Monday, March 22, 2010

Wow, the Stock Market likes Socialism!

According to top Republican operative Larry Kudlow, “Stock markets are the best barometer of the health, wealth and security of a nation”

So what did the stock market think of the passing of the Democrats' socialist health care program?

The Dow closed up 44 points.

Wow, the stock market must like socialism, or communism, or fascism!

Yeah, I guess they must, because according to this major study published in finance's most prestigious journal:
The excess return in the stock market is higher under Democratic than Republican presidencies: 9 percent for the value-weighted and 16 percent for the equal-weighted portfolio. The difference comes from higher real stock returns and lower real interest rates, is statistically significant, and is robust in subsamples. The difference in returns is not explained by business-cycle variables related to expected returns, and is not concentrated around election dates. There is no difference in the riskiness of the stock market across presidencies that could justify a risk premium...Using data since 1927, we find that the average excess return of the value weighted CRSP index over the three-month Treasury bill rate has been about 2 percent under Republican and 11 percent under Democratic presidents -- a striking difference of 9 percent per year! This difference is economically and statistically significant.
-- "The Presidential Puzzle: Political Cycles and the Stock Market", abstract and page 1, The Journal of Finance, 2003

Anyway, at least it's official now, the Democrats have finally laid, "the cornerstone of their Socialist utopia" .

No wait, didn't we already lay the cornerstone of the socialist utopia when we passed Medicare in 1965 – universal single payer health insurance for all seniors?

No, we did it when we passed Social Security for our seniors in 1935.

No wait, we've been socialist for at least 100 years with the passing of free schooling for our children.

Boy, the Republicans really have a lot of work repealing stuff to make us no longer socialist.

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