Posted by
john on Thursday, February 12, 2009 7:08:49 PM
That was Cramer's opening line today, regarding the Obama administration, and the so-called "stimulus". He says sell any rally tomorrow. Again, I find his negative outlook vis-a-vis the administration's economic policy notable, given his self-identified status as Democrat, and previous and palpable efforts to cheerlead. This guy is about money, period, and if something isn't going to make him money, he's not going to pretend for long. Hence his swift abandonment of the Obamessiah, based on the utter uselessness of the "stimulus". The market is under no illusions about the "cluelessness" (Cramer's word) of Washington's current ruling elite.
Perhaps this is a time to repeat my theory about the election of 2006, as it relates to the markets, and the economy. As the election of 1994 signalled a multi-year resurgence in the markets and economy, the election of 2006 signalled the reverse. Why? With respect to 2006, it was the signal that killed any hope that sanity would prevail in Washington. That is, notwithstanding the foibles and weaknesses of Congress while under Republican control, market participants could be reasonably certain that nothing crazy was likely. With the Dem's takeover, all hope was lost.
This is particularly important with respect to the soon-to-lapse "Bush tax cuts". My theory was that the housing boom, to the extent it was precipitated by Fed policy, constituted a deferral of the tech-bust, 9/11 secular downturn. In that light, there had to be a potential for some other factor to spark the economy once the housing boom ran its course. It might have been, apart from the extension of the 2003 tax cuts, further tax cuts (particularly the corporate tax rate), more substantial tax reform (flat tax?), or non-tax policy improvements, such as an enlightened energy policy. Once the 2006 returns were in, any clear-headed observer knew none of the above was possible. So the economy was left to fall flat.
As I've remarked before, we are going to have a recovery, of sorts, in spite (NOT because) of the "stimulus" legislation. This is the natural order of things - GDP posted blowout quarters even during the Carter administration. But the best-case prognosis for the economy is growth in fits and starts - no long boom. That's what's got Cramer so bearish. Remember, he wanted to believe, but faced with the facts of current economic policy, he just can't put his money on growth. That's what I like about people who actually have (major) skin in the game.