The Stock Market Surge Proves Wall Street Trusts Obama...Oh Really?

I was recently taking a long drive home from a business trip and enjoying a rare opportunity to listen to Rush and then Hannity on the radio. One of Hannity's liberal callers (I love that he is so willing to take calls from libs) tried to make Hannity admit that Wall Street is happy with Obama's economic policy. The caller's reason: the stock market is up 4000 points since he took office.

Sean did a reasonable job of explaining to the man that the stock market is only one indicator, but, frankly, he failed to sufficiently address the man's mistaken conclusion.

There is a very reasonable explanation as to why the stock market is going up these past several months.

Where else were investors going to put their money? When trying to predict the market, you have to always remember that investors are investors. They make their living INVESTING. They will look for the best place to INVEST their money and they will INVEST it. Where else are there profits to be made but in the stock market?

Banks? Failing at record rates and paying little more than a couple of percentage points in yields.

Bonds? Perhaps, but again, unless they are planning on taking that junk bond ride again (that's what led to the '87 crash), there isn't much by way of a good yield there either.

Real Estate? only if they want to wait a good long time to make money, or are willing to do some serious speculating.

Gold, already being done and no one is dumb enough to put ALL their money into a commodity of any kind.

All other investments, currency trading, commodity trading and so on are merely too risky for more than a small percentage of a person's portfolio.

This leaves us with stocks. Look at what the investors were seeing a year ago after the crash. Stocks at relative all time lows. Where can they possibly go from there, but up. Could they have gone down? Of course. But the relative risk of that happening was far less strenuous for investors to bear in light of the fact that there was literally no other option with even close the potential upside.

So, why are stocks up? Because that's what happens when the market loses 50% of its value in a matter of weeks. It leaves investors with very positive opportunities to make money. And once they start buying, the train is rolling.

Will it last? That's the big question.

When markets hit a big down turn or a big upswing, it is generally fueled with emotion. When that happens, the pendulum swings in the market will be large at first, up and down and up again and down again. The nice thing about market economics is that eventually the emotion gives way to serious analytical evaluation of the economics of each stock, each industry, each market, and each economy.

When that happens, in this case, the reality of our current economic situation will settle in. Huge deficits, staggering unemployment, the virtual (and soon to be literal) collapse of the dollar, bludgeoning taxes with more to come, inevitable hyper-inflation, increasing numbers of failed banks and companies across the country and no prospects for change will drive the markets to all time lows sooner or later (most likely sooner).

Call me a doomsayer if you will. But, unlike my liberal friends and enemies, I am not all too confident in what our President and his friends in Congress are doing to fix things. And, in fact, I am not too far from believing that they are orchestrating it. But that's a topic for another day.