Obama stocks, McCain stocks

Trust me the top will always get their share. They will just adjust their behavior to avoid paying taxes. They will still have enough money to buy the best healthcare, out of the country if need be. Social Security is something they don’t need.
Those who will be hurt will be the middle class. They will be the ones neither rich enough to fend for themselves and not poor enough for the government to qualify for what little benefits will be left.
The adjustments are going to be painful to say the least and I am afraid the majority of the population is ill prepaired for the financial storm that lies ahead.
To put those numbers I stated in perspective the total Gross National Product of the entire U.S. economy is 14 trillion. So we currently are underfunded by 7 times what the total goods and services of our country is worth in order to deliver on the promises of our current entitlement programs. That my friends is frightening. We have the perfect storm developing and no direction from the people who we elect (Congress) as to how we are going to deal with it. Partly because nobody is going to like the answer.

We tried ‘trickle down’ policy and it looks like it never trickled all the way down. So we will try a new one ‘Feed the root’ and let the top layer get their share at the end (if any left).

I just listened to a audio of a speech that the Chairman of the Federal Reserve in Dallas made recently and regardless of who becomes President there are some staggering numbers he used associated with what we have currently promised under entitlement programs:

Unfunded future Social Security benefits 14 TRILLION

Unfunded Medicare/Medicaid benefits (all parts) 85.2 TRILLION

Then he put into perpective what it would take to fully fund these programs and deliver the benefits that we currently have promised:

Coporate and individual income taxes would need to be raised 68% and stay there indefinately

Discressionary spending (Defense, Environmental, Education) would need to be cut 97%. Basically all eliminated. Also indefinately.

The total responsibility today for every man, woman, and child in the U.S. based on 305 million population is $330,000 each or $1.32 million for a family of 4.

Now forget about the credit crisis and think of the much bigger crisis that we are facing if our future President and Congress does not address this issue.

Basically we have committed to 99.2 TRILLION in benefits to future generations. We have no choice but to make some painful benefit cuts or have some incomprehesible tax increase if we are to deliver on these promises. Unfortunately no one in Washington has the courage to admit it.

McCain is much better for stocks.

For those of you who vote Obama, wait until 2 years from now…you will be at the soup kitchens begging your way.
This baby boomer will not be providing any charity.

I am not advocating which candidate would be better for the stock market and the economy. Just what policies. That is the real question. First of all, government or the president does not have the ability to create jobs. Businesses create jobs. Government can spend money to put people to work temporarily, but the job is not permanent. You can use the word “invest” but it still doesn’t change that fact. Government can give businesses incentives to create jobs, but cannot create jobs in themselves. Redistributing wealth does not change the macroeconomics it just moves money from one group to the other. It is really quite simple when you think about it, Joe has 50 dollars and Jim has 150 dollars. You take fiftey dollars from Jim and give it to Joe and he will be better off. But Jim is not. You can argue that Jim could afford to give it up, but it is irrelavant from a macroeconic veiwpoint. The net result for the economy is zero. It makes no difference if Joe spends the money or Jim. If you give Jim AND Joe a tax break of $25 then they both have more money to spend and the net effect is positive. Why that concept is so hard to grasp is beyond me. As for GM, the problem is not as much of the demand being destroyed. A lot of cars are still being sold, just not by them. It is funny how capitalism and a free market society takes care of things like that all by itself. You make a product that people want and a funny thing happens, they buy it. That is what has made this country what it is today. Unfortunately our government is making those decisions now. They are saving companies that should be left to be taken over or die with no game plan on who wins and who loses. They will help GM buy Chrysler and 30,000 jobs will be lost and GM will suck the 11 billion in cash out of them with no guarantee that they will still survive. Instead we should be encouraging a stronger partner to buy Chrysler with less overlap in manufacturing in the U.S. and save a lot of those good paying jobs. The money would be better spent helping GM right istself instead of aquiring companies with the same problems they have.

Reaganomics or “supply side” economics is officially dead. The primary tenet of supply side economics is that “supply creates its own demand”.

The problem is that in the process of catering to big business and the wealthy, the supply siders forgot about everyone else. Perhaps it was somebody else’s responsibility to keep wages rising and purchasing power strong.

Now, businesses like GM have more supply than they could ever want and there is no demand for the products – so prices must fall. However still there are no sales because demand has been destroyed. This is because if they have jobs, people are fearful of losing them. The nice to have things like consumer products are being “crowded out” by the need to have items, like FOOD!

Obama will be better for the economy because he will be the President with the vision of creating good jobs (not just Wal Mart jobs or E-Bay businesses). When Americans are working again the demand will begin to rise. Vote for McCain and we will get more of the same!

The Trickle Down Theory [TDT] has been in place for some time now and it has run adrift into the law of diminishing returns. The TDT requires that wealth is distributed generated at its highest amount for those taking the highest amount of risk, but the missing piece to this argument is that the rewards must pass down from the top to the bottom. As evidence that this is not occurring, one needs only to look at the industries over the last 8 years. Look at the meltdowns first passing through the dot-coms and now to the financial sector, we have seen where greed has gone wild and wealth is no longer trickling down. Sure, there were accelerants with Fannie Mae and Freddie Mac, but my argument is bigger in the reality that their place was legislated into existence and hearded by free market attitudes.

I find that persons advocating we return to the mantra of the trickle down are akin to folks who would ask us to return to the stone ages. I think we have grown in intelligence enough that we all advocate that we must now change our entire approach to manage our economy better. We should have learned the lesson that “Greed is out of control” and to perpetuate that model will continue us within the stale markets we find ourselves.

In closing to those points, I understand why Obama presents a lot of fear to conservatives as he does suggest that we find a means to take the economy back to the original thought surrounding TDT. Note, that was thought, not theory. In fact, TDT could be considered a derivative of “spreading the wealth”, but was appropriate for the time it was implemented. Now, the markets have moved very far to one extreme and we need to make some stark changes.

For those who do not want to have the “wealth distributed/spread”, feel free to use your own verb, my argument to you is that without everyone spending a little, no one makes any money. Everybody needs to have money to spend to make a free economy work. The unfortunate issue is that our economy has had to live off credit over these last 8 years. [We have seen credit balances grow, which further solidifies my suggestion that real wealth was not spread.] We are now out of credit and the actual wealth has been absorbed by a small amount of the population. If we do not find a means for people outside of the wealthy to generate income (not loans!), we will remain in the quandary we presently find ourselves in. The Republican approach of tax less (it takes money in hand to benefit from this) and allow free market to reign is missing some teeth in Greed has not been put in check.

The stock market has done better under Democratic presidents only when under a Republican Congress. This puts the necessary checks and balances in place to prevent extremes from one party or the other. As for Reagan and the trickle down theory there has simply NEVER been a time since his presidency that we have experienced the kind of growth in jobs, income, GDP, increase in government revenues and just about every economic measure. It’s a fact, look at the numbers. Contrary too what people believe, lower taxes actually increase government revenue because it spurs investment in capital and job creation. The issue is that government spending has almost always outstripped the increase in revenues from growth with additonal spending. Rasing taxes has never been a solution to spur growth especially during a recession. That is simple econiomics. So the argument shouldn’t be which party is better for the stock market, but what policies are better to spur economic growth that will increase profits of business and hence shareholder value. Regardless of who is president,you cannot tax and spend your way to prosperity and if we continue to do what we are currently doing we are going to have no choice but experience a long period of high taxes, high inflation, little growth, and government programs that will be impossible to fund. It’s like the bumper sticker says “reality sucks”.

I conclude, after examining their platforms, that Sen. McCain’s programs will probably be better for the stock market, and perhaps a lot better.

Raising taxes on capital and business, as Sen. Obama wants to do, is a 1 – 2 punch directly to the stock market. First, EPS would go down 17% due to higher corporate income taxes. Second, the remaining returns to investors would go down 12 to 15%. Put those together and you have the recipe for an approximate 30% beating.

The other critical point I see is the Sen. McCain’s energy program [build, dig, and drill] will create hundreds of thousands or millions of jobs in heavy industries such as drilling, heavy machinery, heavy construction, cement, steel, fabrication, railroads, mining, and others. All of those will be well paying jobs right here in America. They have to be far better for the economy than a collection of make work jobs in “green” energy and will have the bonus of putting downward pressure on oil and gas and gasoline for the next several decades.

Democrats usually are better for the stock market. I don’t know why. With the new talk from democrats of taxing our 401K money we put in, I hardly see the stock market doing well. What is the incentive to keep saving if I pay taxes on the money to put in 401K and withdrawal when I retire? Should I just depend on democrats for Social Security? I don’t like this spread my income around very much. Why should I even work at all? I’ll be punished for success while others are rewarded for laziness. Doesn’t make sense to me.

Providing we still have a place to invest when this is all over I think it really does not matter who is in the White House. Obama has just be endorsed by Iran so maybe more overseas investors will invest into the US instead of building nuclear plants. McCain could be the reason for the season since he will spend more for defence that the US will surely need because most emerging nations will most likly be in a war or the beginnings of. It is a plain fact of life that if you have nothing, look to your neighbor and take over his country to ease the pain of the one you have. Look to the East if you think I am a bit gloomy about wars and rumors thereof.

Obama is BAD for an economy built on capital flow into and thru businesses, his tax structure;s will cripple business with less jobs and more overall income taxes we all will have to pay. I say and for what…….. its to take care of all the free loaders who want a free lunch at usa countries expense. Anytime you pull another $860 billion dollars of tax revenue to support democratic driven programs, you get half as much as if you put to work into our businesses to create out-worth growth.

THIS IS A TOUGH QUESTION. I DON’T BELEIVE ANYONE CAN PREDICT THE NEXT MOVE.

Thomas,

McCain is NOT the answer. Laissez-faire (the correct name for Reaganomics) doesn’t work because it overconsolidates capital and depletes the demand side of the economic proposition.

The laissez-faire philosophy adhered to by McCain and Bush is all about capital formation,has made a great deal of progress toward impoverishing the general population of the US. Without a balance between capital formation and income distribution, the consumption side of the economy has been driven to rely more and more heavily on making promises of future payment, at the same time as income erosion has undercut their ability to keep those promises. It is the ability to make and keep promises of future payment that defines the credit market; if you undercut income enough, the value of the promises in which credit markets trade will disappear. (Does this sound at all familiar?)

The appearance of a boom during the early 21st century was entirely based on borrowing against diminishing future incomes, and was, therefore, an illusion. The underlying free-market/free-trade policies were flawed in that they set up a situation in which American workers are driven into dollar-for-dollar competition with the world’s poorest people, destroying the Americans’ earning ability, and leading directly to the collapse of the credit markets. Compared to this issue, the costs of taxes and new regulation are insignificant.

Because McCain doesn’t understand the fundamental structural flaws in laissez-faire, he will make decisions that will exacerbate the weakness in our economy, much as Hoover did.

The economy can support taxation of capital very easily. It cannot support the impoverishment of the demand side of the economy, which has been imposed as a result of thoughtless obsession with capital formation and cost-cutting. This is a structural weakness in the economy Mr. McCain is poorly equipped to correct.

Karen, I understand that there are a number of wildly over-levaraged hedge funds being liquidated right now, but these are not part of the $700 billion bailout; they’re not banks, and they’re not even non-banks. This appears to be another reason that Lehman was liquidated, in addition to their being a subject of investigation for criminal activities.

But, back to bank bailouts, I don’t see how we get the feds demanding $700 billion bailouts for losses that are much, much smaller ?

The stated bank write-offs already exceed the $700 billion; there can’t be that much left to cover. The only thing I can guess is that the banks and especially the ‘non-banks’ were speculating in derivatives, in which case the losses could be in the many $ trillions and we should not bailout them at all.

Paul, I think there is a story in here somewhere. If you could offer up an explanation in this or a future column, it could be helpful to us.

Posted By Mike, Redwood City, CA: October 22, 2008 3:09 pm

I will answer your question with one word : leverage.

Hedge funds have leveraged dollars by factors of 100 at times. That means if 1 percent of the loans go bad the whole original investment is wiped and the whole things has to be unwound. which means as banks were leveraged 30 to 1 even 50 to 1 in the US and the unregulated Hedge Fudns up to 100 to 1 this means that when you unwind them that wealth they generated disappears into thin air.

We are watching the total destruction of at least 2/3 rds of the world’s wealth right now.

McCain is the answer. In my opinion, by increasing taxes on businesses (via increased income taxes) and business owners (via increased capital gains taxes on both public shareholders and small business owners), Obama will discourage capital investment and employmnent. Can any Obama supporter explain why this is not the case (and pointing to the current banking crisis is not an answer)?

Looking at the 72-year period between 1927 and 1999, the study shows that a broad stock index, similar to the S&P 500, returned approximately 11 percent more a year on average under a Democratic president versus safer, three-month Treasurys. By comparison, the index only returned 2 percent more a year versus the T-bills when Republicans were in office.

http://money.cnn.com/2004/01/21/markets/election_demsvreps/

But Democrats, it turns out, are much better for the stock market than Republicans. Slate ran the numbers and found that since 1900, Democratic presidents have produced a 12.3 percent annual total return on the S&P 500, but Republicans only an 8 percent return. In 2000, the Stock Trader’s Almanac, which slices and dices Wall Street performance figures like baseball stats, came up with nearly the same numbers (13.4 percent versus 8.1 percent) by measuring Dow price appreciation. (Most of the 20th century’s bear markets, incidentally, have been Republican bear markets:

http://www.slate.com/default.aspx?id=2071929

There is one category that the Republicans beat the Democrats in hands down: DEBT CREATION! Since 1981 the Republicans have increased the National Debt by over 1000%.

according to the washington post writers Al-Qaeda wants McCain to win and that would push stock prices into the drain as America gears up for Iraq part II. I see stock prices falling no matter who is elected. We are basically in free fall with no net.

Quote :

The Web commentary was one of several posted by Taliban or al-Qaeda-allied groups in recent days that trumpeted the global financial crisis and predicted further decline for the United States and other Western powers. In language that was by turns mocking and ominous, the newest posting credited al-Qaeda with having lured Washington into a trap that had “exhausted its resources and bankrupted its economy.” It further suggested that a terrorist strike might swing the election to McCain and guarantee an expansion of U.S. military commitments in the Islamic world.

“It will push the Americans deliberately to vote for McCain so that he takes revenge for them against al-Qaeda,” said the posting, attributed to Muhammad Haafid, a longtime contributor to the password-protected site. “Al-Qaeda then will succeed in exhausting America.”

Obama win will give tech stocks a boost…

Is this a serious question? Does any serious person even argue this? This is the problem with our country right now – press people. who have no concept of how our economy works ask inane questions and then hope they get the right response. There is no one that supports Obama that seriously thinks he will be good for the market – No one! If you are to argue that higher taxes and wealth redistribution are good fro the market you should have your degree revoked (if you have one). You dont create jobs by taking money out of the economy and putting it into the hands of politicians – it has never worked and ot won’t now.

Paul, I know that you read these posts. If you’re in a good mood, I’d like your answer to a question that puzzles me:

First, the background: since foreclosures are only running 1.5 million per year and the average home price is only about $200k, even if the mortgages are for 100% of the prices, the total mortgage losses in foreclosure if the homes sold for $1 would be ($200k)x(1.5 million) = $300 billion per year. Even if the mortgages were for 2x the average price, this would only be $600 billion. If the foreclosed homes sold for a lot more than $1 (hopefully they will, and they seem to sell for ~50% of the mortgage/home price), then the mortgage losses would be much less.

So, the question is: how do we get the feds demanding $700 billion bailouts for losses that are much, much smaller ?

The only thing I can guess is that the banks and especially the ‘non-banks’ were speculating in derivatives, in which case the losses could be in the many $ trillions and we should not bailout them at all.

If you can say, what is going on ?

Steve, are you trying to tell me that the credit freeze, global recession, significant drop in consumer confidence, and terrible earnings and guidance coming out has nothing to do with the poor stock market performance?

I don’t think it matters that much who wins, to be honest.

Stocks are going down because OBAMA is ahead in the polls. If McCain pulls off a miracle- the DOW goes up $3,000 points the day after.

Clearly stocks will perform better in the long run if Obama wins. McCain is out of touch. He still believes that the market can fix everything and that the current meltdown is because of too much government, when clearly it comes from the lack of government regulation and oversight. More effective regulation will lead to an increase in investor confidence.

McCain said himself that he would continue the same economic policies of President Bush (the trickle down theory) and we all know that that doesn’t work so I cannot see stocks improving any under McCain.

Stocks will perform better if Obama wins because the economy will perform better and company earnings will stop shrinking and start growing.

Infrastructure and energy companies will do well under Obama, who will have strong support from Congress. Drug and health insurance companies will chafe under cost pressures from Medicare reforms.

It’s difficult to think of a sector that will do well under McCain: his trickle-down policies that date back to Reagan just don’t work. It’s too bad that it took 25 years for people to figure it out. Also, if McCain wins, he will not have support from Congress. In fact, he will receive a lot of bills from Congress that he will need to sign but hate to sign. All bills originate in the House.

This may be more like Roosevelt in 1932 than we realize, just on a much more compressed scale. My grandparents lived through that cash-only economy for about 20 years, and I hope that we don’t have to do so. Good luck.

Stocks will perform better if Obama wins because the economy will perform better and company earnings will stop shrinking and start growing.

Infrastructure and energy companies will do well under Obama, who will have strong support from Congress. Drug and health insurance companies will chafe under cost pressures from Medicare reforms.

It’s difficult to think of a sector that will do well under McCain: his trickle-down policies that date back to Reagan just don’t work. It’s too bad that it took 25 years for people to figure it out. Also, if McCain wins, he will not have support from Congress. In fact, he will receive a lot of bills from Congress that he will need to sign but hate to sign. All bills originate in the House.