Thursday, November 20, 2008
Wednesday Night Market Update" (President-elect Obama needs to step up)
A somber Wednesday good evening, Since the Presidential election a little over two weeks ago, the S&P is down nearly 20%. IF President-elect Obama doesn't enunciate his tax policies more clearly in the days ahead, the unwinding of old money could continue regardless of how strong balance sheets look or how oversold charts appear. These are unbelievable times that we are witnessing. On the day of the election, Mr. Carl Icahn was on Fast Money and said, "If this Obam-er wins, the market will not like it." http://en.wikipedia.org/wiki/Carl_Icahn We now better understand the power of those words; larger government and higher taxes in the midst of a global recession is something smart money fears. Even though this is the worst bear market since the Great Depression, we do not believe there'll be soup lines or runs on banks. There are safe guards like social security and massive bank liquidity injections, unlike the 1930's, so we know the reaction of panic today is way overdone. Just like we predicted oil would implode from the $120/barrel - $140/barrel area after the Beijing Olympics; just like we disagreed with Fast Money's Joe Terranova about his call that oil will not break $120/barrel for long a couple months back, we now feel the overshoot in the stock market has the same parallels and psychology driving it ... The market is dying to hear President-elect Obama say 8 words: "I will not repeal the Bush tax cuts,". The S&P would rally through 1,000 within a couple days. POTC stands behind the bear market rally call, but it would help IF Mr. Obama stepped up and delivered. The majority of the people who voted for him (college - under 30) do not have much riding in the stock market, so he needs to reinforce to the older conservative money he will not raise taxes. IF he doesn't do that, the market will have another climactic sell off, perhaps S&P 720; that would be the death of an entire generation of investors. Could Mr. Obama want the market to fall further before he takes his Presidential Oath this January 20th on the steps of Capitol Hill? We hope not. POTC gave him the benefit of the doubt, as we felt he would be pro-active and more Wall Street friendly than the Carl Icahn's believed. So far we were wrong and they were right. Mr. Obama needs to clarify his fiscal policies very soon, or investors will continue to sell until there is absolutely no doubt regarding who and how much tax is paid. Raising taxes on individuals and businesses making over $200K a year now would be ridiculously ignorant, as they are the growth engine for jobs and have the greatest amount swirling around in the financial markets. We continue to believe Mr. Obama will do the right thing and tell Wall Street nobody's taxes will go up. But time is running out. The Psychology of the Call team is dumbfounded by the valuations, technicals, and battered sentiment. We believe the Bush tax cuts will remain in effect through 2010. That is the panacea this stubborn bear needs to hear in order to dig the claws in & climb through S&P 1,000 by Thanksgiving Day, otherwise POTC will be eating stuffed crow!
Posted by The Call Team at 1:59 AM