New Market Analysis: The Obama Factor

By Richard Miller Author, "In Words and Deeds: Great Speeches in History"

Among the variables experts use in predicting or explaining market action are the cost and availability of capital (e.g., interest rates), the integrity of money, (e.g., inflation/deflation), the strength of corporate earnings and what might be called the "X" factors -- wars, economic embargoes, threats to energy, supplies, and so forth. Most of what ails or strengthens markets may be traced to one or several of these factors.


I have come to the conclusion that the recent stock market rally is not so much a bear market rally as it is a reaction in support of the growing bipartisan disenchantment with Obama's spending, tax, and so-called stimulus plans -- or, as some contend, the lack of any clear plan. His competence is now being openly questioned, even within his own party; the market has already reached solid and unpleasant conclusions about his management skills. No surprise here. Other than running for president, Obama has never met a payroll in his life. Suddenly, he's entrusted with managing the world's largest payroll. It's all reminiscent of ancient times when 10-year-old kids suddenly found themselves as emperors of something, and had to appoint regents to run things until they grew up. Unfortunately for the nation, Obama's regents, such as Treasury Secretary Tim Geithner, are well-meaning but don't seem to be any better at managing than their boss.

As the banks strengthen, they are beginning to voice regret about accepting TARP money -- and disclaim the need for more. This means that stimulus money is now seen as a liability and not an asset, quite a reversal from last fall when Bush-driven hysteria persuaded Congress to pass the first bailout. Obama has sought to prolong the hysteria, but it's worn too thin to be effective.

The larger point is that if one overlays the Dow or SP 500 against Obama's weakening poll numbers, it is clear that as he goes down, the indexes go up.

I predict that this relationship will soon become clear enough to justify its inclusion in any stock market analysis. A sad comment on an American president, but against any logic, wisdom or political smarts, Barack Obama decided to govern as a society-wide "transformative" president when all he was really hired to do was to fix the economy.

I'll put in investment terms: Shorting Obama is about the same as going long on the U.S. economy.