Is Obama’s Victory Killing the Stock Market?

November/13/2008 21:57PM
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The Dow has fallen 1,400 points since President- to- be Obama was elected. Is that a factor?

Can’t be, the economy is why he was elected. That’s what all the pundits say. If Bill O’Reilly says it once more there will be a national scream. This is all based on the polls. Before the TARP issue, McCain was leading, after McCain went off the campaign to save the country, he started dropping. Had to be the economy, right O’Reilly?

Could it be the Obama factor? First, GM is going down in flames. The UAW is quiet as a church mouse about this. No stepping forward and offering to make concessions to save all those jobs. Ford and Chrysler are just a step behind GM. Many intelligent investors believe Obama will pass card check his first month in office. This will expand the labor union illness that is choking GM to the entire universe of business in the U.S. Obama is on record that we need to help GM. He wants to tell them what kind of cars to make. Retool to make fuel efficient cars. That’s part of his bargain. 

There’s an old marketing joke about the company that spent millions to produce the most nutritious dog food in history. Packaged well and promoted well it got great distribution. Sales were 80% below projection. Retailers started to ship the product back. What went wrong? The dogs wouldn’t eat the dog food.

The Chevy Volt is supposed to save GM. This is the car Obama wants to put in the market. If you charge it for 6-8 hours it will take you 50 miles. GM is smarter than the company that made the dog food, they  know about the Volt, the dogs are not going to eat it. Obama doesn’t know that, nor do 80% of the dogs in congress. This is a scam by GM to get help. They say they will sell it for $40,000 and it costs $50,000 or more to make. They want government subsidies on every one they sell. This is over and above the subsidies they want to stay in business long enough to make a few. 

The investment community knows too much about the damage Obama’s platform can do to the economy.  They are sending a signal.

Here’s another example. In New York City 50% of the taxes came from 1% of the earners. Sound familiar? Guess what? Many of those 1% are either out of work or facing huge cuts in bonuses. Where will New York get the shortfall? New York state spends $14,000 per pupil on education. This is 60% above the national average. Their average Medicaid bill is twice the national average. So New York has big costs due to big union contracts and big social bills for education and health care. They have been taxing the wealthy to pay for these costs. But, the wealthy are getting less wealthy fast. The unions won’t stand still for wage concessions. The state and city won’t cut expenses. Where will that money come from?

Every day there is some more bad news. The investing public is connecting the dots. Aggressive tax increases, increased union activity in more non-union organizations, more costs for environmental programs , especially cap and trade, make for bad business.

Saving 3 million jobs in the auto industry by spending taxpayer dollars you don’t have, and will have less of in a faltering economy, even if you increase taxes, is a pay back to the unions for their $400 million dollar contribution to your campaign. Then, having the government tell the auto industry what kinds of cars to make will insure a dog food problem. That will mean chapter 11 later, but not before the unions got a year or more of someones money.

This is simply a chasm. The investment community is paid to see into the future in a cold analytical way. The voter is an emotional creature guided by a misguided media. Now that the votes are in and counted the cold eyed investors are voting. The only way Obama can stop this is to start talking. He need to decry card check, tax increases, and cap and trade. Won’t happen, he is committed to all. 

Let’s give the unions their $400 million back. It’s big a price to pay for a full blown depression for the next few years. One of their first card check targets is Walmart, one of the few companies doing well today. Let’s wreck them and screw up the price benefits they provide to the people who need them most. When we’re done with that, let’s mess things up for the 100,000 plus workers who are happy at the non union auto plants in the U.S. So much mischief to do, so little time.        

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Comments (3)

  1. Chris Johnson says:

    You wrote <<The Chevy Volt is supposed to save GM. This is the car Obama wants to put in the market. If you charge it for 6-8 hours it will take you 50 miles. GM is smarter than the company that made the dog food, they know about the Volt, the dogs are not going to eat it. Obama doesn’t know that, nor do 80% of the dogs in congress. This is a scam by GM to get help. They say they will sell it for $40,000 and it costs $50,000 or more to make. >>

    GM has already put substantial R&D into Volt for the last several years, so your claim that Obama is pushing GM to do this is false.

    Almost 80% of American commuters travel 40 miles or less for their daily commute. Driving a Volt would mean these commuters would rarely, if ever, have to buy gas. The electric charge necessary to fully charge the Volt is estimated to cost 50 to 80 cents. If they drive farther than 40 miles, the small gasoline motor kicks in to provide the electricity to power the car for an additional 500+ miles. The price for the Volt is currently estimated at $35,000.

    Hybrid vehicle sales have grown from basically nothing in 2000 to almost 330,000 cars and trucks in 2007. Toyota sold 76% of those; other Japanese automakers 19%. Only 5% were sold by American automakers. There is a market for these cars.

    Even if you put aside the global warming debate, the US has a massive problem with imported oil. We import some 35% of our oil from the Middle East. I fail to understand why you would be pooh-poohing an American company trying to help provide a solution to this major national security issue. Whould it be better if GM just continued to pump out Hummers that nobody wants to buy?

  2. David Enmark says:

    In response to Mr. Johnson:

    You are correct in pointing out how GM has spent substantial R&D money over the years but you failed to point out they were forced through federal mandates and subsidy incentives – Not market forces. Also, I am a bit confused as you first accuse GM of a scam to get help and then laud them for their efforts to "help provide solutions." Listen, the bottom line is GM can do what they want as long as its not with my tax money. If the VOLT is truly that good of a product it will stand on its on two feet. Only time will tell. The rest of the arguments with regard to global warming and oil consumption are irrelevant in a financially strapped company. The only thing that matters at this point is can GM produce products which consumers will want to purchase in enough quantities to save their company? And by the way, there exists a world of difference in the mind of the consumer between an hybird fuel vehicle and an electric/gas hybird. The market shows when you produce an electric/gas hybird product like the prius in which people have confidence in it does well.

  3. Audrina says:

    I admire what you have done here. I like the part where you say you are doing this to give back but I would assume by all the comments that this is working for you as well.

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