Politics and Markets Update

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!

Comments

[michael]

CNBC is so pathetic. If it werent for Erin B. i wouldnt bother turning on. It is unfortunate that so many people take them as being spot on.

[barry]

President Obama didn't mention drugs or the Betty Ford Clinic either.

[Adam]

caught that moment too, what a joke. As a professional, you try to advise people to put biases aside, and think objectively. Then they turn on the TV and see that nonsense.

[adasds]

This thing has gotten so bad that Kudlow has started snorting his cocaine through rolled up Fives instead of Hundreds. Awful.

[Brian]

Man, Larry is like talking doll who says the same thing over and over and over. I think he would talk to graduates about tax cuts at their ceremony... I think he'd preach tax cuts in virtually any situation...

[VennData]

The apoplectic CNBC demographic has seen that flipping Baidu just isn't not fun anymore. Have they learned a lesson or are they looking for someone to blame so they can continue to day-trade?

CNBC doesn't want to lose their viewership as they did during the post-dot-com meltdown. They also need someone to blame. This symbiosis gives birth to the blame-Obama meme.

Rather than becoming apoplectic, their viewers should become apolitical and realize the long-term implications of this pattern and change their hobby.