I just find it remarkable that a politician thinks it is appropriate to comment on equity valuations. Any time someone says market X is cheap, or expensive, they are basically saying that the collective opinion of the world's richest investors is seriously wrong. Given the number of smart professional investors who underperform the market, I would expect only someone with a lengthy (min 5 years) superior proven track record to feel that they are qualified and proven enough to say a market is mispriced. Let's put it this way. I would find it arrogant for Bob Rubin to say the market is underpriced, but at least he has had a career on Wall Street. What's more, Rubin is aware of the difficulty of valuing markets - in his book, he readily admitted he thought stocks were overpriced in the late 90s but felt he did not know how to predict when that might end i.e. he was humble. For someone like Obama who has *no knowledge whatsoever of the stockmarket*, to comment on stock valuations is arrogance of the most advanced and hubristic kind. I view this as an INCREDIBLY bearish signal. What it says is that regular middle class folk (what Obama was until a few years ago) think they know what they are talking about when it comes to the market, and that their confidence only rises when they get into positions of authority. This is ultra-bearish. It means that tens of millions of US professionals - doctors, dentists, lawyers, middle managers, teachers - think they have the first clue about investing or markets. It is equivalent to a bunch of CME floor traders thinking they know how to perform a heart transplant or root canal surgery. In other words, it is the height of arrogant stupidity and ignorance. Furthermore, it tells me that Obama doesn't have any humility about his own knowledge or abilities. Probably he has not had an experience in his life where he has tried something, been confident he was right, and then failed utterly and spectacularly. Every single long-term market operator has had that experience, that is why you never meet a long-term successful trader or investor who is arrogant about their market knowledge - stick around enough and you will always take a licking at some point. Obama's pronouncement means he has never had that experience. Just like Bush, this means he will be arrogant, and underestimate the chance of his judgement being totally mistaken. Bush's arrogance and ignorance was exposed by his approach to Iraq and foreign policy. Obama's will be either that or, more likely, the economic crisis. Basically this is just incredibly bearish for US society. It means the typical investor is still arrogant and wrong. It means their president is going to fuck up big-time the first occasion he has to engage in a chaotic, difficult situation. It means he doesn't understand the concepts Taleb talks about in the Black Swan. That is pretty darn scary. Obama is obviously more intelligent than Bush, but with this pronouncement he has shown he is not *wiser* than Bush. Before, I was thinking the S&P might hit 400. After this, maybe even 200 is possible.
I wonder if the Obamanation is buying stocks with HIS money. More likely he's just hoping the sheeple will step up and support the market so his administration doesn't continue to look bad in the shadow of a plummeting equity market.
Gees Cutten, you write the most amazing commentary. I always enjoy posts, ET should be grateful you are here.
I agree with you, Obama shouldn't be making comments like that, but to say regular middle class folk are stupid is a little out there. I think the market proved how much all the educated Banksters that ran AIG, Citigroup, LB, GS, BAC, the FED, I'm sure I left out several others, and all politicians that voted for the bailout know how to run a business. I thought insurance companies were all about risk and if so didn't any of these smart educated people take any classes about risk/reward or ethics? Too many highly educated crooks(BANKSTERS) are probably still making big wages when they should be getting fired!
He's joining the jawboning wagon. Made a rookie mistake in using circumstances to push through a legislative agenda for the democratic party. Now finding it difficult to shift stance in midstream. The hope card was squandered by flipping it over to fear - interesting that it was taken right out of the neocon playbook. <snip> Hey.... I disagree with the extent of your bearishness, with my original target about 550 now perhaps 400 is more likely due to the inexperience present. 200 is tough for me to fathom. However, I do agree with your argument.
Why would anyone with a brain listen to him or any other President/Prime Minister? He's only going to say one of two things - 1 - Say nothing on the matter, or 2 - Say buy because I believe in the long term prospects of America/The UK/France/insert your country here. It really does amaze me at how people cannot understand just how stage managed pretty much ALL comments are that come from politicians. STOP PRESS! California Senator says 'California is a great place to invest in' BREAKING NEWS! Florida Gov announces that with the fall in real estate prices Florida properties are starting to look unbelievable value.
Yes, because the president says to buy stocks, the SP must now decline to under 400. Makes sense to me! Man, if I only had such power over the market, I could make some serious money.