Bull

Bull

Bull

A campaign blog.
May 23 2008 4:26 PM

Bull

In a Wednesday post at National Review Online, Larry Kudlow, he of CNBC fame , asserts that the stock market likes Hillary Clinton more than Barack Obama. How does he know this? Because on two occasions, the stock market went up after Clinton won a primary, and down after Obama won.

The clearest example was Hillary’s massive West Virginia victory. Stocks opened strong the following day. But after Obama’s big North Carolina win, a night he nearly carried Indiana, stocks opened way down.

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Even though Hillary clocked Obama in Kentucky, since Obama took Oregon convincingly, he really carried last night’s elections and now stands on the verge of gaining the Democratic nomination. Not surprisingly, stocks opened down 80 points this morning.

Kudlow, to put it simply, is off his rocker. He is asserting that the stock market would react strongly to a Democratic primary after the nominee has been all-but-anointed. One would think an economist like Kudlow would have more faith in the market than to think it was subject to the whims of a now-meaningless primary that pits two very similar candidates against one another.

Kudlow’s facts are right. The Dow went up by an unimpressive 73.26 points after Clinton won West Virginia. Why? Not because Clinton won; because Wall Street got good vibes from a new inflation report . The Dow went up even more after Obama won Wisconsin and Hawaii. He’s also right that the index plunged a substantial 196 points the day after Obama took North Carolina and made Clinton sweat in Indiana. But not because Obama won. AIG, a bellwhether for subprime-affected insurance corporations, was about to unleash a gnarly balance sheet the next day. As Kudlow notes, stocks tumbled nearly the same amount after Obama won in Oregon and clinched a pledged delegate majority. Why? Not because Obama is going to be the nominee; because oil prices hit a record high and inflation edged upward.

Kudlow doesn’t mention that the Dow rose 32 points during Obama’s streak of 10 straight victories, or that it went up after Obama’s South Carolina, Potomoc, and Wisconsin wins. Kudlow must have been dumbfounded when the market didn’t crater in response to Obama’s success. He must think the market agrees with Clinton and must not count caucuses as real votes.

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All of those rebuttals take for granted a tacit, yet crucial, piece of Kudlow’s logic—that Clinton and Obama would be drastically different stewards for the economy. This, also, doesn’t make any sense.

Kudlow takes issue with Obama’s "class warfare" of repealing Bush tax cuts and other initiatives.

Obama then repeated his usual litany: big-government health care, an attack on oil companies, a big spending plan for education, big bailouts for housing, and a pension assault on corporations.

Clinton , of course, is for all of those things, as well. Superficially, Clinton is no more of a sure-thing bull economy than Obama is. Kudlow seems to recognize his argument’s flaw, and attempts to push it aside.  

Interestingly, stocks have preferred Hillary in the Democratic fight a) because she was roughing up Obama for the general-election fight against McCain and b) because markets believe they can do business with Hillary in a way they can’t with Obama.

Personifying stocks is always a risky affair, because, oh, you know, they don’t have brains. Traders don’t think "they can do business with Hillary" any more than Kudlow does. Watch this clip of Kudlow castigating Clinton’s economic policies, and you’ll see that Kudlow isn’t exactly a Democratic cheerleader. He’s a staunch supply-side McCain supporter who is using his NRO platform to knock Obama and proliferate McCain talking points. Kudlow saying Obama would be bad for the markets is the same as Karl Rove  saying Clinton is the stronger Democrat in November. Even in a quantifiable realm like economics, qualitative spin rules the day.

The Dow Jones is down nearly 150 points today. Maybe it’s because Obama picked up three new superdelegates.