He Could Even Touch Off a Huge Rally
I think we're all getting a quite vivid sense that
President-elect Obama's way of handling tough situations is to set
his jaw, furrow his brow, stare purposefully forward, say
reassuring things, but on no account to make any clear statements
of intent, or to actually do anything.
At least one of the consequences of this extremely risk-averse
approach to leadership, is that financial markets are completely in
the dark about what they can expect from the new government.
And when financial markets don't know what to expect, they
always err on the side of excessive caution. Hence the great
difficulty they've been having in finding a bottom to bounce off
from.
The stock and bond markets appear to be discounting an economic
future that is little short of catastrophic. Since total
catastrophe is one of the least likely outcomes, it stands to
reason that markets are currently underpriced.
But that's not to say they can't very easily become a lot
more underpriced!
Obama could sweep away a lot of this uncertainty and unreasoning
fear with no more than a ten-minute news conference.
He could stand up, with the towering Paul Volcker, the
sour-pussed Larry Summers and the sardonic-looking Tim Geithner
standing behind him, and say the following:
"Ladies and gentlemen, I've consulted at length with my
economic team. We're acutely aware that our economy is facing great
uncertainty. We understand that our system is a capitalistic one.
We intend to do whatever it takes to get business and capital
working again, for the sake of every consumer and working person in
America.
We also recognize our critical responsibility to the rest of
the world. As the pre-eminent economic power, it's up to us to lead
global markets back to health and prosperity.
I'm announcing the following key decisions, which we will
stand by until our markets are back to normal, employment is
growing, and our economy is healthy again:
All tax increases on capital, dividends, and business income
are OFF THE TABLE.
All protectionist legislation, including increased tariffs
and import duties, are OFF THE TABLE.
All new regulations, mandated costs and taxes on businesses,
including export businesses, are OFF THE TABLE.
That is all. Thank you."
If Obama were to give this speech, you'd see explosive market
rallies, and everyone would heave a big sigh of relief.
So how about it, Mr. President-elect?
-Francis Cianfrocca