Conventional Wisdom

Here's an article by Daniel Gross in Slate which points out that conventional thinking, the "prediction markets", Republican strategists, and economists have all been wrong in predicting what would happen under Obama:

Those shorting the Obama candidacy got crushed. And since January 2009, so, too, have those who have shorted the Obama presidency—especially the performance of the markets and economy under Obama. The same Republican politicians and economic pundits who (wrongly) said Bill Clinton's 1993 budget would destroy the economy and the stock markets, and who (wrongly) said President Bush's tax cuts would usher in an era of endless prosperity and wonderful market performance, warned again that the presence of a Democrat in the White House would spell doom for the Dow.

Here's a two-year chart of the S&P 500; if you shorted the market after the election, or after the inauguration, you've lost money. And if you shorted in March 2009, after the passage of the stimulus package, when Stanford economist Michael Boskin penned the foolish op-ed in the Wall Street Journal with the headline's "Obama's Radicalism is Killing the Dow," you'd really be feeling some pain. The S&P 500 is up 72 percent since then.

The shorting of the economy's performance under Obama wasn't limited to the ideologues who populate the Journal's editorial page. Economist forecasters have also effectively shorted Obama, arguing that the economy would not respond to the stimulus and other efforts. In the second quarter of 2009, economic forecasters surveyed by the Philadelphia Fed said the economy would grow at a 0.4 percent rate in the third quarter of 2009 and a 1.7 percent rate in the fourth quarter of 2009. The reality: The economy grew at a 2.2 percent rate in the third quarter (more than five times the rate they projected) and at 5.9 percent in the fourth quarter (more than three times the rate they projected). Oh, and if you shorted the dollar on the grounds Obama's policies would debase our currency, you've lost money, too.

What I find amazing is that rich people support the Republicans despite a hundred year history showing that the economy and the stock market do better under Democrats than Republicans. Sure, the Republicans talk a good line about "stimulating business" and "building a strong country" but in reality they have been historically bad managers. It is the Democrats, the guys for the little people, who have done well by the country.

I'm reminded how all the "smart money" moaned that Brazil was lost when they elected leftist Lula. But the country has boomed. All those years under military dictatorship and right wing "strong man" governments that claimed they would build a better Brazil went fizzle. It was only when the people when for a guy who supported the "little people" did the economy boom. There is a profound message in this fact.