CatherineRhodes.com

These guys look scared

A FRIEND OF MINE mentioned that when the market gets to 8,000 he’s going to liquidate his portfolio. That’s what is different about this ‘Great Recession.’ In prior downturns, people understood that they needed to hold onto their distressed stocks in order to ride the wave back up. Otherwise they would sell at a loss. Now there seems to be a generalized feeling that the Dow was irrationally inflated at its peak on Oct. 9, 2007 when it hit 14164, and that it needs to be recalibrated to a new baseline. Where is that? The “Clinton bull” high was 11723 on Jan. 14, 2000. Weren’t those the good old days? Peace, prosperity and a bull market.

So my sad theory is that this recession will last a very long time. As soon as the market starts to get some momentum people like my friend will sell their shares and drive the Dow back down. Then the next burst of confidence will result in a  small spike that will quickly be deflated by another round of sell-offs. People are living with terror and loss on an unprecedented scale, so they don’t want to risk waiting for a return to prosperity. The aggregate of this is that the recovery will be extremely protracted as the dow bumps along the bottom.

My colleague Randy Goldring argued persuasively on his blog that the markets are voting against the stimulus plan and President Obama in general. He cites an editorial in yesterday’s Wall Street Journal saying the same thing: that the Dow has fallen 25 percent since Obama took over, that the markets have lost confidence.

While the Wall Street Journal is railing against Obama in the Op-Ed section, the polling wing of the paper shows a different result.

President Barack Obama enjoys widespread backing from a frightened American public for his ambitious, front-loaded agenda, a new poll indicates. He is more popular than ever, Americans are hopeful about his leadership, and opposition Republicans are getting drubbed in public opinion, the new Wall Street Journal/NBC News poll suggests.