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Will the market plunge if (or when) Obama gets elected as Dem candidate?
- Thread starter crgarcia
- Start date
Quote from Cutten:
Stocks bottomed October 2002, 6 months before the Iraq invasion.
I didn't ask for the low. I asked for the bottom. Very different. SPX essentially made a triple bottom but each of the first 2 rallies ultimately failed. Miserably. The 3/2003 low was the bottom and I believe the FTSE made it's only tradable low the week before the invasion.
There's yet to be an American war in the past century that didn't produce higher stock prices. WW's l and ll, Korea, Vietnam and both Gulf Wars all produced MASSIVE index liftoffs. In fact to this DAY the market has never traded below it's reaction levels to each of the aforementioned wars except for the 1932 lows which took out the war bride boom lows of 1915.
Quote from bellman:
Oh, that is a scary comment. It sent chills down my spine. The last time I heard that excuse was back in 2000 and 2004 when they were justifying a vote for Bush. Yikes!!
I never had any doubts about Mr. Bushes intelligence level (and didn't vote for him either time) but I have at least deluded myself into thinking that Obama is a pretty sharp guy - he seems to think well 'on his feet'.
Quote from Pa(b)st Prime:
I didn't ask for the low. I asked for the bottom. Very different. SPX essentially made a triple bottom but each of the first 2 rallies ultimately failed. Miserably. The 3/2003 low was the bottom and I believe the FTSE made it's only tradable low the week before the invasion.
There's yet to be an American war in the past century that didn't produce higher stock prices. WW's l and ll, Korea, Vietnam and both Gulf Wars all produced MASSIVE index liftoffs. In fact to this DAY the market has never traded below it's reaction levels to each of the aforementioned wars except for the 1932 lows which took out the war bride boom lows of 1915.
....and most wars are paid for by printing money
Quote from aboldoldtrader:
....and most wars are paid for by printing money
Yes. Of course. And you and Gnome are indeed correct about inflation and currency debasement. However, as history proves inflation and debased currencies are bull items for assets. If someday a can of Coke sells for $8 then KO's stock price will reflect that increased revenue figure.
Hence questions like "will the market plunge" are meaningless unless we talk about benchmarks and relative value to like globally fungible assets. It's the 70's..
Quote from Pa(b)st Prime:
WW's l and ll, Korea, Vietnam and both Gulf Wars all produced MASSIVE index liftoffs. In fact to this DAY the market has never traded below it's reaction levels to each of the aforementioned wars except for the 1932 lows which took out the war bride boom lows of 1915.
This simply isn't true. Just look at the Dow Jones performance during each of these conflicts:
WWI - the market sold off heavily on the outbreak of the war. There was then a rebound as the US stayed out of the fray, but after US entry into the war in 1917, stocks fell again and ended lower at the end of 1917 than they were in 1914 before hostilities. By the end of WWI stocks were below their 1910 levels.
WWII - the Dow collapsed after the 1940 defeat of France, and went down even further after Pearl Harbour, experiencing 3 consecutive down years in a grinding bear market. The market only turned up after Guadalcanal and Midway, which stopped an invasion of Australia and destroyed the Japanese carrier fleet, and the market only got above the pre-war high after D-Day, when it became obvious that the Allies would win easily. Stocks were effectively flat during WWII, with a significant dip at the worst point, down over 25% from the pre-war level.
In Korea stocks sold off sharly as soon as the invasion started - stocks fell for the next month and were lower until the Inchon victory, at which point it became clear N Korea would never win the war. If war was good for stocks, the invasion would have pushed stocks up and Inchon would have caused a selloff.
From the start to the end of the Vietnam war, stocks performed horribly in real terms. Even in nominal terms, the Dow was lower in 1975 when the war ended than it was in the mid 1960s when the war began. In real terms the performance was even worse.
In Gulf War I, stocks sold off on the invasion news. They only made new highs once the war was already over.
Gulf War II, stocks sold off once it was clear conflict was unavoidable - another bearish reaction. Stocks rallied on invasion only because once again it was going to be a clear cakewalk, so you had a typical 'sell the rumour, buy the fact' rally off an over-discounted news event. The rally in the rest of 2003 was the result of their having been a killer bear market in the 3 prior years which had depressed stock prices and sentiment, nothing to do with what happened in Iraq.
The only war which produced a meaningful rise in prices was Korea, and that only after defeat was clearly staved off, and a stalemate entered into. Even then, stock prices rose much more immediately after the war than during it.
Conclusion - wars are not good for stocks.
Quote from Pa(b)st Prime:
Hence questions like "will the market plunge" are meaningless unless we talk about benchmarks and relative value to like globally fungible assets. It's the 70's..
Nominal wages are a good benchmark for measuring inflation IMO. It is hard to employ people below their cost of living for long. Currently wages are rising no faster than in the 1980s or 1990s, when annual wage growth was 3-5%. The 2007 figure was 3.7% for the year, and they are almost certainly even less in Q1 2008. That is not indicative of major inflation. By contrast, even by 1969 US wage growth was above 6%, and it ranged between 6 and 9% during the next 10 years or so.
Thus we are not in a 1970s environment - at least not yet. Now it's certainly possible, with such loose monetary policy, that as soon as this slowdown finishes, we'll get a secular increase in inflation. But if that is going to be sustained, it should show up in the wage growth figures. It would take wage growth getting up to 5% or higher before you could really consider that inflation has broken out of its 28 year downtrend. We certainly have some ingredients for this - an ongoing expensive war, a balooning debt burden and budget deficit, three socialist presidential candidates, and helicopter Ben in the Fed. But until it starts showing up the data - which won't happen whilst the economy is slumping - you should hold back on any major inflation bets IMO.
Quote from Pa(b)st Prime:
Yes. Of course. And you and Gnome are indeed correct about inflation and currency debasement. However, as history proves inflation and debased currencies are bull items for assets. If someday a can of Coke sells for $8 then KO's stock price will reflect that increased revenue figure.
In the 1970s stocks got creamed in real terms, as did bonds. In this respect it was a far worse bear market for a typical stocks/bonds portfolio than even the Great Depression (where bonds soared). Only real estate sporadically, and commodities reliably, were an effective inflation hedge in the 1970s stagflation.
Since stocks had a 2 decade bull run up to 2000, it would not surprise me to see them be either flat or even down in real terms if inflation does pick up, especially if the economy remains weak. Stocks have made negative almost no returns in the last 10 years, after tax and inflation. The recent bubble in real estate also suggests that asset class will be a poor inflation hedge as oversupply will crimp capital gains.
Commodities and TIPS are really the only assets likely to perform really well in real terms if a 1970s scenario does eventually arise IMO.
Why the hell would the market sell off, I mean seriously, how the hell could McCain OR Obama do any worse then this jerk off Bush??
Market should RALLY when this moron, illiterate, scumbag, (insert adjective) Bush leaves the office. His policies and debting this country for a bogus war, is a significant reason the market is where it is today.
Market should RALLY when this moron, illiterate, scumbag, (insert adjective) Bush leaves the office. His policies and debting this country for a bogus war, is a significant reason the market is where it is today.