Nope, not an Onion headline. Kevin Hassett, co-author of Dow 36,000 — which proffered exactly the sort of advice that you might reasonably infer from its title — has now penned a column accusing Barack Obama of deliberately attempting to sabotage the economy.
It is no wonder that markets are imploding around us. Obama is giving us the War on Business.
Imagine that some hypothetical enemy state spent years preparing a “Manchurian Candidate” to destroy the U.S. economy once elected. What policies might that leader pursue?
He might discourage private capital from entering the financial sector by instructing his Treasury secretary to repeatedly promise a brilliant rescue plan, but never actually have one. Private firms, spooked by the thought of what government might do, would shy away from transactions altogether. If the secretary were smooth and played rope-a-dope long enough, the whole financial sector would be gone before voters could demand action.
To review, Dow 36,000 came out in October, 1999, within months of the tippy-top peak of the tech bubble … this is when stocks were as overvalued as at literally any time in American history, including the Roaring 20′s — and Hassett was telling you to double — nay, triple-down on them! It would be hard to identify an individual who better embodied the phrase “irrational exuberance” — well, maybe the Pets.com sock puppet — or who destroyed more wealth with charlatanic financial advice.
And this guy thinks it’s all some big conspiracy against him. Literally.
Wall Street needs to get its house in order. A big reason for the financial crisis is because of market failures — the country had to endure the weight of two consecutive bubbles, first in tech stocks and then in housing. Another big reason is because the Fed kept interest rates much lower than they ought to have been. There were a number of reasons for that, but the fact that the NASDAQ would pitch a fit anytime that Greenspan or Bernanke wouldn’t meet their expectations on perpetually low interest rates was probably one of them.
There appears to be no acknowledgment of any of this, no attempt whatsoever to come to grips with reality. Instead, all we get is denial and anger.
Nobody is going on CBNC and saying: “You know what, our bad. We had a lot of good and honest disagreements with the Bush administration’s policy. We have a lot of good and honest disagreements with the Obama administration’s policy. There are a lot of things we couldn’t have anticipated. We were trying the best we could. But we also gave you a lot of bad advice. And that advice cost you a lot of money. And for that, we’re sorry.”
Why can’t anyone on Wall Street man up and do that?
The worst news is that we appear to be in only the second of five stages of grieving — and you can pretty much project the path the markets will take until the healing process completes itself.
1. Denial (Nov 2007 – Sept. 2008) : Markets surprisingly resilient in face of recessionary pressures.
2. Anger (Sept. 2008 – present): Wall Street throws tantrum; markets crash.
3. Bargaining (Summer 2009?): Bear market rally.
4. Depression (Fall-Winter 2009?): Dow gives back most of gains from rally (and then some, perhaps); sits near 15-year lows as volatility and volumes decrease.
5. Acceptance (2010?): Market finally capitulates; Dow rebounds to an historically sustainable valuation of perhaps 9,000 points.
Then again, if Hassett thinks that things are going to get even worse, there’s probably no better time to get your money in than right now.