Another blood bath is underway on Wall Street today. As I type this, at 1:55 PM EDT, the Dow is down close to 350 points and 98% of S&P 500 stocks are trading lower according to CNBC. Oil is down $5.65 a barrel at the moment, approaching $86. How can this be? I thought the brilliant Obama economic team had gotten us out of the ditch or something. Just yesterday Debbie Wasserman Schultz, DNC chair and deep economic thinker, told equally deep economic thinker Al Sharpton that “we’re continuing to get this economy turned around“. Also yesterday, White House spokesman Jay Carney averred “we do not believe that there is a threat there of a double-dip recession.” Well that’s good to know. Crisis averted, no doubt due to Obama’s brilliant leadership on the debt-ceiling deal.
The reality, of course, is quite a bit different. But then none of the aforementioned individuals are known for having a close relationship with reality. Today’s collapse on Wall Street contradicts Team Obama’s fantasy-based optimism. Although no economic indicator is infallible, the stock market has often been a fairly reliable leading indicator. That is to say, it leads the market. We can expect the market to tank before the economy does or, conversely, to begin rising before the overall economy turns around. In a piece today at Commentary, John Podhoretz explains why the dramatic sell off on Wall Street is yet another indication of the merits of Obamanomics, and that savvy investors may be in the process a pricing a doube-dip recession into the market:
With the Dow Jones and SP500 on a downward slide so dramatic that we might see trading curbs installed before the close of day, talk in political circles has turned mordantly to the debt-ceiling deal—about which no one is enthusiastic and which therefore is already serving as an ideal scapegoat for everything that might go wrong over the next month. That’s sheer provincialism emanating from the political chattering classes. In fact, the debt deal came to fruition at exactly the same time as a series of devastating economic reports that indicate we will be lucky if the current moment is only a “slowdown” and not the beginning of—maybe even the middle of—a double-dip recession. You don’t need an economics degree to see the disaster in these numbers. Lower consumer confidence means less consumer spending, which means less demand, which means less economic activity, which means no improvement in employment figures and very possibly a worsening of unemployment. What we are seeing on Wall Street this week is that a coming recession is being “priced in.”
Businesses are not comfortable hiring, taking on new projects, or doing much of anything because they have no way to predict what kinds of policies politicians will enact over the next couple of years and the effect those policies will have on them. What I’ve been hearing over the past week from major investors in the markets in New York is that to a man, CEOs and others with whom they speak regularly are frightened and paralyzed when it comes to new projects. They all echo the alarming things said by the casino magnate Steve Wynn, an important Democratic donor: “I’m saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right.”
In a post a couple days ago, I predicted that the spate of bad economic news with which we’re being bombarded on a daily basis will cause Obama to pine for the good old days when the debt-ceiling negotiations dominated the news cycle. I stand by that prediction.
Update: After the dust settled today, the Dow had plunged nearly 513 points, putting all three major market indexes into negative territory for 2011. Today’s carnage capped a string of nine straight losing sessions for the Dow, during which the index lost 10.5% of its value. The nine consecutive losses is a record of futility not seen since the Carter years. Meanwhile at the White House, while his boss attended a cookout, Jay Carney asserted “the White House doesn’t create jobs.” Er…not this one, heh. This surprising lucidity on Carney’s part, however, would certainly seem to contradict Obama’s claim that Porkulus saved or created 3 million jobs, no?
Update II: (h/t TT) Hilarious. While Obama was at his cookout today, Carney struggles mightily to explain to Jake Tapper what, precisely, the President is doing or planning to do about jobs and the economy. Video and transcript here.
Update III: Flashback:
“We are poised for progress. Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again,” President Obama said in his 2011 State of the Union address.