to the political tracking poll.

Is there any similarity between the two as Obama suggested? I didn’t see it. Did you?

Comments

[J. D. Swampfox:]

Obama's advice yesterday was: "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it." Hmmm... sounds kinda like the "buy high, hope to sell higher" real estate debacle...

Mar 04 07:12 AM

[atlasman:]

I got my start in investing by watching to the Lewis Rueyiser Report on PBS many years ago with my father. Tyhe most common piece of advice given by he and longtime guest Marty Zweig was "don't fight the Fed". I have added to that maxim "Don't fight the Administration". If they are hostile to business and wall street, than I will stay away and will not return until their position changes.

Mar 04 07:19 AM

[user344210:]

If the market is representative of "mass psychology", which encompasses everything that participants think about not only their own futures, but the futures of people who aren't direct market participants, but do participate in the real economy, driving earnings of the companies whose equity traders are buying and selling, then not only is the market a tracking poll, it's the "population" from which each narrower tracking poll is drawn. Hence, the market has a "margin of error" of zero, to use the language of statistics and the distinction between a "population" and a "sample".

That's why it's so stupid of Gibbs to say that the market represents a "narrow" part of America. The market also represents what that "narrow" part of America thinks the "other" part of America's economic prospects are (e.g., will the people working at Wal-Mart be able to buy enough I-phones to keep Apple's share price where it is or will Obama's plans hurt Wal-Mart's ability to expand and hence ability to hire 17-year old kids and pay them enough to buy those I-phones). The market is all-encompassing and every day it is a reflection of the answer to the question "Does your future look better today than it did yesterday?"

I'm glad Obama "gets it" verbally, but would like to see some action, too.

Mar 04 07:57 AM

[MauDib:]

The public gets to vote every two years - capitalists get to vote every day. The silent partner IRS is ready to take its cash off the top while I have to leave in my profits to fund increased receivables and inventory caused by growth - or maybe I will buy that $309 ticket to Paris since my silent partner wants 50% of the cut.

Mar 04 08:06 AM

[Hexan:]

Per Chief Investment Officer and President Barak Obama:

"What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long term perspective on it,"

Actually, it's Price to Earnings ratio.

It's like when George Bush Sr. did not understand how much a gallon of milk cost.

Mar 04 08:53 AM

[robert.b.fe...:]

Jim, Rodgers has the right idea. Buy guns and ammo as your next commodities investment as they will be worth thier wieght in gold. The comming storm is likely to be a doosey.

Mar 04 09:39 AM

[citishark:]

Wise up gentleman!. This is pure politics. This wind-bag has as much financial accumen as any other community organizer, so what do you expect? And he is in a rapid course to "fake it" in public ...("until he'll make it" some people thinks) with a little help from cram sessions with "his experts" previous to hispublic appearences..and the jamming of the teleprompter.

Analyzing his assersions (that somebody is still chisseling in marble....)is a total waste of time ...for busy people!.

Cheers!

Mar 04 10:13 AM

[Howard_T:]

If the Market is a tracking poll, the President Obama is in deep, deep doo-doo. He's the intern suddenly thrust into the CEO's office, doesn't know how to select key personnel, has no clue how the business makes a profit, and spends lavishly on travel on his corporate jet (Air Force 1), and on parties at his company-provided residence. The travel and parties are not to drum up more business, but are intended to bribe important stockholders into keeping him in office the next time the board of directors is elected. When any of the banks receiving taxpayer funds tries this, the outcry is heard loud and long. When Obama does it, the yapping chihuahuas in the mainstream media are strangely silent.

Mar 04 11:55 AM

[mrbill:]

What these market moves mean to me (selling on a presumably positive outlook) is that there is a lot of big money still wanting to get out. After the president or anyone of importance speaks, even the slightest rosy outlook becomes a sell signal. The fact that the market falls more than what seems rational means there are too many sellers of this kind. Big money can't unload their stocks on regular trading days, or they will crash the market. Now if you're not scared already, consider the rather weak short covering rallies. If you're big money, sooner or later this pattern becomes a major sell signal and you'll unload everything, or risk being the last one out. When this happens it will look like October '08, but starting at these levels. If you don't think it can happen, I encourage you to visit your local shopping centers. I was surprised to see back in December that some people were still shopping. But now the malls and retail stores are virtually empty. I ask my wife every time she goes out what the traffic is like, last she told me, "dead parking lots", and "I only see old people". Senior citizens, basically. Amazing, those living frugally are the one's left supporting our consumption based economy. And today my wife went to the hair salon and it turns out the two other customers were actually coworkers getting their hair done by each other on break time.

Mar 04 10:54 PM