Stock market gets giddy over Massachusetts

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by: Scott Marshall
January 21 2010

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It's tempting to go into a long rant about the results of the Massachusetts elections. But I'm basically of the "let the dust settle a bit" school of punditry. For now I fall into the "It takes a fight to win" camp. Having said that, something that really got me going before the polls closed on Tuesday was Wall Street and the stock market.

Business reporters and Fox Noise analysts were ecstatic. All the U.S. markets rose steadily all day long. "The markets are betting that the Democrats will lose Kennedy's seat in the Senate," they thrilled, "and this will not only kill health care reform, but all the rest of the Obama agenda." Most mentioned banking reform and labor rights, like Employee Free Choice. Then they also mentioned that pharmaceutical and insurance stocks seemed to be leading the way higher.

Most of us have heard economists tell us that the stock market is not much of an indicator of the health of the economy. Sure, when it goes all to hell, it does tend to state the obvious: things are bad. But remember how it was rising out of sight just before the crash? Not a clue. Of course the stock market's value as gauge of the economy has gotten even worse as banking capital has gotten "too big to fail," and edged out manufacturing capital that might be some small measure of productive wealth creation. Now it's more of a "heads they win, tails we lose" kind of indicator. "They" are Wall Street and "we" are most of the rest of us who work for a living on Main Street. Another example - next time a giant corporation announces a huge layoff, watch the ticker. Cost cutting (jobs, automation and speedup) seems to raise stock prices.

Anyway, back to the elections. The stock market might not be a useful economic indicator, but at times it just might be an indicator of the class struggle. The investment houses, the banks, the derivative traders, ("coupon clippers," Woody Guthrie used to call them) got giddy at the thought of defeating even the modest reform agenda of the Obama administration. Even though none of the modest reforms being proposed would be more than a mosquito bite on Wall Street profits.

The next day the stocks took a tumble that wiped out more than the gains of Election Day. Traders were worried about profits because the dollar got stronger, the price of oil dropped and China's banks are tightening lending.  What irony. The financiers who took billions in bailout money are worried that China's banks might tighten money and "hurt the economic recovery." Isn't it still a problem that the U.S. banks are not lending much even with all the government handouts that were supposed to loosen their lending? Well one thing for sure - reading the tea leaves of the stock market won't tell us much about how working people will respond to Tuesday's election in Massachusetts. Anyone know where I can buy some "fight for a second stimulus and public works jobs" futures?

Photo: http://www.flickr.com/photos/thewalkingirony/ / CC BY 2.0



 

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  • Scott, thank you for your thoughtful article. I too, was impressed by the dramatic selloff the two days following the election. As a professional investment advisor, it's my job to try to interpret Market movements in order to help my clients understand why these movements occur. Market watchers have long asserted that the Market hates uncertainty. In the case of the defeat of AG Coakley, the Market was shocked by the threat to the Obama recovery program and other reforms that his administration has tackled. I would bet dollars to donuts we would have seen the flip side of this Market reaction had Coakley won.
    While we're at it, I have long asserted that institutional investors sold off their stock holdings in the first few months of the Bush Administration (the Market crash of 2001) in anticipation of the "feed the rich" policies of that administration's economic train wreck.

    Posted by Jim Hannley, 01/22/2010 11:55am (2 months ago)

  • Good point, Scott. And today, after Obama appeared on talk shows indicating he would be serious about curbing some of Wall Street's excess, the stock market had its biggest loss in 3 months. Workers with 401K plans tend to root for the market to go up. But in a broad sense, when the market does well, it means corporate profits are high and the working class is getting screwed. I'm with you. The best investment is not in stocks and bonds -- it's in the working class struggle.

    Posted by Art Perlo, 01/21/2010 5:19pm (2 months ago)

  • Some common sense views of the economics going on presently will tell the workers commonwealth that we have been skinned and taken to the cleaners. The top corporations have looted the public treasury, social security pensions, and the societies entire social infastructure.

    That coupled with the continuous financing of the unjust wars, and illegal violence (non-production which consumes over half the wealth consumed each year now for the last few decades) means that aggressive wars cause depressions, which is something the militaries and their money making ammo manufacturies have been lying to the people about to cover up for a long time.

    In fact they propagandize and glorify the military killers, and please notice they do not glorify the real sources of wealth for a flourishing economy: the working class in each country. The workers do deserve to be glorified provided they don't pollute and destroy the environment as wars do. Destruction of the socialized economy is not production. Simply--- destruction is not production. To use the stock market as an indicator in this phase of a society being pushed to terminal decay of its self is much like a black hole star starved for fuel and imploding on itself.

    Stockmarkets like all materialism, come into being, be, and go out of being. This present one is showing the bailout syndrome, which says the rich are robbing the poor and unemployed, as is one of the central laws of capitalist ruling class practices throughout the existence of their society by robbing the 3rd law) surplus value added each year from the workers. This economic aggression against the workers has as yet to be fully responded to by the working class of America and in full around the world.

    This society is at present is tearing itself apart at the seams. Take for instance how it calls 'security' the hiring of more corporation guns per corporation. That is destruction and not production. So is hiring more police and making more prisons. Real security is hiring the workers to do socially necessary labour at trade union rates. IWW--everyone works poverty ends.

    The workers are the core security to all societies on the planet. The use of automation to throw the workers into the soup lines is theft of their cumulative wealth work on the means of production for centuries. This anti-worker practice is indicative of a society in terminal decay from which there is not going to be a revival to previous practice.

    The alternative is that the workers take over the means of production and make a planned society that ends the pollution, wars, unemployment, poverty, and racial and gender discrimination.

    Stock markets would become valid indicators again in the new society that is motivated by the renewables, such as wind, tidal, and solar power and not the coal, gas, oil, and atomic energy which is presently destroying our planets livability. We are late already as the CO2 is at 390 in the atmosphere, when 350 is the maximum allowed for safety. That means the oxygen has been burned out to an unsafe level (36%+) and we cannot live on CO2. To push the same society onward with the same stockmarket would only cause ultimately suffication of the air breathing species, in the not to distant future. Workers of the world, unite!!

    Posted by john, 01/21/2010 4:51pm (2 months ago)

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