Has the Market Fully Discounted the Bush Presidency ?
What is it that the market is pricing in?
While partisans try to blame the crash on one or the other candidates, here’s something I have yet to hear any of the TV pundits discuss: Blaming it on the presidency of George W. Bush.
Let’s have a look at how various markets have priced in his 8 years in the White House, and what it might to markets going forward.
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Currency Markets are the world’s vote on US monetary policies
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S&P500 2001-08, weekly
Equities: Which Sell off do you hold the occupant of the White House Responsible for: The One that began prior to his arrival, or the one that began prior to his departure?
Chart courtesy of Fusion IQ, Bloomberg
I do not believe that the 2000-03 crash was a result the markets pricing in a Bush Presidency. However, one could certainly make the case that the past few years market action has been the result of his fiscal, tax, and spending policies.
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Oil Prices Respond to Energy and Military Policies
Two oil men in the White House, two wars, no conservation efforts, and no attempts to develop alternatives to Crude Oil:
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Gold, 2001-08 weekly
The Gold market is a store of value in uncertain times — what is it saying about the Bush policies?
Chart courtesy of Fusion IQ, Bloomberg
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Bonds: 10 Year Treasury, 1980-2008
Chart courtesy of Fusion IQ, Bloomberg
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Longstanding downward trend in rates was in effect since the Volcker Fed broke inflation in 1980 — recent Presidents (W, Clinton, Reagan) have all benefited from this trend
What are the markets really pricing in ? Might it be the W. presidency?
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Previously:
Pricing in a Bush Presidency (July 08, 2008)
http://www.ritholtz.com/blog/2008/07/pricing-in-a-bush-presidency/
November 4th, 2008 at 11:46 am
Thanks for reminding me how long this clown has been in office. How depressing!
November 4th, 2008 at 11:46 am
Agreed – it’s understandable that those willing to look closely at their policies and actions, would go negative on the clique that took control via that ignominious Supreme Course hijacking of the electoral process in 2000, perpetuated by voter suppression in Ohio in 2004.
November 4th, 2008 at 11:47 am
At least historians won’t have to search for a term to describe Bush; Would there be any doubt who is referenced by “The Subprime President”?
November 4th, 2008 at 11:50 am
I like that WM.
November 4th, 2008 at 12:01 pm
People talk about how long it’s been without a 20% rally. We’ve rallied 18% from the low now. Anyone feeling rich?
November 4th, 2008 at 12:02 pm
So if Kerry had won in ‘04, the Dow would be at 17,000 right now?
November 4th, 2008 at 12:11 pm
Bush was responsible for the rise in VW shares. Clinton: the drop in the Shanghai market. Obama: October 1008 Panic, credit tightening, and Ellen Degeneres’s marriage… Bush: the drop in oil, freedom, and Indian (that’s right… “Indian” not native-American) summer we’re enjoying… jk.
On the VW shares, I’ve never liked the “Shorting is dumb because of the potential of ‘unlimited’ losses” argument. I stand corrected. When your fund goes out of business, it is mathematically no different than an infinite loss. Two and twenty to enter the dustbin of history.
November 4th, 2008 at 12:12 pm
Only time will tell whether the market is discounting the presidency. At the moment, the rally is all the range. Two weeks ago, things were grim. Everyone hates Bush now. On 9/11 that wasn’t the case. Things change with time. Two weeks ago Obama was a lock, the same as today.
Somehow, I am suspicious that the last five days is simply the market discounting the presidency. But again, only time will tell.
November 4th, 2008 at 12:15 pm
And as everyone knows, Global Warming is caused by a lack of pirates…
November 4th, 2008 at 12:20 pm
Works for me, Barry. On a related note, looks like a nice rally building today. I wonder if Sir Goldlilocks and the other supply-side idealogue nabobs will attribute any rally today/this week to the “Obama Bounce?” I’m guessing………probably not? Nevermind then.
Our long national nightmare is nearly over. Back to the faux-ranch prop (which you’ll be selling now, no doubt) for you, GWB.
November 4th, 2008 at 12:37 pm
It is amazing to watch the talking heads on CNBC continue to advocate their policy of take two tax cuts and call me in the morning when the reason the democrats are winning the election is that the republican policies have failed miserably — for example the stock market is about a third lower than when Bush was elected.
They just never learn do they?
November 4th, 2008 at 12:51 pm
@spencer: No they don’t. They’re in the “we make our own reality” crowd. It’s just pathetic.
November 4th, 2008 at 12:56 pm
Interesting; Bush 2 inherited a mess and made it worse: with an interlude of irresponsible monetary policy.
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BR: My thoughts precisely !
November 4th, 2008 at 1:08 pm
The 2000-2003 decline was the popping of the internet bubble. The 2007- 20?? decline is the popping of the housing bubble. Both bubbles were created by the perpetual low interest rate monetary policy of the Alan Greenspan Federal Reserve. Low interest rates and the resulting decline of the US dollar gave politicians of both parties what they wanted, mortgages for all and an improvement in the balance of trade. The biggest difference between Clinton and Bush is that Clinton was fortunate enough to be out of office before the internet bubble burst.
November 4th, 2008 at 1:23 pm
The fact that one left office with a budget surplus and one is leaving with a trillion dollar budget deficit is kinda a big difference
November 4th, 2008 at 1:24 pm
Barry,
This topic is just silly. Have you run out of real ideas?
I know politics plays a big part on this blog, but really, there are those of us who really just want to see your ideas on investments, maybe music, maybe comics…but political agendas disguised as ideas?
For us apolitical investment types, work harder. Under the new format, there are very few replies anyway, and I come here (or did) to read what some of the brighter minds here thought about the economy and investing. Religous topics and political topics= huge turnoff….
just my opinion….
November 4th, 2008 at 1:32 pm
I agree with you 100%, Bruce, but it IS election day. How can this not be addressed in some fashion? After all, it does greatly affect the markets………
November 4th, 2008 at 1:47 pm
Mannwich:
Well, even if you take this as a serious topic, economics is not a science…I read something this morning by an academic economist who called economics more of a “war about various ideas”…seemed pretty good to me.
As an example, would you blame the recession at the start of the Reagan presidency on Reagan or the stagflation that developed under Carter and his fed chairman? Volcker was brought in and did what was necessary, raised rates mightily, and killed inflation, something Arthur Burns was not willing to do. So who gets the blame for the recession.??
Barry, conveniently shows oil until 10/31 and the spike we all lived through. Yet, the two oilmen are still in the White House, and I bought gas today for 2.05 a gallon. Same two bubbas in, yet if you wanted to you could say,” Two oilmen in the white house have brought oil down to an affordable 2 bucks a gallon.”
Barry really knows better than this. I am just saying, he risks alienating people like me who visit the blog because of the sharp minds and opinions we are used to seeing. I am shocked at how few people still blog here after the changeover, and frankly, if the professor’s class has many fewer students than it used to, I may drop it. This class to me was as much about the students as it was about the professor.
November 4th, 2008 at 1:54 pm
Bruce: I agree with you and was being somewhat facetious with my prior comments mainly to illustrate the mindlessness of many supply-sider advocates. Reality is always more complicated and muli-factored than any simple political ideology. In fact, I always thought that Bush I didn’t get enough credit for making some really difficult decisions (raising taxes) to balance the budget and that the Right wing idealogues destroyed him for it. I also always thought that Clinton was largely the beneficiary of a recovering economy by the time he took office and if Bush I had better timing, he would have won re-election in ‘92.
I too am wondering where all of the regular commenters have gone. Do they not like the register and log into the site to post comments? I hope they come back. That’s one of the best things about this blog. All of the informed comments. Have really learned a lot from you/them in a short period of time.
November 4th, 2008 at 1:54 pm
Remember when Nancy Pelosi said they had a plan to bring down oil prices before the 2006 election. They’ve finally done it! Or was it the end of the China Olympics bubble and drill,baby,drill? Either way I don’t take this post too serious since Barry has made it clear in his posts that he thinks certain presidents just happen to be lucky/unlucky regarding the business cycle etc. Hey Barry, do you agree with Jim Rogers call to abolish the Fed?
November 4th, 2008 at 2:03 pm
@ Bruce:
“This topic is just silly. Have you run out of real ideas?”
Agreed. Politics are a bore. Give us market talk. Market talk much more fun. I’m talking cave man I’m so deprived.
At least the election’s today, and we dont have another three months of campaign bullshit to hear about!!!
November 4th, 2008 at 2:06 pm
I think (hope) this is just a temporary lull and we’ll get back to market talk after today. Politics have the stage today but tomorrow let’s get back to the markets……
November 4th, 2008 at 2:30 pm
The “economics is not a science” again… there is the classical scientific method (empiric) and there is the statistical method. Both can be misused and not every statistical analysis is scientific. See political polling for instance, there are so many tweaks that it is almost pointless.
One documented use of statistical method on economics was during the Renascence when at one point Venice looked at the books and decided that warring against Milan was a bad deal even if they won (cost and reconstruction on both sides). So they kept the trading alive and well.
November 4th, 2008 at 2:42 pm
I totally agree, Where is everybody? After the new site, people have stop showing up here. WTF?
November 4th, 2008 at 2:54 pm
OK…this is from our pals at the CNBC website, but the article does say consumers bankruptcies are up 40% y/y and 20% IN ONE MONTH..(my emphasis)
and this is really just the start of our recession…I just don’t see how the bleakness of the consumer allows the Dow to continue upward….the problem this time is that we started out deeply in the hole…(mortgages, credit cards, government defecits, 72 month car payments, etc.) that was exacerbated by another oil shock and increased costs for food and energy. I don’t consider myself a permabear by a long shot, but it seems to me this bounce runs out of steam. Can the fed print enough money? To me they are the ONLY stimulus for the next year…
http://www.cnbc.com/id/27537718
Consumer Bankruptcies Soar in October.
November 4th, 2008 at 3:01 pm
I agree with Bruce. The new format is not conducive to posting comments. Barry, you might want to think about abandoning the tabs. Or at least diminish their importance somehow. I’m not going to click on videos. I dont’ care about digital media. In the past, if you were to post stuff that I didn’t care about, I’d just ignore it. But now, I feel like your other tabs are cannibalizing your main page. That is not good.
dgov
November 4th, 2008 at 3:24 pm
Markets are like free pr0n to holistic thinkers (more _Day The Universe Changed_ and _Connections_, not crystal-snorting faith healers) because there are always so many variables and permutations… Hail Eris!
As for voting.. All I’ll say is that I voted against my congressional rep because he voted _for_ the bailout, as I promised my folks (and nephews) I’d do.
November 4th, 2008 at 3:27 pm
why do some of you feel the new format isn’t conducive to posting? it’s much easier for me as I’m automatically logged in and no longer have to enter that anti-spam code…
November 4th, 2008 at 3:33 pm
Dr. KN,
James Burke is ‘Da Man!
November 4th, 2008 at 4:05 pm
Come on Barry you can do better. You are here to say there is a linear relationship between when a President is elected (or takes office) and the economy. Please! There are too many complexities for it to be as simple as you portray in your charts. You also ingnore the influence of Congress on these issues. Last I checked this was not a monarchy.
November 4th, 2008 at 4:37 pm
Karen,
It’s not the logging in part that’s the problem. It’s that we used to just add our comments to the last post, but now, we don’t know if people are commenting on the video tab or the BP cafe tab, or somewhere else, and I think that this uncertainty is deterring people from commenting at all. Perhaps in time people will settle down into a routine of ignoring the other tabs and only consulting the main page. I doubt that they’ll comment vigorously on all of the tabs. I, for one, am not going to check the comments on the other tabs. I just don’t have the attention span for that type of thing. And I have a longer attention span than most.
dgov
November 4th, 2008 at 4:42 pm
I think there are a couple of things going on here:
1. Barry is yanking the chain of the Bush dead-enders who want to say that the market goes down whenever it looks like a Democrat is doing well.
2. Nevertheless, you can’t look at the performance of the markets during the Bush presidency and think that things have gone well. That is a longer term view than the day-to-day stuff that you’ll hear from Limbaugh, Luskin, et al.
Bruce N Tennessee — one disagreement/clarification. Carter is the one who appointed Volcker. Volcker’s actions were not good for Carter’s re-election, but certainly were good in the long run.
As far as the comments issue — BR, I’m not sure if this is by design or what, but my “regular” Wordpress login doesn’t work here. I need to log in with a specific Big Picture identity and password. That tends to make things a bit clumsy……
November 4th, 2008 at 4:42 pm
No, the market has not fully discounted GWB presidency. There are another 77 (26+31+20) days to go and the outgoing gov can screw up things much worse than what they have done so far. The trend line for SP500 has already seen the breakout from where I would put the line, into the bubble territory. 1025 is the max for this week (especially closing number on Friday). If I see it beyond that number, I would be concerned. The higher we go the harder we fall!
November 4th, 2008 at 5:18 pm
Sharky: I would also recommend the accompanying books.. The hard part with JB is actually being able to STOP following threads and getting useful things done, what with Wikipedia basically providing a ’self-directed’ _Connections_.. Gotta wonder if anyone’s doing anything interesting analyzing Wikipedia relationships and coming up with AI-ish historical analysis..
November 4th, 2008 at 5:44 pm
Fun time is over bulls…Market has had a bounce on lower and lower volume…now when Obama gets elected tonight, Bush trashes the place on the way out and Obama welcomes it…he wants things to suck for 2 years so he can blame Bush then turn it around. Bush want things to tank to be able to stick it to Obama and blame him getting elected for ruining his bailouts. Both sides want a market drop.
November 4th, 2008 at 5:47 pm
Shiller is on CNBC…even he is conflicted…S&P publishes his index so he won’t trash them
November 4th, 2008 at 6:13 pm
After the election, we will return to all economics/markets all the time…
November 4th, 2008 at 6:13 pm
A minor point on logging in. If you can’t remember the password, that’s a good thing. Because if you can remember your passwords, then you’re probably using variants of the same password on all your sites, which is hardly secure. With a password manager, all your passwords are secure and you only need to remember one master password. There are several available — I came across http://www.LastPass.com on Charles Kirk’s blog, of all places, and it works fine.
Absolutely great blog, BR, and many thanks for the amazing amount of work you put into it. But where’s the pooch?
November 4th, 2008 at 6:45 pm
I agree with Karen. I find the new format to be easier and more inviting for comment. The old system, where you had to type in the letters in the box to verify that you are a person could be challenging (I’m color blind and some of those overlapping letters merged on me if they were certain colors).
Also, I don’t see how the tabs have any impact on posting. I don’t click on any of them. I just go to the main page and read what’s there (and comment, if I feel bold). If you are worried about someone posting on a different tab, stop it. Pick a tab and stick with it
November 4th, 2008 at 7:00 pm
I wonder how many here are using RSS to read blogs like The Big Picture? If you’re not then you are wasting precious time.
Here’s a really nice simple overview of how to get started with RSS. Once you get setup, you’ll never go back to hunting and pecking through one website after another!
Video: RSS in Plain English
November 4th, 2008 at 8:20 pm
glad to see your going back to econ and stock market; this topic is such a stretch as to not deserve a comment.