Obama vs Banks

pbama and banksDespite favorable earnings from both Goldman Sachs and American Express, markets were able to have one of the biggest down days on Thursday they have had in a while. The Dow closed down 212 points today as new worries are brewing from investors. Not only that, but volume levels were finally showing levels of normality, which goes to show that much of the new volume was selling volume. It could very well be reality setting in for investors that indeed this market is way too overbought.

President Obama spoke on Thursday, declaring his willingness to take on Wall Street and the big banks and to make a change. Many feel that his bold declaration was due to the recent election upset, in which Republican Scott Brown won the Massachusetts senate race. At any rate, today's reaction shows that investors are very skeptical of President Obama's ability to take on banks without severely altering economic growth. Just as I have said in recent posts, liquidity in banks will be a contributor to a recovering economy, as available residential, commercial, and business loans keep the money supply fluid and also helps spur employment. Sure, President Obama has a good reason to want to take on the banks and their regulation, due to recent years of extremely poor underwriting. However, too much regulation could very likely cause an adverse effect, sending this economy even deeper down than it is already. It was a failure of confidence in the banks that took the Great Depression of the 1930's into new lows.

Tomorrow's movement, particularly in financials, will be a big indicator of the true momentum of today's fall. If weakness in financials persist tomorrow, I believe a clear manifestation of investor's expectations will be solidified. As a result, big trades in my portfolio could be coming as early as next week.

President Obama should worry less about "declaring war" on the banks, and focus more on how to responsibly get money from banks into hands of responsible consumers. Sure, recent lending standards became much too lax and sloppy, but complete regulation could even be worse. Look for Friday's market performance to be a big indicator of whether or not we are seeing a turn in the market. Happy Trading.


  1. Unknown Says:

    Done you mean you believe the marked is way too overbought? I’m really confused.


    The president loves the big banks.

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