Monday, December 08, 2008

More cause and effect fallacies

As part of their Obama-worshipping, the Associated Press often employs the Post hoc ergo propter hoc fallacy to give credit to The One where credit is undue. Today we read:
"Wall Street extends big rally to 2nd session"

A stock market gaining in confidence shot higher for a second straight session Monday as investors bet that President-elect Barack Obama's plans to increase infrastructure spending will help lift the economy back to health. The major market indexes jumped more than 3 percent, and the Dow Jones industrials' nearly 300 point advance gave the blue chips their highest close in a month.
The truth about today's rally is that Obama's plan had nothing to do with it. He's been talking about this plan for weeks, so investors have had plenty of time to price it into the stock prices of any companies that might benefit.
Alcoa Inc., the world's third-largest aluminum producer, surged 18 percent on the news; while heavy-equipment maker Caterpillar Inc. jumped 11 percent.
[cough] What an idiotic short-term perspective. These weren't "rallies" on news of Obama's New New Deal, but fluctuations of the last several trading sessions due to bargain-hunting and profit-taking. Both Alcoa's and Caterpillar's gains merely brought them back to where they've been hovering for the last several weeks.

If either had exceeded their October 10th bottoming, then that might be something worth mentioning. But not this.

The major U.S. indices were up 3-4 percent today, but the simple explanation is bargain-hunting after Friday's plunge. Or if indeed The One is responsible for the rallies, what will we do when he runs out of appointees to announce and programs to propose?

Supposedly there was a "Geithner rally" on the day Obama named Tim Geitner to be the new Treasury Secretary. [cough] Obama named him on November 21st. November 21st was the third Friday of the month. Stock options expire on...the third Friday of each month. That is why you had your late-day rally, because everyone was scrambling to fulfill his contractual obligations at whatever price he could get. Not because Obama picked some anti-free-market interventionist twit, but you can be sure Obama chose that day for a reason.

With the help of the liberal media, Obama's deftly playing a sinister game of making people believe he's responsible for certain things that are in fact out of his control. Think of "A Connecticut Yankee in King Arthur's Court," specifically when the hero, during an eclipse, convinced everyone that it was he who made the sun disappear. The difference is that the Connecticut Yankee wanted to help people by destroying people's superstitions, allowing them to think for themselves so they could evolve beyond serfdom and enjoy the benefits of technological progress. Obama wants to be our king so he can "help" us, meaning keeping us well-controlled, all for our own good.

So if stocks fall tomorrow, can we then blame it on something Obama did? How about blaming Obama because his victory made Japan stocks fall immediately after his election victory?
Japanese stocks fall on Obama win

As U.S. television networks called the presidential election for Barack Obama at 11 p.m. on the East Coast and cued up celebrations in Chicago’s Grant Park and across the country, Japanese stock traders in the middle of their Wednesday afternoon workday had a very different reaction.

In trading in the half hour after the victory announcement, the Japanese Nikkei stock market declined steeply, falling from nearly 9,450 to below 9,250. Still, the index was up nearly 2 percent for the day on the strength of a rally earlier in the trading day.

Reuters quoted Tomomi Yamashita, a fund manager at Shinkin Asset Management, who noted that Obama’s tax proposals might have been behind the initial Japanese market reaction.

"His plan to tax higher income earners may dampen incentives a bit, and this might limit U.S. competitiveness,” he said, “and as far as the currency market is concerned, a Republican victory might have been better."
Did Obama's victory really make Japanese stocks fall? Probably not, but it's far more likely than any Obama announcements creating stock rallies.

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