CNBC news anchors have reached a new high in politicizing daily market reporting.
Regular readers of "A Dash" are well aware of the danger of inferring causation when two events occur simultaneously. In a market environment where we have intra-day moves of five percent, often with no apparent reason, it is silly to speculate about a gain or loss of 1%.
Today's Example
It is dangerous to confuse your political views with your investment decisions. Most financial journalists do not distinguish between analyzing events and offering opinions. Let us turn to today's example.
President Obama was making a speech to the graduating class at a police academy in Columbus, Ohio. While discussing today's terrible employment numbers, and the total job loss during the recession, he observed that the stimulus package had saved the jobs of this class. Avoiding impending budget cuts in state and local government was part of the package for a simple reason: Most states have balanced budget requirements, constitutional or otherwise, and the federal government does not. State policy is pro-cyclical, with increased spending in good times and lower spending (and perhaps higher taxes) in bad times. This aspect of inter-governmental fiscal policy was addressed as far back as the JFK Administration.
The Obama speech was exactly what most investment pundits were asking for just a few weeks ago. The chorus was that he was too negative, a note struck to get the stimulus package passed. Now he is trying to restore public confidence and get people to look ahead. Whether you like Obama or not, and regardless of one's opinion about the stimulus bill, this is what we are going to see. It is a textbook example of Presidential leadership.
If this is the reality, what does it mean for the economy and the markets?
The CNBC Reaction
Starting their daily program on CNBC, Melissa Francis and Larry Kudlow began as follows:
Francis: ...Stocks had been higher, and then as President Obama was speaking, not surprisingly the market fell. It's down 30 points now. It had been positive before he came on and started speaking....
Kudlow: I didn't hear the word "capital formation" in his talk, Melissa.
Francis: No, or tax cuts, I would think.
Kudlow: Tax cuts. I didn't hear that. Stocks are off more than 20% since he took office. Is he to blame for the weakening economy and the stock sell-off?
Our Take
We highlighted the excellent Jon Stewart segment on this topic as part of our series on why the market cannot find a bottom. The financial punditry is setting up an unrealistic expectation about the content of every Obama speech. Would Larry Kudlow really speak to the graduating police officers on the topic of "Tax Cuts and Capital Formation"?
Well.....maybe he would!
