The other day, I had made the joke that President Obama had promised to roll back the President Bush's years but unfortunately he had started with the Dow Jones. In case you were asleep last week, the Dow fell to its lowest point since 1997. A friend of mine commented, "Obama doesn't have any control over the stock market, ". When questioned further he told me that the stock market was like "gambling".

My friend is an educated gentleman who has read books on how to invest and still doesn't get the fundamental links between economic policies and the stock market. If an educated person doesn't get it, I must assume there are many more people who don't get it either. While the intricacies of the market are too much for a single blog entry, I am going to speak to it in a more general sense. Hopefully you and maybe even the President will have a better understanding of his affect on the market and thus the economy.

Literally, President Obama has very little control over the direct value of stock. Although, he does have the ability to control public policies that affect the environment in which a company does business. So while you could say he didn't break the china, he did let the bear into the china shop.

The stock market is a barometer of investors’ opinion about what the economy is going to do. Let's say that you are going to do things that don't favor growth, the market will rise slowly. If you in turn say you are going to do things that hurt growth that will make the market decline. This happens because companies will not make money so there will not be profits paid to shareholders and other benefits of growth.

Before he was in office, President-elect Obama had said that he was going to raise the capital gains tax even though it would decrease the amount of tax revenue generated. This affects the market because those people who have invested in stock pay capital gains when they sell that stock. If is beneficial for someone who was thinking of selling to sell before those tax hikes go into effect, so investors begin selling when they think he is going to get into office before he does. Selling of stock makes the market go down.

Another example is the continuing nationalization of companies. A company's sole objective is to make money. The government is terrible at making money, because the motivations are not there. Government organizations make political decisions instead financial ones, like Freddie and Fannie and Andrew Cuomo's decision to give away high risk home loans. So as the government gets its hands into more and more businesses, and they impose more mandates, those companies become worth less and less to investors. As long as the government owns part of AIG, the likelihood they are going to pay dividends is very slim. If we look at an example to the contrary, Ben Bernanke announced on Tuesday (2/24) that there would not be a further nationalization of banks. That day stocks began to rise. That night President Obama reiterated many of the same threats and the market began to tumble again the next day.

He is also increasing government spending by more than threefold and that is only in extra spending. He hasn't even declared the budget yet. I saw a poll the other day that said 53% of Americans believe the Stimulus package will fail or do nothing. The only slice of the population that believes that it will work is government workers, by a margin of 1%. Each dollar spent by the government is taken from someone else. These are no growth jobs, and therefore do nothing for the economy at large. The government hiring someone to build a road does nothing to help grow our GDP. A company hiring someone to build a car does.

Hopefully you have learned something. If you still disagree you will at least understand why everyone else is selling their stock. I have yet to see an economist debate these issues, but if you look hard enough I am sure you can find one, probably in the cabinet. My observation is that it seems like he is doing it on purpose. If he is as smart as people say he is, then surely he understands what he is doing. So why does he keep doing it? Well the answer to that is beyond this post and range from "he is sinister"(Marx's plan to fleece the bourgeoisie) to "he is an elitist"(Eliminate the middle class from investing) and everything in between. I am not going to debate any of those without a beer in my hand.