Follow The Smart Money: Falling Obama Popularity And Political Rebuff Reflected In Stock Market Rise?Oct 22, 2009
Kent Engelke is the chief economic strategist and managing director at Virginia-based Capitol Securities Management, and is one of the most quoted market experts in the country. His forecasts largely get it right. I get his daily Early Morning Commentary and today's had some compelling statistics that should alarm everyone. People, take heed. Using the stock market as the predictor it is, he asks why equities have experienced a rally of late. He posits a theory that investors think socialized medicine will not occur. He cites President Obama's own economic team's warnings of financial disaster if the deficit is not reduced substantially. (Of course, they always say that and spend and tax and print money anyway.)
But take this with more than a grain of salt:
The 2009 fiscal deficit was an astounding $1.4 trillion as spending increased from $3 trillion to $3.5 trillion while tax revenue fell from $2.5 trillion to $2.1 trillion. The debt is now at $12 trillion and is expected to grow by another $9 trillion over the next decade. [Dow Jones]
CBO is estimating spending on Medicaid and Medicare will grow over $700 billion over the next 10 years while health care legislation is conservatively estimated to add another $900 billion to the deficit. [Dow Jones]
But most alarming is this:
Incidentally and as per the Organization of Economic Corporation and Development today 42% of U.S. GDP is comprised of federal, state and local spending. Wow! We all know the efficiency of the government.
Mr. Engelke doesn't pontificate political often in his writings, so a letter devoted almost exclusively to our current situation is remarkable. He also notes that since the Obama administration, by general agreement (and even Saturday Night Live) "is steep in hype but low in accomplishments" and asks rhetorically whether the stock market rally suggests "a backlash in government spending, perhaps even a reduction, because the President’s approval ratings are plummeting?"
According to the Rasmussen Report:
40% strongly disapprove of the president’s job performance. 27% strongly approve. Overall 47% approve of his actions while 53% disapprove, the second lowest ratings for this President. Fifty four percent oppose health care legislation while 42% approve it.
When a normally non-plussed and widely respected market strategist and economist goes to this length, something is up. The stock market often is an indicator of things not only financial, but societal, technological and political, among other trends. Looking at it strictly from a personal stock-holdings point of view doesn't paint the entire picture. You know what they say: Follow the money. Especially if it's smart money. Expect political changes shortly.