Obama: Buy Stocks!

After months of sounding the alarm bell, President Obama is finally talking up the economy.

President Obama told Americans to take a look at investing in the stock market this afternoon, a remarkable utterance for an American president, especially as the Dow Jones Industrial Average proceeds on its course Southward.

“What you’re now seeing is … profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it,” the president said on a day that trading continued to hover under 7,000.

The president predicted that Americans’ consumer confidence would improve as they see the stimulus bill “taking root.” “Businesses are starting to see opportunities for investment and potential hiring,” he said. “We are going to start creating jobs again.”

The macroeconomy is incredibly complex, obviously, and thus hard to unravel.  Megan McArdle, for example, argues that we may yet be a long way from bottom.

But to the extent that what’s happening with the stock market is a crisis of confidence and sheer panic selling — and I do think these are major factors beyond the underlying real systemic problems — then having a popular president jawbone can help.

Whether he can cheer Donald Sensing up about his retirement portfolio, I don’t know. It would be more likely to work, though, if Obama would use something more akin to his campaign rhetoric than wonky talk about price-to-earning ratios.

FILED UNDER: Economics and Business, US Politics, , , , , ,
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Steve Plunk says:

    Talking it up will not change the reality of Obama’s declaration of war against the investor class and business as Larry Kudlow pointed out.

    If all of the Oabama policies were good for stocks the market would have already rebounded but the policies are bad so we can expect nothing.

    Instead telling us to buy stocks how about taking real actions to shore up confidence like promising no tax increases, no increased regulations, and maybe even a real energy policy? No? I didn’t think so.

  2. Pete Burgess says:

    He’s admitting his prescription is flawed

  3. Eneils Bailey says:

    President Obama told Americans to take a look at investing in the stock market this afternoon,

    No, Thank you. I have always stayed away from “short selling.” I have always been better at recognizing and picking winners than relying on loser’s.

  4. Drew says:

    “then having a popular president jawbone can help.”

    Really? When he wanted to sell his “stimulus” package, he talked the economy down. Potential “catastrophe” an such. Now he magically wants us to believe in equity prospects? I give you: Flim Flam Man. Period.

    Team Obama is making the exact same policy mistakes the Japanese made circa 1990+. Ineffective fiscal stimulus. Failing to make banks and corps fix themselves by dripping in the money.

    Here’s a gentlemen’s bet: despite a potential Bear rally in 2009, DOW Bottom: 4500

  5. Eneils Bailey says:

    DOW Bottom: 4500

    I am betting 800-1000 points lower than that.

    Of course, this is speculation; I never sell short.

  6. odograph says:

    I think I’ve talked before about creating a narrative. And I’m pretty sure I asked, once Obama’s narrative turned, once his stimulus was passed, if you would respond by talking down the economy yourself.

    (BTW, I bought yesterday. Nibbled. Increased my quite low equity allocation by a smidge.)

  7. odograph says:

    I see that you still, impossibly, treat this as a “stock market” crisis of confidence. That is wrong on several levels, but not least because US conservatives have a deeply parochial of what is in fact a global problem.

    Heck, you’d be able to cure yourself of a lot of the partisan blinkers if you’d just cross-check with what is happening in Japan, or Scotland, or China, or Spain.

    WTF, did they ALL get “Democrat” governments at the same time?

  8. odograph says:
  9. Drew says:

    I’m not sure who’s post odo’s response’s were aimed at, semi-coherent as they are…..

    But to this particular observation:
    “Heck, you’d be able to cure yourself of a lot of the partisan blinkers if you’d just cross-check with what is happening in Japan……”

    I think that’s exactly what I did, and observe that Team Obama is turning a rough situation in the US into The Japanese Experience II.

    Oh, and thanks for being the poster boy for absolving George Bush. What with all that international perspective an sech………

  10. odograph says:

    I put a couple longer responses in the other thread, Drew.

  11. tom p says:

    Talking it up will not change the reality of Obama’s declaration of war against the investor class and business as Larry Kudlow pointed out.

    No offense Steve, but these people declared war against me a long time ago. (and no, I am not going to apologize for the acknowledgement of “class warfare” as it exists now, in this day)(and Larry Kudlow is a hack… ask yourself this: How much does he make? I rest my case.)

    If all of the Oabama policies were good for stocks the market would have already rebounded but the policies are bad so we can expect nothing.

    Steve, that is so simplistic, it defies explanation. Maybe, just maybe…

    THE ECONOMY SUCKS????

    Instead telling us to buy stocks how about taking real actions to shore up confidence like promising no tax increases, no increased regulations, and maybe even a real energy policy?

    Where do I start… The lack of regulation on CDS’s and CDO’s got us in this mess. No tax increases… where have I heard that before? (mind you, there is a reason for not doing that just now… which Obama has already promised.)

    and maybe even a real energy policy?

    as opposed to what Cheney proposed? Oil is running out, and with China and India, do you really want to entertain the idea that we can “drill baby, drill” our way out of this?

    We need to move in a different direction, to pretend otherwise, is delusional.

  12. Christopher says:

    tom p you are hilarious! the election is over, dude. stop campaigning! by the way, do you own an automobile, or work for a business that uses autos or buy from businesses that use autos? if so, u r a hypocrite.

  13. Christopher says:

    Does his Holiness posses a securities license? If not, isn’t he in violation of the law by giving investment advice on a large public scale?

  14. Pete Burgess says:

    tomp, we can’t drill our way out of this, but we can give ourselves a cushion. Why not tie spending on new energy to more drilling? Do you know what is going to happen before this “more drilling” issue is resolved? Refining shortage. The world is maxxed out on refining. Watch what happens when the world industrial expansion picks back up.

    Yes lack of proper oversight, a “bullet proof” attitude by Wall Street, government offering perverse incentives, all these and others caused our mess.

    The wrong prescription to fix it is just piling on.

  15. tom p says:

    the election is over, dude. stop campaigning! by the way, do you own an automobile, or work for a business that uses autos or buy from businesses that use autos? if so, u r a hypocrite.

    Christopher, you are a simpleton, incapable of dealing with the complexities of such matters. I will move on to people a little more serious:

    tomp, we can’t drill our way out of this, but we can give ourselves a cushion. Why not tie spending on new energy to more drilling? Do you know what is going to happen before this “more drilling” issue is resolved? Refining shortage.

    Drew, you have a point (about the “cushion” aspect of it) and yet you acknowledge that “drill baby drill” is not and never was, the answer: You say refining is the true choke point and you are absolutely right… but we still have the NIMBY syndrome… Wood River IL just got thru the regulatory phase… how many more years before it comes on line?

    The wrong prescription to fix it is just piling on.

    Agreed again… we need a true energy policy, one that actually deals with our short term needs, while planning for our long term constraints.

  16. tom p says:

    I apologize… I thought I was quoting Drew, when I was quoting Pete… Sorry Pete, looking at too many posts.

    tom

  17. JKB says:

    Well, I suppose if your are naive enough to think Obama’s agenda is not a direct attack against businesses, business owners, and investors, then I suppose your naive enough to buy stocks on Obama’s advice while he is still making the regulatory and tax risks unpredictable but clearly hostile to the market.

    A fool and their money are soon parted

  18. tom p says:

    Well, I suppose if your are naive enough to think Obama’s agenda is not a direct attack against businesses,

    JKB… my woman has been invested in this “market” thru her 401K these past I don’t know how many years… A year + ago, I told her to get out of it. Guess what? That was not an option for her (so much for “freedom”, eh?). She lost over half the value of her savings in the past yr. That investment was not on Obama’s advice.

    As for me? I have not had a raise that outpaced inflation in 7 yrs…

    A fool and their money are soon parted

    You are just beginning to find out. Hope you like it.

  19. odograph says:

    JKB, I would not politicize my portfolio to that degree. As it happens, I’ve always liked Shiller’s PE10, and it seems that Obama has been listening to similar things.

    This is not an investment blog, but without going into it too much, I think it is about an investor’s age and asset allocation. If we believe in equities at all, we should have some position. If we are going to maintain a position, then we need the guts to buy when prices are low.

    There is a well known statistic that the average mutual fund investor does much more poorly than the average mutual fund. That average investor only buys “when the market gets going” which tends to be half-way up a peak. They tend to sell near bottoms.

    For my age, my equity allocation is very low, far below texbook levels. So I can (and I think should) buy, or at least nibble, on down days.

  20. odograph says:

    BTW, JKB. You get extra irony points for ‘talking down the market’

  21. Christopher says:

    tom p

    You have not had a raise that outpaced inflation in 7 yrs? Not only are you a worthless liberal, you are also a worthless contributor to the economy. Pathetic, but even more so that you admit it, in an attitude of “blame”.

  22. JKB says:

    Perhaps I just missed making my point. Which was that the guy who is now saying you should buy stocks is the same guy who is making it uncertain as to how the stocks might perform in the future, therefore causing buyers to stand on the sidelines.

    Uncertain as to how struggling companies will manage the increased energy costs from the cap’n trade. Uncertain as to how companies will be impacted when those making over $250k adjust to the increased taxes to be imposed on them. Uncertain as to how the massive increase in the deficit will affect the economy, the economies of our trading partners or the cost of money. Uncertain as to how the promised increased taxes on businesses will affect their ability to continue as a going concern. Uncertain about the impact of a massive new universal health care program. Uncertain as to what new plan to redistribute wealth is about to be announced.

    It’s not the the P/E looks good now, it’s that few if any have confidence on what it might look like tomorrow or next year or even 10 years from now because of the agenda Obama is pursuing.

  23. odograph says:

    What part of global downturn did you miss?

  24. odograph says:

    An excellent read on the global aspect and policy parallels in europe:

    The Line: Not My Fault (Gordon Brown On NPR’s Morning Edition Today)

    That Brown made similar errors to Bush does not absolve either of them.

  25. FaithG says:

    The only kind of stock that a sensible small investor would buy now would be the kind that lives in a barnyard, so I’m considering buying a goose and a cow. While the goose is laying the golden egg, I’m taking the cow to town and trading her for a couple of magic beans. I should be set for life after I’ve gathered the eggs and stolen the giant’s treasure. Since we seem to be living in a fairytale where stocks are a good investment for the little guy, I’ve decided to believe in the tooth fairy, too.