Thursday, November 6, 2008

Obama Gives Stock Market A Dead Cat Bounce

News service Reuters got most of it wrong in an article describing the positioning of Wall Street investors in aftermath of the Obama victory in the 2008 campaign. Tuesday, November 4, was voting day in America, as everyone knows, and the stock market went up a couple of hundred points. The Reuters writer Jennifer Ablan must have been steeped in euphoria when she wrote her November 5 article praising the wonderfulness of it all. She probably wishes she could withdraw the entire article since, just one day after the Obama victory, the Dow index experienced its biggest HISTORICAL two-day point drop in its long life, far worse even than 1987. The S@P lost ten percent in the 2-day period.

The Dow is down another 443 points after a similar drop yesterday. Obama's scrambling to get his economic team in place and has called a press conference for tomorrow to see what it can do to buttress business confidence.

What I'd like to know is what can Obama's team do that $700bn didn't? Nonetheless, Reuters didn't get the entire article wrong, just 90 percent of it. They did publish the comments of a skeptic:

Doug Kass, founder and president of hedge fund Seabreeze Partners Management, said Tuesday's 300-plus point rise was an "Obama bounce, not an Obama rally. I think that all we are going to see is what we've basically seen now."

Kass said the economic fundamentals are deteriorating, giving him reason to keep selling stocks short.

"My plan is to expand my short book," Kass told Reuters in a telephone interview late Tuesday. "It's growing clear that the recession is going to have a shelf life unlike the last recessions in both scope and duration."

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