Markets Rising On Obama's Stumbles?
I think so. Markets might be sighing relief at a weakened executive. President Obama is by no means weak but he is losing relative strength.
1) The parade of his nominees that are bedeviled by tax problems is highly embarassing and the Daschle loss is a big one. One tax scofflaw who made it through, Geithner, is arguably Obama's most important appointee and is under a cloud. A heroic performance is needed out of Mr. Geithner to salvage Obama's cabinet line-up. (It will be interesting to see if the smoothest sailing nominee gliding into office turns out to be Republican Judd Gregg. This could be interpreted as a bipartisan triumph of new Washington under Obama, but I doubt that's how it will be looked at - Dems will be bitter that the Mr. Clean in Obama's cabinet is a Republican, and the far left will just puke at the thought of Sec. Gregg.)
2) Right out of the foreign policy gates, Obama has given Iran a chance to demagogue against the US. If this isn't a free "Save Some Face" card that is accompanied by backroom hardball, well, it constitutes another embarassment. We'll see, but the optics stink.
3) Obama's base already seems to be wise to the fact that they are being thrown bones without alot of meat on them. Guantanamo, "Don't ask, don't tell", CIA renditions - all seem like they could be "policy" but are really just a giant TBD.
4) The stimulus vote in the House was a mini-disaster for Obama. Through sheer stupidity, the Senate Republicans could allow Obama to snatch victory from the jaws of defeat, but they still have a chance of rebuking Obama's call for bipartisanship and making it look like just what it is, an empty plea with no leadership. Obama has an all-star economic team, but it looks as if his team wasn't allowed within 4 counties of the room where the stimulus package was put together. People are scratching their heads; they see no Summers, no Romer, and no Furman fingerprints on this thing at all. This isn't in Obama's loss column yet, but it could be. (UPDATE: Apparently, Obama's all-star line-up of economic heavyweights hasn't even met yet. So, Obama is trying to ram this thing down the nation's throat, but his economic best and brightest haven't even gotten together? Hmm.)
5) Obama is ratcheting up the populist rhetoric against banks and bankers. He may be just playing to the crowd but he has to be careful here. All this rhetoric combined with the serious calls for bank nationalizations spooks the business community. If these bankers and enough business leaders decide to hide under their desks for four years, Obama is a one termer. Already, GE and Caterpillar are having to mobilize against the protectionist elements of the stimulus (and they have European politicians joining in). There will be many more who join this fight. Obama needs the business community, but he's not starting off well.
Finally, and this is not a blunder but rather a fundamental flaw, Obama's legislative support is only as good as his public sheen. The reason he had to stack his administration with Clintonites is that he had no decent network to speak of. His limited experience in government, and life actually, has left him lacking in broad and deep connections to people who can achieve things and stand by him. His quick rise to popularity and electoral promise has attracted a cadre of government and business types to fill the ranks now, but they do so for the sake of Democratic power in and of itself. Does anyone think that previously loyal Clintonites/now Obamites will stay loyal if the bloom starts to come visibly off the rose? I truly wonder how much uphill sledding those around Obama now are prepared to endure. I guess some, but not much.
Directionally, I think this is all fairly obvious, but what matters is magnitude, which I can't estimate. If Obama's stumbles continue and are big enough, the massive expansion of government that is disguised as economic stimulus could run aground. I think the markets have a slight sense of this and are perking up at the thought that we aren't necessarily going to ride a wave of populism to monstrous government intervention in the economy. Bottom line, investors think Obama will be capable of alot less damage than they had originally feared, and the market is reflecting this cautious optimism.
1) The parade of his nominees that are bedeviled by tax problems is highly embarassing and the Daschle loss is a big one. One tax scofflaw who made it through, Geithner, is arguably Obama's most important appointee and is under a cloud. A heroic performance is needed out of Mr. Geithner to salvage Obama's cabinet line-up. (It will be interesting to see if the smoothest sailing nominee gliding into office turns out to be Republican Judd Gregg. This could be interpreted as a bipartisan triumph of new Washington under Obama, but I doubt that's how it will be looked at - Dems will be bitter that the Mr. Clean in Obama's cabinet is a Republican, and the far left will just puke at the thought of Sec. Gregg.)
2) Right out of the foreign policy gates, Obama has given Iran a chance to demagogue against the US. If this isn't a free "Save Some Face" card that is accompanied by backroom hardball, well, it constitutes another embarassment. We'll see, but the optics stink.
3) Obama's base already seems to be wise to the fact that they are being thrown bones without alot of meat on them. Guantanamo, "Don't ask, don't tell", CIA renditions - all seem like they could be "policy" but are really just a giant TBD.
4) The stimulus vote in the House was a mini-disaster for Obama. Through sheer stupidity, the Senate Republicans could allow Obama to snatch victory from the jaws of defeat, but they still have a chance of rebuking Obama's call for bipartisanship and making it look like just what it is, an empty plea with no leadership. Obama has an all-star economic team, but it looks as if his team wasn't allowed within 4 counties of the room where the stimulus package was put together. People are scratching their heads; they see no Summers, no Romer, and no Furman fingerprints on this thing at all. This isn't in Obama's loss column yet, but it could be. (UPDATE: Apparently, Obama's all-star line-up of economic heavyweights hasn't even met yet. So, Obama is trying to ram this thing down the nation's throat, but his economic best and brightest haven't even gotten together? Hmm.)
5) Obama is ratcheting up the populist rhetoric against banks and bankers. He may be just playing to the crowd but he has to be careful here. All this rhetoric combined with the serious calls for bank nationalizations spooks the business community. If these bankers and enough business leaders decide to hide under their desks for four years, Obama is a one termer. Already, GE and Caterpillar are having to mobilize against the protectionist elements of the stimulus (and they have European politicians joining in). There will be many more who join this fight. Obama needs the business community, but he's not starting off well.
Finally, and this is not a blunder but rather a fundamental flaw, Obama's legislative support is only as good as his public sheen. The reason he had to stack his administration with Clintonites is that he had no decent network to speak of. His limited experience in government, and life actually, has left him lacking in broad and deep connections to people who can achieve things and stand by him. His quick rise to popularity and electoral promise has attracted a cadre of government and business types to fill the ranks now, but they do so for the sake of Democratic power in and of itself. Does anyone think that previously loyal Clintonites/now Obamites will stay loyal if the bloom starts to come visibly off the rose? I truly wonder how much uphill sledding those around Obama now are prepared to endure. I guess some, but not much.
Directionally, I think this is all fairly obvious, but what matters is magnitude, which I can't estimate. If Obama's stumbles continue and are big enough, the massive expansion of government that is disguised as economic stimulus could run aground. I think the markets have a slight sense of this and are perking up at the thought that we aren't necessarily going to ride a wave of populism to monstrous government intervention in the economy. Bottom line, investors think Obama will be capable of alot less damage than they had originally feared, and the market is reflecting this cautious optimism.
posted by Donny Baseball at 4:14 PM
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