Why Obama is bad for stocks
A bitter malaise is infiltrating all facets of American life, from the president on down -- and it's awful for the market.
Posted by Jim Cramer on Thursday, June 24, 2010 9:06 AM
By Jim Cramer, TheStreet
I heard it five times this week, twice Tuesday in a Wall Street bar, two times during the day chatting with investors and then last night at dinner with a pal, an old pro trader from down the block.
All said the same word, as if programmed, like pod people in "Invasion of the Body Snatchers." The word? Malaise.
All the people who used this term were older friends from my trading days; wizened veterans of other terrible markets; and, of course, people who came of age during the Jimmy Carter years.
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The unlamented president talked about the malaise in America and how the country was going in the wrong direction, coincidentally in large part because of failed energy policies that produced gas lines and a lack of energy independence.
He talked about a dispirited America in which people for the first time thought the next five years would be worse than the previous five years. When you read the speech -- it was well-known and, yes, well-scorned -- it resonates today as if it were delivered by the current man in the White House. I am surprised he's not delivering it, but he knows better. Carter never recovered from it.
Malaise. The recognition that things aren't going anywhere and there is no getting better. The recognition that the president and Congress can't create jobs and that we can't stop the spill. The recognition that things are out of our hands.
Pitiful, helpless giants
One true presidential historian and arbitrageur invoked the "pitiful, helpless giant" speech, a true throwback, a miserable speech by Richard Nixon green-lighting the disastrous Cambodian incursion in order to defeat the indefatigable and ultimately undefeated North Vietnamese. Given our inability to subdue the Taliban, though, maybe the analogy is not that far off base.
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It sure feels like we are stuck in a malaise and have been reduced to a pitiful helpless giant, hobbled this time by high debt, huge taxes, an anti-business agenda that is freezing job growth, and an intractable economy.
To me, the coincidences are leading to what you see on your screen -- a collective sense of ennui and "it isn't worth it" -- because things aren't getting better, they are getting worse. That's how you get a market that interprets everything negatively and people who are fleeing, not going toward, even the best of values.
I do not mean to be political. It's not like the Republicans are proposing breakthrough strategies to get things done and break the malaise. But I do hear it, especially from people who have come back from Asia, where the can-do attitude of the '80s and '90s or even the '40s and '50s reigns.
A 'failed presidency'
This week's rank insubordination by a key general -- in, of all places, a Rolling Stone interview -- crystallized the moment, didn't it (no pun intended)? I heard only two things: one, that it was right for Gen. Stanley McChrystal to be fired and, two, that McChrystal was right for what he said. Given that a plurality of my colleagues voted for President Barack Obama, the conclusions were pretty grim for what one soul called a "failed presidency."
Bing: Obama's economic agenda
Look, in this country it is never too late for Obama to reinvent himself, to broom the people who have been setting his agenda and tack toward pro-growth. Although his one attempt to break with the orthodoxy came when he embraced offshore drilling -- a luckless failed presidency?
A BP bankruptcy?
And I am confident that the Gulf oil spill, if contained, would provide a lift and a revaluation of the malaise. However, I am NOT confident that BP (BP) will be able to contain the spill. After making so many maddening mistakes, I think BP will have to file for bankruptcy because of its gross negligence and the sheer size of the claims.
I have to marvel that the BP public relations team struck back today with an obvious riposte, as I have begun to read stories about how a BP bankruptcy would be a true blow to the U.S. economy because of the role the company plays in drilling and finding oil.
Claptrap. A bankruptcy filing is to eliminate the possibility that BP would have to be liquidated. It is a peaceful and orderly way to transfer the equity to the claimants while the bonds have a chance of paying off.
This isn't short-term. I am not looking at red futures or weak European quotes, despite the fact that the situation there no longer seems to present a systemic risk, and I had thought Greece would have been booted from the EU by now. Things seem pretty strong over there, though I think a slowly weakening euro may be in the cards because the European leaders want to boost exports.
Problems come from the top
Nevertheless, I keep coming back to the malaise, where even good news is filtered badly: a rising home price obscured by weak sales that should be extremely weak because of an expiration of a credit that paid for a year's worth of interest or maintenance charges, or whatever it was applied to.
This malaise, like the Carter malaise, starts form the top -- although Carter's speech was a thinly disguised attempt to blame the malaise on the American people and their unwillingness to sacrifice.
I think it has to end at the top, with recognition from the president that jobs have to be created, uncertainly removed, the agenda shelved. He obviously has no intention WHATSOEVER of doing that. And I am not saying this as someone who favors or is opposed to Obama. I am saying it from the litmus I always use: Is something or someone good for stocks or bad?
Obama is bad for stocks.
His administration is proving to be the champion for people who don't own stocks and perhaps never will. Or, worse, he thinks that the average working person saves in CDs. Is he unaware of the widespread 25-year campaign to have retirement savings and college tuition paid for by now-tattered stock portfolios?
A market going nowhere
I point out all of this because when I say this market is going nowhere, I think it is going nowhere because of Washington, not corporate America, not the public sector, not the private sector. The companies we have heard from this week are brimming with cash, with the Jabils (JBL) setting the tone of terrific earnings and the Apples (AAPL) setting the tone of worldwide dominance.
But it hasn't mattered.
That's what we are dealing with. You want to put the conversation in stark footing? Corporate earnings aren't making a difference because P/E's are shrinking from the malaise.
My most Republican of friends didn't stop with Carter and pegged the era as most similar to the 1930s, when deflation, not inflation, was the problem. I think that's too extreme but empirically not easily dismissed. I just think that no one reading this believes the next five years will be better than the past five years, even though we just experienced a hideous stock market decline.
There's just no sense of any control.
To dig in your bearish heels, though, is to see the market fall to 9,700 on the Dow ($INDU) and get some wake-up calls: BP containment and presidential recognition that job creation -- not cap-and-trade or financial regulation or amnesty or Card Check, all part of his pro-union agenda -- can help break the malaise and put us back on the right course.
As my old friend Steve Galbraith, a great stock thinker, wrote in a remarkable piece of research for Morgan Stanley, "Look for the union label and sell." He was asserting that union-dominated companies were good sales. GM, anyone?
Well, what happens if the president wants to put the union label on more businesses? What happens if he thinks it's right?
Guess what. He does.
Which is perhaps ultimately what this market is saying -- look for the union label and sell -- because the president is wearing such a label. It's bizarre, given what we know about unions and profits and the lack of success of the enterprises dominated by them.
Forget my politics. Forget anyone's politics. The malaise is here.
And the stock market knows it more than anyone.
At the time of publication, Cramer was long Apple.
Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.
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