October 11, 2008

IBD: Market Dive Due to Impending ‘First Socialist President,’ Taxes, Protectionism

IBDeditorialsPic1008There has been an unreality in the reports on the falling stock markets for at least the past 10 days. Each day’s plunge seems to have been exclusively due to the “global economic crisis” and/or the supposed “freeze on credit.”

Oddly enough, the admittedly small bank where I have my business accounts is having absolutely no problem funding mortgage, home-equity, and other loan applications from qualified borrowers — a fact I confirmed just before posting this entry. With all due respect to the global business press, if there’s truly a “freeze,” how can that be?

I’ve put forth an alternative explanation to the media meme a couple of times this week myself, but an editorial at IBDeditorials.com yesterday brought out a major element of what I have been saying much more forcefully and articulately. Remarkably, though the possibility seems pretty obvious to me, and I suspect many others, I have seen no one in the business press covering daily market events even mention the obvious and quite likely alternative that follows.

The editorial, “Investors’ Real Fear: A Socialist Tsunami,” teases with the plaintive question, “What is it about the specter of our first socialist president and the end of capitalism as we know it that they don’t understand?”

The editorial’s body begins thusly:

The freeze-up of the financial system — and government’s seeming inability to thaw it out — are a main concern, no doubt. But more people are also starting to look across the valley, as they say, at what’s in store once this crisis passes.

And right now it looks like the U.S., which built the mightiest, most prosperous economy the world has ever known, is about to turn its back on the free-enterprise system that made it all possible.

It isn’t only that the most anti-capitalist politician ever nominated by a major party is favored to take the White House. It’s that he’ll also have a filibuster-proof Congress led by politicians who are almost as liberal.

Throw in a media establishment dedicated to the implementation of a liberal agenda, and the smothering of dissent wherever it arises, and it’s no wonder panic has set in.

And there’s more (bolds is mine):

….. All the while, it ensures that nothing — absolutely nothing — will be done to secure a sufficient, terror-proof supply of our economic lifeblood — oil — a resource we’ll need much more of in the years ahead.

The businesses that create jobs and generate wealth are already discounting the future based on what they know about Obama’s plans to raise income, capital gains, dividend and payroll taxes, and his various other economy-crippling policies.

The editorial further notes that 100 economists, including five Nobel winners have signed a letter warning against Obama’s proposed high-tax, protectionist plans. Have read about that anywhere else?

The editorial’s shortcoming, sadly more than minor, is that it does not assign any blame to current actions already taken or under consideration by Congress, the Treasury Department, and the Bush Administration. These would include the passage of the so-called “bailout” bill a week ago, and the possibility that the government will take preferred equity positions in certain banks and insurance companies.

Stock values are fundamentally based on discounted cash flows relating to a company’s expected future earnings. Government interventions in companies’ operations have almost always led to reduced, if not disappearing, earnings, simply because profit is no longer the primary driving motive. The massive proposals currently under consideration are especially dangerous in that respect. If earnings expectations dive, so do stock prices. Those, more than an economy that grew by 2.8% in the second quarter, seems to be a more plausible explanation for the recent steep declines in the equity markets.

Yet the day-to-day business press seems to be in lockstep ignoring what IBD has plausibly raised. Why?

Cross-posted at NewsBusters.org.

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11 Comments

  1. [...] Cross-posted at BizzyBlog.com. [...]

    Pingback by IBD: Market Dive Due to Impending ‘First Socialist President,’ Taxes, Protectionism « A Free Voice — October 11, 2008 @ 3:05 pm

  2. Socialist president!? Did I miss Obama’s call for government takeover of the means of production? I thought that was strictly a Bush/Paulson/banking thing.

    Comment by Tony B. — October 11, 2008 @ 4:19 pm

  3. #2, the corrected link, with full text, as opposed to commentary concerning the text, which is all that resides at your link, is right here.

    Your link has been removed to eliminate confusion and misdirection.

    How many Nobel laureates have signed on to Obama’s nonsense?

    As to being a socialist, three words: The New Party.

    But I will add that nationalizing health care IS a govt. takeover of the means of production in 15% of the economy.

    Criticisms of Bush, Paulson, and Congress have already been lodged in the post above. You act as if they weren’t. How typical.

    Comment by TBlumer — October 11, 2008 @ 7:07 pm

  4. #2, I apologize, your latest comment was accidentally deleted. If you want to resurrect it, you’re welcome to.

    If you’re referring to the Economist’s unscientific poll of economists, that’s been thoroughly debunked in the NewsBusters cross-post comments.

    The one and only reason for the redirect was that YOU misrepresented that YOUR link was THE letter from the economists. It wasn’t, and IIRC didn’t even contain a link to the letter. Especially if it didn’t link to the actual letter, it was a fundamentally dishonest comment, and in reality calls for an apology. Waiting …..

    And again, how many Nobel laureates???

    And while we’re on socialism:
    - Karl Marx: “From each according to his abilities, to each according to his needs.”
    - Barack Obama (properly filtered): I’m going to tax the top 5% of earners, and I’m going to give extra money to the 30%-40% of the population that pays no income taxes.

    Comment by TBlumer — October 12, 2008 @ 7:46 am

  5. What’s the point? You altered my first comment and deleted my second. Sorry to interfere with your fantasy world.

    Comment by Tony B. — October 12, 2008 @ 10:34 am

  6. #5, it was an accident. I’ve accidentally done it at least twice to Large Bill, with whom I largely agree.

    You have read this blog enough to know that. If you want to persist in your fundamental dishonesty, please take the opening you’re appearing to give yourself and take it elsewhere. At this point, you won’t be missed.

    And you still owe me (and readers) an apology for the misdirect on the economists’ letter. I’m inclined not to post any more of your comments until I get one.

    Scratch that. I’m not “inclined,” I’m demanding an apology. This is my place, and I don’t allow people who think they can cleverly vandalize it as you just attempted to.

    Comment by TBlumer — October 12, 2008 @ 10:48 am

  7. Tom, regarding the statement you asked, “Have read about that anywhere else?” As I had read it somewhere else, I responded with a link to it, and I accurately stated that there you would find a link to the statement itself. Check it out: http://blogs.tnr.com/tnr/blogs/the_plank/archive/2008/10/10/mccain-s-not-very-big-guns.aspx

    I know you don’t care for my point-of-view, but I’ve always expressed it respectfully and honestly. Ban me if you must, but be let’s be honest about why.

    Comment by Tony B. — October 12, 2008 @ 11:33 am

  8. #5, you said that THE letter was at THE link. YOU lied, and YOU know it.

    YOU owe me an UNCONDITIONAL apology (“I was wrong, I am sorry,” PERIOD), and without it, your comments won’t clear.

    That, “honestly,” is my position. The choice is yours.

    Comment by TBlumer — October 12, 2008 @ 2:41 pm

  9. #5, I don’t believe you wrote what you said you wrote.

    But, if I am wrong, I am sorry. I struggle to find a reason other than blind faith that I should trust you.

    However, if my actions and style are as “immature” as you claim in your unposted comment, you can spare yourself the clear agony you suffer from visiting here and depart the premises with a clear conscience.

    Comment by TBlumer — October 12, 2008 @ 5:34 pm

  10. Sir, I don’t lie, period. And I do think name-calling is juvenile, at best, and often inflammatory.

    I accept your apology, and I respect the fact that, unlike many conservative bloggers, you allow some commenting to your posts. Your response to my comments, however, is often over the top. I’m certain we can both do better.

    You have now deleted so many of my posts that it appears you’ve been conversing with yourself in this thread. People will begin to wonder about you if the censoring doesn’t stop.

    What on earth spooked you so much about this link?
    http://blogs.tnr.com/tnr/blogs/the_plank/archive/2008/10/10/mccain-s-not-very-big-guns.aspx

    Comment by Tony B. — October 12, 2008 @ 11:01 pm

  11. #10, that’s fine, and I agree we both can do better.

    The TNR post angered me because it takes more than a little nerve for a bunch of punks at the Plank to call a group that includes FIVE Nobel laureates “not very big guns.” The guns actually don’t get any bigger than that. They “somehow” overlook mentioning even the existence of the Nobels, so that readers who don’t go to the link think it’s only a list of hacks.

    Comment by TBlumer — October 13, 2008 @ 8:08 am

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