The stock market’s powerful bear rally, now five month’s old, has fed on false hopes and delusional thinking, but it is unlikely to survive the coming collapse of the Obama presidency. Mr. Obama’s once-overwhelming popularity, though ebbing, has so far survived the voters’ growing discontent with his policies. However, disapproval is mounting, even on the political left, and it’s going to reach critical mass once the president’s ill-conceived plan for a government takeover of the healthcare system has gone down in flames. He will become a lame-duck president after less than a year in office, leaving the country rudderless at a time when the economy and financial system are desperately in need of a firm hand or at least the appearance that someone is in command. Investors had better prepare for the inevitable darkening of America’s mood, since its effect on the stock market will not be pretty. It is often said that Wall Street abhors nothing so much as uncertainty, but this will be far worse – a plunge into despair or even chaos that will make the nation’s depressing wallow during the Carter years seem sunny in comparison.
His Brazen Lie
Concerning Obamacare, its failure to gain traction goes much deeper than Hillarycare’s abortive flop in 1993, early in Clinton’s term. In the interim, healthcare costs have inflated so horrifically that Americans have become desperate for relief. For businesses and individuals alike, health care has become increasingly unaffordable, and all of us are paying much more each year for less coverage. That should have made socialized health care an easy sell. Instead, Obama chose to remake the system so radically and so ambitiously that almost no one believes him when he says that it won’t cost us – except for “the rich” — any more than we are paying now. Americans see Obama’s spin on this issue for what it is: a brazen lie. They also understand that he cannot possibly extract from “the rich” alone the trillions of dollars the government is spending in an already-failed attempt to avoid a ruinous debt deflation.
As a result, it is predictable that many of Obama’s supporters on the left will abandon him. This seems likely to occur sooner rather than later now that stories have begun to emerge that make clear how it is mainly fat-cat bankers who have benefited from all of the would-be rescue packages. Last week’s news that nine big banks paid out $33 billion in bonuses in 2008 when the banks were collapsing is going to galvanize Obama’s opposition in Congress, making his “cap-and-trade” energy tax dead-on-arrival, and rendering all of his other grandiose, statist schemes politically dead. This is going to throw the presidency – and the nation – into a state of uncertainty that Wall Street will not be able to abide. If the stock market is indeed looking ahead six months, the bear rally begun in March should be approaching its last hurrah.
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