The Stock Market, The Business Cycle, and Obama
By: Brooks A. Mick
The stock market had a decent though not spectacular climb from around 8500 to 11,000, and at that point there ensued some severe fluctuations, large dips and almost as large rebounds. I hope you were all in the market and made some money during the run up, but I am afraid current events do not bode well for future advances even though the usual leading economic indicators look good.
Industrial production rose almost 1% in March and current projections for April and May look good. The Coincident Economic Index rose 0.1% in March and February after being flat in January. The capacity utilization rate rose in March to 73.2%. Productivity continues to improve, as American workers, those still with jobs, are turning out more per worker than the average of the past 10 cycles. Retail sales gained 1.6%. Housing starts improved. The year-over-year inflation rate is 2.3%, not bad. The core consumer price index was unchanged in March. Inflation has thus not yet reared its ugly head.
And yet…and yet…things just don’t feel all that hopeful. Some job growth occurred, supposedly, though unemployment rose to 9.9%. A fair percentage of those jobs have been government jobs, temporary census workers, and others likely to disappear after the stimulus funding that paid for them runs out.
And so, back in late April, I cashed out a fair portion of my stock equities and purchased gold-mining mutual funds. That turned out to be pretty smart. Though inflation is not yet here, the fear of inflation drives up gold prices–and it has driven them up. The beginning topping of the European dominoes has created some panic in investors, and often they turn to gold, and the price goes up. There is word that China and other large buyers have been hoarding gold, which drives the price up. There’s talk that Georgie Soros has been buying gold, which drives the price up. I don’t really care whether these rumors are true or not, as it is the rumors and the fears that drive gold prices. And I don’t plan to hold on to the gold stocks very long anyway. My profit has been nearly 15% in just 3 weeks and I’m counting on another equivalent rise and then I’ll sell out at least half and watch the rest for a while longer. Timing the exact bottom or top of a stock price is not necessary to generate a quite handsome profit.
But back to the stock market in general. Why, if the economic indicators of the business cycle are looking good, why-oh-why hasn’t the stock market continued to gain?
I think it is directly due to Obama administration policies. They institute or propose higher taxes on multitudes of goods and services. Indeed, they talk intermittently of a VAT tax, essentially a tax on everything created or produced or sold. They continually demonize and demagogue corporations and businesses and people who have succeeded in earning a reasonable amount of money and thus create fear and an aversion to risk-taking. Why start a new business if you know you will just be subjected to taxes and to demonization if you are successful and earn a lot of money? And now that Obama has caused stagnation in most industries, the well of the wealthy is drying up as far as future taxation possibilities are concerned and so he’s expanding into taxation of the middle class and even the poor, if the VAT tax is actually passed. The energy bill recently introduced is just another way of taxing everybody, as all forms of energy, and thus the goods and services dependent upon the energy, will rise. Obama was clear that his energy plans would cause the cost of energy to skyrocket. That shouldn’t be a surprise to anyone, though many who voted for him were ignorant of his plans, and even when those plans were pointed out, they chose to disbelieve.
But those who voted for Obama have unleashed an economic plague upon the country, and it will take quite a miracle if we are to survive this. Part of that miracle will require the voting out of every RINO, every Blue-Dog Democrat, and every liberal Democrat up for re-election this November–EVERY ONE OF THEM!
That may not only shift the congress sufficiently conservative fiscally, but might scare the remaining congressmen into behaving more responsibly over the next few years. We not only need a balanced budget, but an overbalanced budget! Just breaking even at the end of the year will not be sufficient to stave off financial disaster; we need a surplus to start paying down the debt. We need tax cuts that are true tax cuts for all taxpayers, not just occasional rebates or special favors. We need to cut capital gains taxes and eliminate corporate taxes. They are a drag on economic activity.
There will be some pain, and even more squeals and moans and roars from some of the pigs whose money trough is being leaned, but it will be necessary and we should turn a deaf ear to teachers’ unions, etc., who never, ever, get enough money from their standpoint.
Can we save the country? Maybe, but it’s going to take courage. It’s going to take dedication and enthusiasm among those voters who understand we can’t keep spending and taxing the way we have been. No one of either party has seriously tackled the problems in my memory. It’s time for some political courage such as Governor Christie is showing in New Jersey.
Get out the vote in November. Good luck everybody.
Oh, I almost forgot! Once we vote out the liberals and their useful idiots, and vote in some fiscally conservative folks, we MUST WATCH THEM LIKE HAWKS TO MAKE SURE THEY DONâ€™T DRIFT LEFTWARD! We forgot this after 1994, and look where it has gotten us.