Monday, April 27, 2009
(Cont'd from above)...

Jim (cont'd):   

How did I render this ridiculously optimistic judgment… is it my bias showing… I don’t know… the last time that I looked people were dismissing me as an angry Republican… in the Dick Chaney style of graciousness… after my diatribe about the great wealth destruction that Obama had originally embarked on with his now is not the time mantra… but Obama has put that anti-capitalist rant behind him… aided by Treasury Secretary Tim “I figured it out” Geithner, and Ben “60 Minutes” Bernanke at the Fed… 60 minutes being a bizarre illusion to a program to an inferior network, that showed how spot on Bernanke has become in his desire to turn around the economy… after a session where the averages stunk up the joint like today it is more important than ever to assess the President’s first 100 days because we need to make a judgment on more than just the activity we saw today from 9:30 to 4:00.… we make our assessment by looking at the individual components of the Dow Jones Averages… and they lead us to, well something stark… the President is doing a good job.

First, what has gone up the most since Obama’s inauguration… what does it tell us… the leaders JP Morgan, 82%… Bank of America leapt up 75%… American Express jaunting 55% higher… Dupont up 18%… IBM plus 22%… Intel rallying 19%… and the Home Death Spot, Home Depot, has advanced 19%… given that the banks are the chief measure of whether or not an economy is coming out of a repression, if not a depression… those outstanding numbers from JP Morgan, Bank of America and American Express… I regard them as fantastic news… if these stocks had gone down a lot… it would have been a sign that there is no recovery in sight… and we might be plummeting into an even deeper depression… as bank failures were the epicenter of the Great Depression.

What do we make of Dupont… it is a housing play… a play on more construction down the road… of course, it has some exposure to drugs and ag… but it is housing that drives the stock… and Dupont’s rally says that the housing market seems to be on track for my June 30th bottom call… one that was once ridiculed by the 42 blogs that are devoted solely to betray me as a jerk, in the vein of Cramer fave Navin Johnson, if not Dumb or Dumber… the performance of Home Death Spot tells us the same thing… I have been buying the Death Spot to play for a housing term for My charitable trust, ActionAlertsPlus.com, and I continue you to do so… particularly if it ever goes down.. which it does not seem to… the spectacular run in Home Depot since Obama was sworn in tells you unequivocally that the consumer has both a hope for a bottom in housing… and enough money from the refinancing wave to buy Home Depot’s wears… you do not have to wait for the stimulus to kick in… the refinance wave is upon us.

What do we learn from IBM and Intel’s strength… which round out the Litmus test stocks… these two plays are true plays on domestic and global technology spending… companies do not spend money on big corporate information technology, IBM’s hallmark, or PC’s, Intel’s balliwick, unless they see a turn in the economy coming… and the rallies in IBM and Intel signal that one might just be coming down the pipe.

Now how about the stocks that are doing badly… in many ways these are even better gauges of how well the economy might recover than the winners… among the largest decliners that we have got… Phizer down 23%… Kraft off 21%… Merck shedding 15%… Proctor & Gamble giving back 13%… you typically see these stocks plummeting when it seems like the economy is going to improve quickly… these defensive stocks, the drugs, the foods, the consumer products, are what investors typically buy when they think that things are going to get much worse quickly… and they get dumped whenever it looks like things are going to get much better… if we saw the food and drug stocks going higher that would be like seeing the bank stocks go lower… than you would have reason to believe that this economy was about to take another leg down… it would be an indication that Obama has dropped the ball in his first 100 days… but the performance in these stocks shows about as definitively as anything can that the market is making a different judgment… the market believes in Obama.

Now, the worst performer of all since Obama took office is GM… this is controversial… it is down more than 50%… it is a tough one to define… but I can assure you from Wall Street’s perspective that GM’s decline is really a positive signal about Obama’s handling of the economy… bear with me here… it tells us that he doesn’t appear to be going to let GM survive in its current form… which is why its common stock is so low… now we don’t know the ultimate result of this one… although Wall Street wants to see the union take more of a hit than the bondholders… something that is definitely not happening right now… but to see it so low is a good sign telling us that Obama is no going to prop up the dead… now, I have to tell you that I would not own a share of GM stock… given that the unions and the government are liable to own more of it than anyone else… including you as a common stock shareholder and the bondholders… that is a recipe for a common stock disaster… the fact that the union has given back nothing to speak of what so ever is a terrible sign for the common stock.

Is all of this stock action good enough evidence to characterize Obama’s first 100 days… it is for me… you see these stocks speak louder than the pundits who stick their fingers in the air and say he is doing great… or the economy is still real sick, he is going about it all wrong.

Here is the bottom line...

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The Bottom Line!:     We in Mad Money, trust the performance in stocks as the only judges of how the President is handling the economy… and by the only unbiased measure that we know of… we can say that after a really shaky start, Obama gets two thumbs up for his first 100 days of managing the economy... Judging purely by the stock market, I’d say Obama’s first 100 days have been a success. I am giving President Obama two thumbs up for his first 100 days… for the economy based on the performance on the stocks in the Dow that are going up… and the stocks in the Dow that are going down.

[verbatim recap]

[verbatim recap]

[end of segment]

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