Now What?

Okay, as widely expected, an Obama win is in the bag. What does this mean?

It means I can watch TV again.

Seriously, I'll throw out my two cents' worth on the Obama victory from a political standpoint, then I'll talk about the economy and the markets, both from the perspective of the impact of an Obama presidency, and then in a broader sense.

As far as the political stuff, I believe strongly that it's time for healing. So I won't talk about my worst-case concerns with the guy. We'll just let the chips fall where they may, and if those concerns are realized, I'll have to refrain from saying "I told you so," I suppose. I'm okay with that.

Meanwhile, President-elect Barack Obama is my president, and as an American, I will, as I always have, do everything in my power to make America a better place for all of its citizens - unselfishly.

My general take is pretty simple. I was listening to some talking heads this morning, and they were talking about how many Obama voters, in the exit polls, said they were voting FOR Obama, not AGAINST McCain or Bush or the GOP. One guy said he thought the reason for that is that Obama's supporters genuinely like the guy.

I say poo.

How can you "genuinely like" a guy you've never met? We don't even know who he is. Every candidate has a campaign face, and he's certainly no exception. I think it's two things: one, as my doc pointed out this am when I was having my annual physical (which seems ironically appropriate the day after this election), he's so charismatic that he makes people think they know him. And two, his supporters were generally so desperate for change that they wanted to like him, they needed to like him.

I guess a third factor is that, in the internet age, everybody who reads a blog or a message board post or an e-mail or a PM or a text message thinks they know the other person. But there are screen personas, as we all know, just as there campaign faces.

Heck, I've never even actually taken an economics class in my life, and I'm actually a spearfisherman by trade. (Just kidding.)

Obama doesn't bring us a track record. He doesn't bring much experience. He's been campaigning for president virtually since he hit the Senate floor, and he hasn't served in a meaningful committee role, or authored any meaningful legislation, or even voted "yea" or "nay" on very many meaningful pieces of legislation.

His plans aren't really very detailed or well-defined. When he does provide details, he's prone to change them (maybe that was the "change" he kept promising). He uses a lot of keywords, like "hope," "change," and so on. That resonates with people more than actual plans do, because most people wouldn't know a good plan from a bad one, but they like happy talk.

So why did so many who don't actually know him, want so much to "like" him that they hoodwinked themselves into thinking they did?

Simple: they like the idea of him.

So the bottom line, to me, is that we elected an idea. I just hope it turns out to be a good one.

************

On to the economy. I think we saw today just what the markets think of an Obama presidency, now that they've had time to digest it.

Simply put, he'll be bad for business. On Wall Street and Main Street. Oh, some isolated pockets will do well, like stem cell research biotech firms. But by and large, increasing corporate and capital gains taxes hurts businesses. So does dramatically increasing regulation. So, at least initially, the markets will react unfavorably.

And if he does all the stuff he wants to do, he'll be bad for the overall economy. Of course, he won't be able to, given the sheer magnitude of the cowpie he's inherited. But if he had his druthers, he'd tax the bejeebers out of most of us, re-distribute the wealth, and double foreign aid (not his own, that wouldn't be a meaningful number - I mean taxpayer aid).

The key is with whom he surrounds himself, and no post is more important than Treasury chief. Several names have been mentioned. My take:

Larry Summers. Former Undersecretary. Smart guy. Unfortunately, you don't know what these guys are going to turn into when they hit Washington and have the Pelosis of the world demanding that they print more money to give away.

Warren Buffett. Would be an unmitigated disaster. This is "special interests" in all caps, the same guy who wrote a Wall Street Journal op-ed piece exhorting us all to buy stocks - a few days after he bought stakes in GE and Goldman, and a few days before the market tanked.

Paul Volcker. Not a Treasury guy, but he'd be my pick for Fed chief. Bernanke's chairmanship is up February 1, 2010, but I'm sure he could be persuaded to step down. If not, just lock him in a room with Volcker. I give Paul about ten minutes to bring him around.

My personal pick would be Bill Seidman, the former FDIC head.

On to the markets themselves.

From the bottom on October 27 until today, the Dow had risen by triple-digits four of those six days, and fell by just 5 points and 74 points on the other two. That produced a 17.7% gain over those six days. As a former colleague used to say, "Now if ya annualize that ..." Pretty remarkable.

Know what's even more remarkable? That stock traders produced that kind of rally in the face of this economic news over those six days:

1. A new record drop in home prices. (Housing is what brought us into this mess, and it's still getting worse. But at least that has been expected for a while.)
2. A record low in consumer confidence, dating back to 1967, when the data was first recorded. (Do stock traders not get that this means that even worse consumer spending than was previously expected is in store, which could not possibly have been priced into the market?)
3. The lowest reading on the Richmond Fed factory survey since at least 1993, when that data was first kept.
4. We did get a Fed rate cut, but that was entirely priced in by the futures markets - arguably, since the futures pits bet 50-50 on a 75 basis point cut, the market should have tanked at only 50 basis points. (It did sell off 74 points that day.)
5. A decline in GDP - not as big as expected, but a drop in personal consumption that was three times as bad as forecast. Again, this should tell us the consumer's totally out of the game, and is likely to remain so.
6. A paltry increase in personal income, and the biggest one-month drop in personal spending since 2005 - the worst year-over-year reading since 2003.
7. Continued above-target inflation.
8. The worst reading on the Chicago Purchasing Managers' Index since 2001.
9. The weakest domestic auto sales since 1983.
10. The worst reading on the broadest, national factory survey since 1982.
11. A decline in factory orders more than three times what was expected.
12. A 20% drop in mortgage applications, to the lowest level since 2000.
13. A huge spike in planned layoffs - up 80% vs. the same month last year.
14. A similarly huge spike in the number of private-sector jobs lost - about 50% more than forecast, and the biggest number since 2001.
15. A record decline in service sector sentiment.

Are you depressed yet? I sure am. This basically tells us things:

A. The consumer outlook is bleak. No amount of stimulus will help that.
B. Job losses are mounting, and will get worse, exacerbating A.
C. The factory sector is doing a rapid death-spiral into the economic crapper, which will exacerbate B, which will exacerbate A.
D. Home prices continue to fall unabated, and after B and C kick in, will fall further, exacerbating the foreclosure issue and causing more bank failures.

None of this was priced into the market. Don't let the talking heads on Bubblevision fool you. The market's steep October decline was all about the credit markets. Before, the panic was due to big banks and insurers and brokerage firms and mortgage guarantors failing. That's what the market reacted to through October.

Folks, now, we're talking about countries failing. Entire nations. Argentina, Ukraine, Pakistan, Iceland, Hungary and Belarus are all on the bubble. The IMF is running out of dough. China won't pony up to help them.

We are not yet at a market bottom. And today is an indication that the dead cat is coming back down.

Just wait 'til Friday's jobs report hits.