Saturday, January 10, 2009

Obama and economics

Yesterday, Obama spoke about the next government intervention, AKA Rescue Package to finance entitlement programs. Some believe this would hurt the economy further and others optimistic. Does it really matter?

Too many uncertainties

Obama gives speeches where he reiterates American sentiment in very broad terms in order to create rapport with the majority, and he isn’t exactly known for specifying solutions. No explicit answers lead to speculations toward what he might support (e.g. relieving a certain African American from auto, mortgage loans and etc.), and uncertainties lead to increased volatility.

The stock market has a negative correlation to volatility measures. Remember the day America announced Obama’s win, and the market dropped like a rock immediately? That is uncertainty, volatility at work.

At the same time, if the entitlement programs do surface, financing them through debt and heavier taxes could lead to a slow inflationary decline like Japan in the 90’s. Stagflation is undesirable, but it will offer an illusion of economic expansion as inflation typically pushes market indexes into higher ground.

Obama’s motivations

Campaign contributors, big money individuals and entities usually have large influence over the politicians they finance. Since information regarding campaign backer interests will not likely be divulged publically, though Webster Tarpley has speculated, Obama’s motivations remain largely uncertain.

Who cares

It is usually a bad idea to make conclusions based on uncertainties, however educated they may seem. Whatever comes next, just roll with it and adapt. Barak Obama is not that special; whatever he does will not affect the markets more than past politicians.

We have always, and probably should work with what we DO know. After all, everything we have achieved so far has been a result of our own decisions.

Most people are wrong about most things, most of the time. They're wrong about Obama.

It has begun.

0 Reflections: