Stock Market Gives Stimulus And Bailout Plans A Big “Thumbs Down”

thumbs-down.jpgThe markets responded today to the passage of the stimulus plan, backed by the President and majorities in Congress, and the Obama Administration’s bank bailout plan with a complete lack of confidence, falling 5%. Many investors fear that President Obama and Congress are simply capitalizing on the current recession as a way to pass the largest spending bill in history under the disguise of “stimulus.” One investor today reminded me what the President’s Chief of Staff, Rohm Emanuel said in October, “Never let a good crises go to waste.” While President Obama campaigned on the platform of “Real Change,” investors apparently feel that it’s really ‘business as usual” in Washington DC, at best.

The question not being asked by the media is, “How are we going to pay for this?” The decline in the markets today is an indication that investors fear the spending bill will not result in significant short-term spending, but result in increased taxes, inflation, and dampened future economic activity.

President Obama has repeatedly called upon passage of the stimulus bill to prevent a “crisis from turning into a catastrophe.” He, and most in Congress, forget it was government intervention in the form of higher taxes that helped turn the severe recession of 1929-1931 into a depression and took the stock markets 25 years to recover.

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3 Responses to Stock Market Gives Stimulus And Bailout Plans A Big “Thumbs Down”

  1. knute knudson February 10, 2009 at 4:21 pm #

    I don’t follow this as closely as you do, however, wasn’t the drop in the market really due to the disappointment in the bank bailout plan outlined by Geithner this morning. If anything, the street is disappointed that the stimulus plan is not large enough. I mean you are far wiser than me in such matters, however, it seems to me that the market has baked in the stimulus plan at roughly some equal compromise between the Senate and House numbers versions. Any reaction to the stimulus would have occurred many days ago in my humble opinion.

  2. Rick Kahler February 10, 2009 at 5:29 pm #

    Knute: You make some good points, as usual. One could argue that the run up on Friday was due to the announcement of having enough votes for the stimulus plan and that all the drop today was about the lack of clarity around the bailout of the banks. I have a hunch it was a bit of both. I am more convinced that investors are more concerned about where the money is coming from and what effect that will have on their finances and portfolios than the short term pop.

  3. Bruce Kern February 22, 2009 at 6:41 pm #

    Rick, THANK YOU for, what I believe, is the correct view of the “spending plan” put forth by the present administration. The question I pose to others is, “Where is the $ coming from?” It will come from those who’ve been $$ responsible to “enable” those who’ve not. The “it’s- not- my- fault” folks will be allowed to continue to have the government sucker in their mouths. According to my reading of the Constitution government is supposed to work for the people and not vice versa which is the direction we are heading that the liberals are not pointing due to the fact of their heavy investment to our current president. Mike Huckabee, being interviewed by Sean Hannity, said it this way, ” The previous generation sacrificed themselves for their children. Our generation is sacrificing our children for ourselves to avoid being held accountable for horrifically poor decisions with catastrophic results.”