Marketplace Scratch Pad

Still no confidence

Scott Jagow Feb 25, 2009

Wall Street sure doesn’t think much of President Obama’s speech last night. Not that I want to care what Wall Street thinks, but let’s face it, most of us have to care. Anyway, the consensus seems to be — inspiring political speech, but not enough substance. There are still way too many “ifs.” Felix Salmon at Portfolio sums it up well:

We seem to have a plan based on hope: hope that the banks will be able to repay their loans rather than see them converted into controlling equity stakes for the government; hope that house prices will stop plunging; hope that employers will start hiring again; hope that America’s animal spirits will rally like a beaten-up boxer coming back from a severe beating in a bad Hollywood movie.

Douglas A. McIntyre at 24/7 Wall Street called the President’s speech “a road map without GPS.” He focused on Obama’s hope of cutting the budget deficit in half by the end of his term,

The most perilous assumption about driving down the budget deficit is that, if the number of people out of work over the next two years moves up to the level where unemployment stays above 10% for any period of time, tax revenue into the Treasury will be so badly impaired that cutting costs in some large programs will not be able to make up for it.

Paying for the plan to save the economy may work, if the economy reacts just as the Administration thinks it will. But, the chance of that is like making a basket at the buzzer from mid-court.

And that’s why Wall Street has no confidence. Investors hate uncertainty, and that’s about all we have right now — a bunch of “ifs.”

As Andy Dufresne put it in Shawshank Redemption: “Hope is a good thing, maybe the best of things.”

It just isn’t an economic policy.

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