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When It Comes To Real Life Experience With Stocks, Obama Doesn't Get It

11:57 AM, Mar 6, 2009 • By JIM PREVOR
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I own a small business and as every small business owner realizes, the job of CEO is different when every employee knows your name and has met your kids. You have to be part financial adviser, part psychologist, part pastor and part cheerleader.

On Tuesday, March 3, 2009, President Obama made comments about the stock market. First he likened it to a tracking poll:

"You know, the stock market is sort of like a tracking poll in politics. It bobs up and down day to day, and if you spend all your time worrying about that, then you're probably going to get the long-term strategy wrong."

Then he decided to become stock touter-in-chief and tried to frame an optimistic case for buying stocks:

"What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it."

As he spoke, I realized that three things have changed, perhaps profoundly and forever, regarding the way many people will perceive the President.

1) We are alienated from Obama's concerns.

When President Obama dismissed a decline of the Dow from 9,625 on Election Day to 6,763 on March 2 as something akin to a tracking poll, the vast middle class suddenly saw how alienated their concerns were from Obama's concerns.

Obama had almost no money until he received $4 million dollars in book royalties in 2007. He has always worked for the government or non-profit entities. He is relatively young.

I realized that in the White House, Obama doesn't deal with what I do: Scared secretaries with tears in their eyes coming in to ask for advice when they see 401-K statements down by 25 percent since Election Day.

Obama seems unconcerned with a divorced woman approaching retirement age looking at her 401-K statement and realizing that her plans to retire and spend time with her church and her grandkids are gone.

I wonder how the president would answer his salesman who, after never asking for a dime in his whole life, asks for a loan, because he had promised his children that he would pay his grandkids' college tuition and he hasn't the foggiest idea how he is going to do that now.

Tracking polls really don't matter; the only poll that changes anything is the one on Election Day. But declines in the stock market affect real life. People need their money for retirement, for tuition, for living.
2) We realize that Obama doesn't understand the implications of the stock market dive for real people.

It suddenly became obvious that the President knows nothing about the markets and so has no awareness of the enormity of the problem.

Every stock market investor quickly learns that the math of markets is forbidding. After all, if stock prices go down by 50 percent, they have to rally by 100 percent to get one back to even.

Yet this doesn't begin to explain the problem. In political polling, all's well that ends well. But this is most decidedly not true in the stock market.

If a family needs $25,000 to pay tuition and it sells stocks to raise the money, that money is not available to benefit from any future upswing in market values. So even if Obama orchestrates a miraculous rebound, countless millions of people will have been permanently hurt.

And for individuals and businesses who tried to use prudent margin, Obama seems oblivious to people sitting at their desks desperately trying to navigate not only margin calls but announcements that their brokerage firm has decided the maintenance requirement on certain stocks has been raised and, suddenly, people have to sell anything of quality because they need to raise cash. They get stuck with illiquid portfolios and the selling pressure on anything of quality is immense.

These people and businesses are wiped out, whatever the long term effect of the President's policies.

3) We learn that the President knows nothing about markets or business.

When he said that "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal," he made people shudder. Why? Because stock prices are so low -- $1 for Citigroup, $6 for GE -- that all people actually need to know is that the companies won't go bankrupt or be diluted to death and the stocks are certainly screaming values.

But "starting to get to the point" implies that they may slide further and that the president is not so certain it will work out.