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THE OBAMA ADMINISTRATION APPEARS TO BE GETTING PANICKY

THE OBAMA ADMINISTRATION APPEARS TO BE GETTING PANICKY

This week the Democrats lost a key senatorial seat in Massachusetts, a state that has long been a liberal stronghold.  The loss of this supposedly safe seat stunned Washington and put the Democrats on edge.  In response, they’re doing what any left-wing populist administration that’s frightened of losing power would do: blame big business.

Democrats will continue attacking big business, especially Wall Street, because they believe that the attacks may garner votes in the fall elections.  Perhaps the target of these attacks will be the natural gas and coal industries or other industries that are laying-off employees or moving operations abroad.

This is standard populist fare, and the same type of behavior that has taken place for decades in periods when the public is disenchanted with the party in office.  If those in power are right-wing populists they attack government and blame big government for the problems.  If, on the other hand, they are left-wing populists, they blame big business for the problems.  Since the government is currently controlled by the left-wing, they are implementing the standard left-wing approach.

The latest attack is on Ben Bernanke, the Chairman of the Federal Reserve.  There is talk that he may not be re-appointed to the position and a more left-wing economist will replace him.  This has un-nerved the stock market, and with good reason.  Attacks on business and on the Federal Reserve are not the stuff of which market rallies are made.  We see this as very negative for U.S. stocks.  We expect this kind of attack on business to continue until the elections in early November 2010.

If the Democrats lose many seats in November in spite of their attacks on business, the markets can be expected to rally. Until that time, we prefer to invest in foreign markets as the U.S. stock market could be volatile.

Thanks for listening


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