Tuesday, March 16, 2010

Cramer: Obamacare Will Topple the Market

I don't pay attention to Eliot Spitzer's buddy Jim Cramer very much, but I think he has nailed part of the current stock market climate in relation to Obamacare:
Either the market doesn't care that the health care bill will pass -- and it will -- or it doesn't think that the proposal will cost that much -- something I think is nuts.

Which brings us to a very tenuous crossroad: We have to wonder if this is one of those occasions, like in 2008, where the market doesn't see the coming catastrophe. Or perhaps the market sees any resolution as positive.

I think when the health care bill passes -- and it will pass, I believe, because Nancy Pelosi has worked diligently behind the scenes to bend the anti-abortion foes, the key votes, to her will -- the president will get a second wind. That means the whole agenda -- cap-and-trade, Card Check for easier organizing (something that Wal-Mart's (WMT) inability to move even on its dividend boost tells you is coming) and amnesty for immigrants who are currently not citizens -- will quickly come to pass, perhaps even before the election. To pay for these items I see a dramatic increase in ordinary tax rates and perhaps capital gains and dividend tax rates in 2011 either reaching or exceeding those ordinary income rates as this current version of the Democratic Party believes that only rich people own stocks. (That's been a hallmark from Day 1 with this administration.)

Given those hurdles, which include a suicide pact with financial health for small businesses that obviously can't afford health care without risking the capital formation necessary, I think you have to put the double-dip recession back on the table.

Those who have read me here and watch "Mad Money" know that I was out there early thinking that 2010 would not produce a double-dip, despite ample commentary that it would. But if health care reform passes, I am going to revise my thinking -- and you know I think it will -- especially because immigrant amnesty will cause the health care system to be overloaded and our taxes to soar.

The stakes seem so high while the market appears so complacent, perhaps because none of the levies will pass until 2011. To me that's around the corner. It's been slightly more than a year that I have been bullish. That's hanging by a thread this week.

Obamacare cuts that thread. Even if the market doesn't seem to know it.
Couple this with the current tight money situation and the fact that interest rates are starting to creep up because of the tight money, and it is decidedly not a pretty picture.


  1. Card check was always intended to be paired with health reform. More people will lose employer sponsored coverage, 35.3 million, than will become newly insured, 31 million.

    Unions stand ready to serve as the group purchaser of health insurance, with employees paying the freight. It's their ticket to relevance, that and "mean & greedy leadership." Those are GE CEO Jeff Immelt's words, not mine.

  2. Cramer simply isn't paying attention. The market has already shown several significant signs of downside risk. There is a high probability that the DJI, NAS,S&P500,etc. will be lower at the end of the year than at the beginning. But it is only a probability and that can change.

    Also, failure to pass suggests political gridlock and a weak Executive branch. While this is my personal favorite political situation, I'm not sure it is that much more beneficial to the markets than if the bill passes (there are many business beneficiaries). The last weak presidency (carter) did not produce a strong uptrend until long after that President was out of office.

    When someone says the market is mistaken (as Cramer has) it suggests that person is himself confused and it is best not to take him too seriously.