First the good news: following every Presidential election, in the 10 elections since the Richard Nixon victory of 1968, the stock market has gained an average of three percent in the months of the November and December. As I wrote yesterday, due to the beating the market took in October, creating a severely oversold condition, the stock market is in a good rebound mode. The traditional post- lection rally will certainly help.
On January 20, 2009, Barack Obama will be sworn in as the 44th President of the United States. I hope Mr. Obama is waking up this morning happy that the election is over and pumped to get on with the changes he promises are coming to America. Unfortunately, the economic reality will set in quickly for this young President.
My biggest concern during the election was the lack of financial background of both candidates. Neither McCain nor Obama have an economic background. Do they really understand the stock market? Have they ever studied the economic history of America and our past booms and busts? Have they ever run a business in America and tried to make that payroll when the money wasn’t there?
I truly believe in the theory that you need to have been there yourself to really understand the situation. I realize that the new President will have a slew of economic advisors by his side (Obama has thrown out the name of Warren Buffett as an advisor). But I’m very concerned about the lack of the economic/financial background at the top, regardless of which candidate won the election.
As I have written many times, the head of the Federal Reserve, Ben Bernanke, and the Secretary of the Treasury, Hank Paulson, are doing a tremendous job keeping America out of another Great Depression. But wasn’t it the Clinton administration that started the whole concept of getting more Americans to own their own homes? (Clinton actually started an agency with this task.) Wasn’t it the Bush Administration that did nothing to slow the property boom of the 2002-2005 despite the clear signs of excessiveness
that always lead to a bust?
The budget deficit for 2009 could be the first trillion-dollar deficit. Seventeen banks have failed in the United States so far this year, up from only three bank failures in 2007. Another 117 banks are considered to be in trouble. Manufacturing in the U.S. Contracted in October at the fastest pace in 26 years.
The year 2009 is shaping up to be a terrible one for the economy and the American people. Good morning, Mr. President.