Thursday, January 21, 2010

Yet again, rising uncertainty drives a temporary selloff

I'm going to blame Obama's proposed restrictions on the activities of banks for today's selloff. It seems that he is unwilling to accept the message of the voters in the Massachusetts special election. In his ignorance he is joined by the hopelessly biased New York Times, whose editorial stated that "To our minds, it is not remotely a verdict on Mr. Obama’s presidency, nor does it amount to a national referendum on health care reform..."

Both instead are blaming the economy, which in turn they say is the legacy of Bush and those unfettered, greedy capitalist banks. So he is going to go after the banks and try to divert attention from his own shortcomings. Populist appeals of this sort, however, are not going to restore his popularity nor will they endear the public to his big-government message. Tuesday's vote made that clear.

When you see Obama and the Democratic establishment turn a deaf ear to the powerful message that came out of yesterday's election, then you just have to keep betting against them. They won't be able to hobble the banks, just as they weren't able to saddle us with a disastrous healthcare reform.

Still, as the chart above shows, these maneuvers create great uncertainty, and thus the VIX index shot up today as stocks fell. What I think we'll see sooner or later is that the economy is capable, once again, of improving despite all the headwinds originating in the White House. I remain optimistic and so I see selloffs such as these as buying opportunities.


Bill said...


What surprises me is Paul Volker's charge to break up the banks. I thought he was a pretty sharp guy who pulled us out of the inflation spiral in the late '70s. Just getting too old?

Scott Grannis said...

Maybe he just can't resist the urge to "do something." Congress and Obama all seem anxious to do something to fix the banks. They are all missing the point: the banks weren't in bad shape, but the system was, mainly because of massive government intervention that distorted the market.