Silly Krugman
Krugman writes:
Andrew Leonard has a good point: if Obamacare is such a disaster for the economy, where’s the market reaction?
Silly Krugman. And silly Andrew Leonard. Sure, the S&P 500 is up a few percentage points. But it would be up many, many times that amount if not for the healthcare bill.
Update: Sarcasm alert!
This bill will not materially affect the stock market. It will not change many businesses such as Apple, but may affect some others such as Caterpillar by increasing some of their health costs. But, Caterpillar can just move those jobs overseas to keep the costs in check. The bill may have more of a potential to affect the unemployment rate, than the S&P. There are areas where it could improve employment too, if the bill indeed helps entrepreneurs or small business.
How do you know the market wouldve been up even more without?
Pure speculation.
When the market thinks things are bad, it goes down. – It didnt go down, it went up
I’d say because it does not materially affect the majority of puiblic companies, nor many markets that companies sell to. This bill will not affect multinationals that sell a lot to countries unaffected by this bill. Those are the comapneis that make up the majority of many indexes such as teh S&P. People won’t stop using Google, or stop buying Apple products becuase of this. In fact, many health care companies are going to rake in mucho money from this bill.
Krugman is silly because what he does not remark on is that the fact that markets yawned mean that they think it is pretty much business as usual in the health care sector. Kind of undermines the hubris driven claim of being the Reform of the Century, no?
This is what the AP said on Monday: “…
The 10-year, $938 billion bill will extend benefits to 32 million uninsured Americans. That will have far-reaching effects on health companies. With the bill in hand, investors could place bets on winners and losers. Hospital stocks rose on expectations they would see more business and increased revenue. Some insurers fell because of greater restrictions imposed by the changes.”
So some went up and some went down, and many of those rising have been for some time due to this bill. But as a market segment it has driven some of the recent short term gains.
Guess the market knows who the winners are/will be.
I suspect that Krugman was targeting folks like Kudlow who has been on a rampage about how the expiration of Dumbya’s tax cuts on capital gains combined with the additional medicare taxes on high end unearned income is going to gut the capital markets, send the stock market crashing and threaten sovereign insolvency. I do not have a high enough income to be terribly concerned and most of my investment in the market is through mutual funds and retirement accounts but I acknowledge that I can not keep the market afloat by myself. Personally, I sort of liken what Kudlow says to the fear of planes falling out of the sky when the computers went from 1999 to 2000.
Maybe the market expects the legislation to be overturned or turned into a republican free market verions before the current bill does any serious harm.
Well if it’s such a great thing for the economy where’s the reaction from the market?
The market has ceased trading on fundementals quite a while ago. Trying to read into an approval or disproval of the value of the healthcare legislations based on market movements is an exercise in futility.
Yes…silly market.
Touche’ !!!!
Perhaps Krugman was looking at the wrong part of the market. I am referring to the sale of Treasuries… Ugly.
US SWAPS-10-yr swap yields below Treasuries on heavy demandREUTERS — 03/23/10
* Supply hedging, investment demand narrow swap spreads
* U.S. 10-yr swap yield discount vs Treasuries hit record
* 10Y swap move not seen as fears over U.S. govt credit (Updates market action, adds quote)
By Richard Leong
NEW YORK, March 23 (Reuters) – The cost to exchange fixed-rate dollars with floating-rate ones in the interest rate swap market fell on Tuesday amid demand from supply hedging and keen interest in long-dated investments.
The yield on U.S. 10-year swap contracts fell below that on 10-year U.S. Treasuries for the first time in 14 months.
The disappearance of a risk premium on 10-year swaps over Treasuries spurred chatter that traders are worried about the long-term credit-worthiness of the U.S. government, which is no better than that of a top-rated U.S. bank.
Well if CBO is to be believed, HCR should help the U.S. creditworthiness. Leaving aside cuts that may not be made, it does call for increased taxes and my understanding is that it extended Medicare’s solvency. Now if we would just start cutting unfunded military expenditures, we might really start improving the long run picture. The Soviet-U.S. agreement announced today will help a little and despite the dicey situation in Iraq as a result of the election, I think we are going to stay on schedule there. How about cutting off all economic and military aid to Israel if they do not like our suggestions anyway? And I hope Obama is going to fashion an exit plan for Afgahnistan if the current surge does not stabilize the country.
Hal,
The post was sarcasm. The notion that you can judge whether a bill is good or bad by the stock market’s immediate reaction is an artifact of those elements on the right who believe the markets are always right. See Kudlow et. al.
This time around, as I recall, Cramer was confidently calling for the market to tank if the bill passed.
Hal,
The post was sarcasm. The notion that you can judge whether a bill is good or bad by the stock market’s immediate reaction is an artifact of those elements on the right who believe the markets are always right. See Kudlow et. al.
This time around, as I recall, Cramer was confidently calling for the market to tank if the bill passed.
On the left you may have madness of one sort or another, but not this sort. And it makes sense… adjusting for inflation, the S&P 500 did better under Ike and Bush Sr., for instance, than it did under LBJ and Reagan, and the latter two had much faster economic growth than the former.
To repeat…
The post was sarcasm. The notion that you can judge whether a bill is good or bad by the stock market’s immediate reaction is an artifact of those elements on the right who believe the markets are always right. See Kudlow et. al.
This time around, as I recall, Cramer was confidently calling for the market to tank if the bill passed.
On the left you may have madness of one sort or another, but not this sort. And it makes sense… adjusting for inflation, the S&P 500 did better under Ike and Bush Sr., for instance, than it did under LBJ and Reagan, and the latter two had much faster economic growth than the former.
Terry,
Exactly.
To recycle my reply upthread…
The post was sarcasm. The notion that you can judge whether a bill is good or bad by the stock market’s immediate reaction is an artifact of those elements on the right who believe the markets are always right. See Kudlow et. al.
This time around, as I recall, Cramer was confidently calling for the market to tank if the bill passed.
On the left you may have madness of one sort or another, but not this sort. And it makes sense… adjusting for inflation, the S&P 500 did better under Ike and Bush Sr., for instance, than it did under LBJ and Reagan, and the latter two had much faster economic growth than the former.
Exactly. I guess the sarcasm in the post wasn’t entirely obvious.
Cactus, how about giving us a hint. Smiley faces do work. There is so much hyperbole lately, it isn’t easy to tell when tongue is in cheek.
Cactus
perhaps you are beginning to see the futility of sarcasm in today’s political environment. no matter how outrageous you try to sound, there are six people saying it on television in dead earnest, and half, at least, of the public agrees with them.
Hmph. “The market,” like a nervy horse, sometimes spooks at a loud noise or a plastic bag blowing across its path. Other times it plods on happily while huge dangerous bubbles float by. I don’t think it looks farther forward in time than year-end … in the aggregate, it’s just not that smart.
Ahem, unfortunately, Krugman and Leonard are NOT being sarcastic, they are being serious.
What will really help the all knowing, all seeing market is getting the twin albatrosses named Iraq and Afghanistan of the back of this country. This just might leave some money for health care and paving the crumbling interstates that I have recently driven over. But then again, Europe had events that they called the Hundred Years War. So anything is possible given a docile public, and enough volunteers to fill combat positions, thus avoiding the hated draft.
Cactus,
The post was sarcasm. The notion that you can judge whether a bill is good or bad by the stock market’s immediate reaction is an artifact of those elements on the right who believe the markets are always right. See Kudlow et. al.
My futures market predicted the democrats were going to win well before the final vote. So give the market it’s due.
The stock market crashed plummeted in 2008 and took a big hit early in 2009. This corresponded with the worst time with the backing industry, with plummeting employment, and negative horse. So you might want to try to give that old horse some credit.
Also, Cactus wants to talk about sacrasm so what about the fact that insurance company stock values are not plummeting and hospital stocks are also rising. It looks like cost cutting was just a line by Obama that he never meant.
CoRev,
I think there should be a rule against people that say mostly BS using the sarcasm defense. Half the time we have to suspend belief that they have a brain.
McWop:
In reality, Group Insurance (Caterpillar) will see a reduction in costs.
“With the bill in hand, investors could place bets on winners and losers.”
So the CDS market will thrive once again!
Krugman has been pointing to the markets on this and on other issues where it suits him–like long bonds. Markets are not irrelevant, but they aren’t convincing when talking about longer term forecasting.
Worse, Krugman relied on a Washington Post story to slag Newt Gingrich. Instinctively, Bob Somerby at the dailyhowler.com pointed out how foolish that was — and Somerby was soon proved correctly as Krugman’s “Fear Strikes Out” column has a big, fat Editor’s Note attached to it now.
Should PK apologize to Newt? Can relying on Dan Balz be an acceptable out?
Well, I spoke with The Market itself today. The Market told me it was taking 3247 dollars from me because I made an unwise decision. The Market thanked me. The Market then told me that The Market will win. The Market will be the winner. The Market said that if you doubt that, then lay a little wager with The Market. The Market said that The Market genuinely hopes you will make money because there is enough money to go around.
Krugman goes all out to hammer the opposition. Facts and corrections be damned.
The NYTimes editorial correction was still incorrect, failing to cite all of what WaPo stated in its correction.
The WaPo correction:
“The article about the health-care victory’s potential costs for Democratic politicians quoted former House speaker Newt Gingrich (R-Ga.) as saying that President Obama and congressional Democrats “will have destroyed their party much as Lyndon Johnson shattered the Democratic Party for 40 years” and described that statement as referring to the passage of civil rights legislation under President Johnson. Gingrich said he was referring not to the civil rights legislation but to Johnson overreaching on his management of the economy, the Vietnam War and the cultural divisions that emerged partly because of that war. Gingrich said Johnson erred on civil rights by supporting busing to integrate schools and by failing to take a firmer stance against racial violence in urban areas.”
NYTimes correction:
‘The Paul Krugman column on Monday, about the health care bill, quoted Newt Gingrich as saying that “Lyndon Johnson shattered the Democratic Party for 40 years” by passing civil rights legislation. The quotation originally appeared in The Washington Post, which reported after the column went to press that Mr. Gingrich said it referred to Johnson’s Great Society policies, not to the 1964 Civil Rights Act.”
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/20/AR2010032003349.html
http://www.nytimes.com/2010/03/22/opinion/22krugman.html
.
The article was sarcasm of course. But I’m pretty sure that Krugman himself was being a bit sarcastic/disingenuous/something. If I recall correctly, he doesn’t give much credence to strong forms of the Efficient Market Theory and doesn’t think that the market has all that much predictive power.
http://www.ft.com/cms/s/0/dacbd320-376b-11df-9176-00144feabdc0.html
sammy,
You haven’t been reading Krugman.
You own a futures market?
The point being made, that watching stock prices wander around doesn’t tell you much about the economic impact of policy, doesn’t really suffer much from your response. Causal factors in stock price variation are too many and too complex to allow for the sort of claims that are being lampooned here. One can always attribute causation after the fact, but that doesn’t make the attribution true. Your claim here serves as a very good example of the wickedness of such analysis. When the reaction that on its face would have suggested the health care bill was bad for stocks (not the same as bad for the economy) did not occur, you simply offered up a story which explained away the failure. This reaks of non-falsifiability, so is out of bounds for rational debate.
It is not a good test, but it is at least a fair test, to ask before the fact what reaction pundit A and pundit B expect from some future event, and then to see what actually happens. That is, however, a test of the pundit, not causality.
Offer enough “maybe”s and you can avoid any sort of accountability for you argument that “the market” actually “knows” something. Real tests don’t happen after the fact, with a bunch of “maybe”s tossed in. “Maybe” after the fact is just spin.
Oddly, the bullets say the inversion of swaps to Treasuries was not seen as suggesting credit issues with Treasuries, while the text said otherwise. I would also note that this is from Reuters, which means written by a reporter who is directed by an editor, both of whom need to offer a simply post hoc ergo propter hoc.
I would also point out that having the bond market do something that suggests one reaction to the bill’s passage, while the stock market does something else doesn’t speak well for the story that markets “know’ something. If the attribution is correct (a notion that Rdan, cactus and company are calling into question), why do we have different markets “knowing” differnent things? This is just more of the problems of non-falsifiability and confirmation bias. If you pick and choose among market reactions to justify the claims that the market views some event as good or bad, you aren’t making a very strong argument. In addition, the Treasury market response could be read as a worry about credit, or as a celebration of growth. One has to go into the test with a bias – bad for growth – to be able to choose between the two so readily.
Not this sort of madness on the so-called left? I guess you missed a (maybe THE) leader of the left’s remarks prior to vote. Nancy Pelosi says this bill would be great for the economy and would unleash the entreprenuerial spirit of America. Four million jobs would be created over the life of the bill. The bill would be a significant investment in the economy of the U.S., etc. You’d think those items would move the market a bit. Maybe it was sarcasm.
Nonetheless I totally agree with you that predicting market moves based upon legislation is probably not a great strategy.
Most dead pan sarcasm works because of the sly grin or eye twinkle which follows. Given Krugman makes a gnomish grin before and after everything he says it is hard to tell with him.
LBJ failed to take a firm stance against racial violence in urban areas says MG and WaPo. Having been in US Military then I know that this is BS.
Tom,
MG didn’t say it. I cited what WaPo said.
The predictive ability of the current version of the U.S. stock market is also questionable because the only point of trading is to make money and in pursuit of that a lot of trading has been turned over to high speed computer programs that try to model trends of price movement and have absolutely nothing to do with serious analysis of businesses, much less long term economic trends.