Did Politics Cause Monday's Dow Decline? 18 comments
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Well, the week that wasn't, was it fact followed swiftly by heavily directed market action. The bears came out Monday and sent stocks lower from the start of trading, as the Dow was hovering another the minus 200 point total all afternoon.
Weak economic signs triggered some of the sell-off, which was broad enough to come to stocks and commodities. A Home Builder survey citing a drop in confidence was partly to blame, as was a New York survey of a decline in factory activity, according to the Wall St. Journal. Oil also slid, falling back towards $70/barrel after spiking to the mid $70s last week.
With options expiration occurring at the end of this week, traders are looking at where lock-ins are likely to be. Lock-ins are the certain levels stocks regularly fluctuate and float towards during options expiration week. While several economists and general "experts" are throwing around the term "green shoots" these days, the market's rally since the March lows proved that stocks at attractive valuations can recover to fair value in almost no time at all, given even glimmers of prospective recovery.
Many are hopeful for economic recovery by the end of this year, however the still rising unemployment is tempering optimism and political fighting between Republicans and Democrats on everything including the most trivial of issues does not invoke the confidence Americans need in their government at a time of broken-down micro and macro-economics climates.
The President and his administration are trying to fight battles on several fronts and they appear to be taking their toll. The financial situation, the automotive situation, housing, health care and education reform, and the stimulus package are only some of the bigger areas where President Obama and his team are entrenched for change and involved in business more heavily than any world leader would want to be. Could an agenda push too broad for its own good be responsible for the latest setbacks in the stock markets as businesses see future profitability diminished by stricter rules and regulations?
Most investors, economists and traders know significant overhaul is needed, though many don't accept several sweeping changes at once. The bankruptcy in the American auto sector, leading to government ownership and European partnership for 2 of the big 3 has turned that industry on its head. The financial fallout of the credit crisis is still very much at the top of the heap of troubles in the United States, with the Treasury and the President rolling out new reforms and a plan of action for the financial sector which will undoubtedly bring about increased regulation not likely to appease profit-seeking investors.
The health care issue, the latest on the President's seemingly worldwide tour of change, may bring prosperity to some, in the field of electronic medical records and cost-saving technology, but is sure to complicate business for the private insurers and medical practitioners who in the future see a potential competitor in the public sector.
An agenda this broad and this ambitious is always met with an incredible number of challenges, but the time may not only be right, but may in fact be perfect, allowing America to somewhat reset itself stronger and leaner, more productive and more profitable in the years to come. As the economy recovers and some banks pay back TARP money and some infrastructure projects begin in the summer across America and some medical institutions start saving costs, the up swell of goodwill can spread across the country and public perception will lead to spending, leading to profitability, and leading to stock market advances.
Stocks are taking a breather today (after a 40% rally its almost expected), but looking to the future, the Investor should not be afraid of an administration taking drastic steps, but should embrace the goal that all investors share. Prosperity.
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This article has 18 comments:
wall st. doesn't like regulation. after 8 yrs of anything goes casino action the prospect of applying some regulation causes a temper tantrum.
> jack
He showed a chart detailing how stock prices got above the 30 week trailing average and thus the Monday drop was a correction to wipe out the gap.
Stocks had gotten ahead of themselves, in other words, as they struggle to find a new equilibrium,
And while Congress debates how to tax the healthcare of the well to do, their own healthcare system pays 100% of all charges for life at no cost to the Congressperson.
To have the opportunity to prosper in a world of billions of others, I ask only for well established rules of conduct applying to all, and a referee to watch the game closely enough. This works in sports and other areas of endeavor. In fact, the very existence of good rules insures that the very best will be rewarded with the prize, the cup, the profit.
When someone who has much and wants more complains constantly about the regulations, the rest of us should beware. I agree with the author. There is cause to hope for a better game
plan and a result worthy of all our hopes and efforts.
The market listened and sold off.
There is considerable hope that the current administration will be short lived, one termer, they are overreaching and none of their programs are succeeding, most are failing badly.
If the senate elections go against the Obama plans, then Dems will lose the fillibuster proof, and McConnell can keep Obama at bay, until Obama loses in the 2012 election.
Thats the slim ray of hope for a free and capitalist America.
On Jun 16 12:22 PM tweaks wrote:
> I don't usually comment, but this is silly - was it political? The
> whole $&#*(@$@# thing is political. Out TARP funds are being
> used to manipulate the markets. Notice that when they repayments
> were to begin, the market tanks - maybe because the monies are being
> pulled out to repay? A pox on both their houses, the Republicans
> are just as bad as the Democrats.
Agreed!!!
The market upswing was political, but the renewed downswing will be another round of reality bites.
their brains are in dire need of a good effluvia cleansing enema!)
american voting public majority would by some unexpected sudden
miracle decide to elect independents to legislative office it might be
that not only would Newt Gingrich's statement that if his party did not live up to their "contract with america" there would be a mass
defection to a third party be vindicated, it just might bring about a
revolution that would be less painful than the two previous violent
tax revolts of 1787 (Shay's Rebellion) and 1791 (Whiskey Rebellion)
through 1794.
By the way for those whose educational upbringing executed by
the illustrious forward thinking and egaltarian-truth revealing
American eductional system probably don't know, that second
rebellion was crushed by 13,000 government troops led by Mr.
(Generalissimo) George Washington, the first of only two chief
executives to personally direct troops in the field during a crisis
of "natioinal security" as is the priviledge of an elected chief of
state in a Republic. (Ten Days that Unexpectedly Changed America, by Steve Gillon) Nowhere in any legal document founding this country is the word democracy mentioned! In fact, the aristocratic forebearers of the present day elitist power barons in the United States were horrified of the very idea of common folks and farmers having direct access to any significant real power in this country! To that extent Mr. Washington was offered the position of emperor by his general staff who even guaranteed the storming of congress and the enforcement of martial law to insure his position as ruler of this country! Though that abviously did not take place, it came dangerously close to that end result!
These underlying historical facts collecting dust over the centuries need to be examined and evaluated in order to understand why these problems now exist and why this government can seize the privacy rights and contract law priviledges that are sure to diminish as time moves forward! The ultimate responsibility for all of this
including the wanton debasing of the currency and the like really
is the fault of the american majority voting population. The people
in office are only a reflection of those that elect and re-elect them!
EDT
Chicago, Illinois
Actually Lowry's data suggests that there is a lack of buyers more than an abundance of sellers. This rally has been shilled up one side and down the other by the good folks at CNBC and in government so that the banks can sell stock to raise capital.
> I don't usually comment, but this is silly - was it political? The
> whole $&#*(@$@# thing is political. Out TARP funds are being
> used to manipulate the markets. Notice that when they repayments
> were to begin, the market tanks - maybe because the monies are being
> pulled out to repay? A pox on both their houses, the Republicans
> are just as bad as the Democrats.
Oh come on now, they won't tell us how the money is used because it's for our own good. Settle down! It's just a few trillion.