Stock Market Needs Certainty, Not Geithner-esque Waffling

"Wait and see" means we need action, not "details will be coming soon."

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By Mary Kate Cary, Thomas Jefferson Street blog

As yesterday's stock market slipped ever lower—Dow down 250 points, S&P Index down 26, Nasdaq down 53—I thought of something said at a symposium I attended over the weekend marking the 20th anniversary of the first Bush administration. Andy Card, former deputy chief of staff for George H.W. Bush, pointed out that in February of 1989 the Dow jumped to 2250. By the end of that administration, the Dow ended up even stronger at 2700 points. Hard to believe, isn't it? And it wasn't that long ago. Amazing what's happened in just 20 years.

It reminds us that everything is relative. While the first Bush administration had its economic problems, such as the S&L bailout and the budget crisis, times were pretty good for most Americans—and yet the Dow was nowhere near what we're now all used to.

Today investing seems stalled, and stocks are taking a daily beating. And while there's plenty of blame to go around when it comes to how we got into this mess, some of the problem seems to be the lack of certainty about how we're going to get out it. There's a "let's wait and see where things go" sort of attitude among most of the people I know who would normally be active in the stock market. People are hungry for some direction from Washington, and instead we're getting Geithner-esque "details will be coming soon" stalling. Maybe we'll nationalize the banks, maybe not. Maybe there'll be a second stimulus package, we haven't ruled that out yet. Maybe we'll sell the toxic assets, but we don't know yet how to value them. Wasn't it Geithner who urged fast, decisive, aggressive action to keep the markets strong? 

Markets need certainty, and there doesn't seem to be a lot of that right now.

For example, I am a member of a volunteer board that supports a local charity here in Washington. We have a small endowment from which we make multi-year pledges to support current programs. Well, when it came time to pay this year's pledge, we chose not to take our payment out of our dwindling endowment funds—all tied up in the stock market—on the advice of our volunteer who is a stock broker. Now is not the time to be selling stocks to pay this bill, she said, and so we're not touching our account when we otherwise would have been selling. Instead, we're paying our pledge out of cash we raised at a fundraiser—money that otherwise would have gone into the investment account to grow. So we're not buying or selling right now. It's better to just wait and see what happens, we all agreed.

It's not just fat-cat investors on Wall Street who are waiting to see what the administration's plans are for the various bailouts and economic recovery efforts. It's teachers pension funds, it's folks holding 401K funds, it's volunteer boards at charities. I'm hoping the President speaks clearly tonight, and gives all of us some idea of what's next. Then maybe investors—big and small—will get off the sidelines and back into the market. Otherwise, we may be back to the days of the Dow at 2200.

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