A Big Reason For the Market Decline

The stock market continues to plummet almost daily. Five percent drops, almost unthinkable a month ago, now occur two or three times a week. Weren't these drops the main reason Congress crammed through a bailout bill of $700 billion? Wasn’t this going to stop the sky from falling and Armageddon from happening? Isn't this the same reason the Federal Reserve lowered interest rates by 1/2 a point the other day? How come this hasn't stemmed the tide? The S&P 500 is down almost 20% in the LAST TEN DAYS. People have lost a combined $2.5 trillion dollars in wealth.

There are many reasons behind a market's rise or fall. It is much too big a phenomenon to explain by simply one thing. Fear and greed always swing the pendulum too far in one direction or the other. I suspect this major drop is long overdue but shouldn't be quite as deep or have occurred quite as fast as it has.

The market is a forward looking indicator. The "people in the know" about future profits (institutional investors) take positions in the market for a profession. Their livelihood is looking at companies all day long. Their success depends on being right about the direction of the market more times than not. These investors talk to professionals all day long. So, despite the bailout and global interest rate cuts, why is the market still tanking? I believe there is one big reason right now. Investors are discounting a Barack Obama presidency. It is becoming ever clearer Mr. Obama is going to win the election. Our economy is struggling right now and the market sees Barack’s ideas as a death blow to corporations’ ability to make money and create jobs. One need only look at a few top line bullet points from his speeches to figure out why people are beginning to hide money in their mattresses.

*Barack’s sidekick believes taxes are “patriotic.” To an investor patriotic taxpayers cause very upset stomachs. I actually believe this comment was the precipice for the decline. Since Sept. 19th when he said it, the S&P 500 is down more than 30%. In only three weeks.

*Universal health care for all including the 12-20 million illegal aliens here. Why do I say this? You say “it can’t be Mr. Conservative in Ohio.” Well, Barack continually cites the 47 million uninsured he is going to take care of. Illegals are included in this number, so either he is going to insure them, or his rhetoric is a bit off. Either way, assuming he is lying about the number and subtracting them out, free health care for another 30-35 million folks has got to be paid for somewhere. This somewhere is all the rest of us.

*He is going to substantially increase taxes on “the rich.” While this sounds nice, they are the ones creating jobs. Would you invest in companies soon closing up shop rather than giving half their earnings over to the government? How about investing in companies moving offshore to avoid the excessive taxation? Or companies laying off workers because they had to raise their prices to cover the increased taxes?

*Mr. Obama has this very nice sounding rhetoric about our “shared responsibility” as a nation. This just seems so nice and fuzzy, but when you pick it apart, it really means those at the top of anything in society need to care about others through the use of government force. Forced caring is socialism and is what has put Europe on the back burner for a very long time (at least economically).

*An additional $1 trillion dollar government spending spree is the cure for what ails us according to Dr. Obama. Granted, Republicans have been no better for the last ten years on this issue, but digging the ditch deeper to, in essence, buy votes is sickening.

I have no proof that my theory is correct. Maybe the sky is falling? Maybe the market isn’t sure who is going to win the election or what their real policies will be?

All I know is the market looks ahead, and with 27 days until the vote, this issue is front and center in the minds of everyone. It sure seems like more than a coincidence to me. If you care about the next four years, please discuss this issue with everyone you know. It is too important to ignore.