Friday, October 24, 2008

Obama and the Economy: Isn't It Ironic

...that the "big money people" are speculating the market is dropping due to speculation that Obama will win the Presidency --yet the worse the economy gets, the better Barack does?

Alanis should write a song...

From Cutting Through the Fog:

"...There is no real business person or investor in this world that would believe that Mr. Obama's tax plans won't be extremely detrimental to businesses in this country and to the global economy. Investors are yanking their money out of the stock markets, around the world, in order to keep their powder dry until they can navigate through the future of investing. That future definitely includes the plans that Obama and the Democrats have in store for business in this country. I also think that the investment community is concerned that we will move into a protectionist mode because Obama and the Democrats appear to be so resistant to free trade agreements. Certainly, any protectionist movement by the United States could seriously hamper international trade and that could ripple throughout the global economy. America is still looked upon as the primary driver in any world economy. What investor's are seeing from America is causing global fear and not confidence.

Another evidence of the fear of Obama rule, is the fact that power and gas utility stocks have tanked almost 50% in the last year. Normally, utility stocks are "safe havens" because those companies have a captive consumer base that tends to have limited losses of profits in a recession. While those consumers might reduce consumption of electricity and natural gas, their is a finite limit to what they can do to save energy costs. At best, maybe 10 or 15 percent. For a gas or electric utility to fall as much as 50 percent makes no sense unless you really start thinking about what the investment community is saying. Under Obama's plan, dividend income will be taxed at the pre-Bush levels of 39.6% as compared to the current 15% rate. This fact, alone, makes utility stocks unattractive; especially in comparison to a tax-free municipal bond that is paying near 6 percent but is tax free. This is a substantially better investment than a utility stock that may be paying a 5% dividend and will carry a 40% tax rate under Obama..." (Read the entire post)

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