04 March 2009


Stocks have fallen to ridiculous levels. Blue chip companies are trading in single digits and averages are reflecting a total lack of confidence in the administration’s plans. The half of the country owning stock and largely supporting the other half is bearing the brunt of the economic downturn. Trillions of dollars in savings and investments have disappeared. Major companies are cutting back dividends to conserve cash and there is no end in sight. The formerly “wealthy” have sustained most of the losses, while the superwealthy who went for Obama have more than enough to get by. Those at or near retirement are in the worst situation as the value of retirement funds has plummeted which means that many more will not be retiring as planned.

On top of this the same people will be taxed more, leaving even less for investment to drive future expansion. A dozen years of growth has been wiped out. Or has it? Are we to believe that all of these industrial enterprises are intrinsically worth no more than they were a dozen years ago? That this much wealth has simply vanished? The productive capacities of most companies remain intact. In truth the market is undervalued for the long term and now is just about the worst time to sell.

The market is where it is because Democrats are more interested in taking advantage of the financial crisis to enact a radical policy agenda (in health care, environment, and energy) rather than in solving it. Nothing whatsoever is being done to shore up the confidence of the market, whether by design or stupidity. It is true that the market may not always reflect intrinsic value, but it does reflect sentiment as to where things are headed, and right now it doesn’t look good.

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