Wednesday, March 24, 2010

Should You Short Obama?

Giddy over Obama's health care win, financial journalist Daniel Gross wrote a column saying that the people who doubted Obama, or who shorted him, were wrong and have been losing money. Link here.

Gross comments both on the political futures market and the stock market. Since most of us have more money tied up in the stock market than in the political futures market, so I will limit my comments to the Dow and the S&P.

Apparently, Gross is unaware of the Obama Disapproval Indicator. See my discussion here. Since I count myself, immodestly, as one of those who first discovered this indicator, I am happy to revisit it here.

Let's look at the tape:

In the spring of 2008, when Obama first took the lead over Hillary Clinton in the Democratic primaries, the Dow was at something like 13,000.

When Obama first drew ahead of John McCain in September, 2008, the Dow was well over 11,000.

When Obama took office in January, 2009, the Dow was in the 8,000 range.

And when Obama's approval ratings hit their all time high of 70% approval, in late February, 2009, the Dow was close to its early March low of something like 6500.

Now, ever since that time, Obama's disapproval ratings have been rising. As has the Dow and the S&P. Right now, his disapproval rating is at an all time high of over 50%. Last week, amid the glee of liberals like Daniel Gross, more people disapproved of Obama than approved of him.

As I said in the post I linked above, as long as Obama's disapproval rating keeps rising, it is OK to be long the market. If ever that rating starts to fall, and if ever Obama's approval rating starts to rise... that will be the moment to exit the market.

If you had shorted the rise of Obama and had covered your shorts when his disapproval rating bottomed in a flurry of irrational exuberance, you would be doing quite well. If you had gone long when his approval rating peaked, you would have made money as the market rose with his disapproval rating.

Daniel Gross may be a financial journalist, but here, at least, his bias seems to have gotten the best of him.

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