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"Stocks Fall as Investors Ponder Obama Presidency,"

reports an AP headline. But wait: Even if Obama's election would be worse for the economy (or even just the stock market) than McCain's -- something that I do believe -- surely the Obama victory can't have been much of a surprise to investors. Presumably they incorporated this likelihood into the value they were already putting on stocks, and while I suppose there is a difference between 100% knowledge and 80-90% prediction, would it really be that much of a difference?

All of which, it seems to me, leads me to ask: How does the AP, or its sources, actually know that the stocks fell because of "post-election nerves ... as investors began questioning what impact a Barack Obama presidency will have on business and the overall economy"?

josh:
More importantly, while Obama's win was not absolutely certain during the entire time stocks rose considerably yesterday, don't you think that information had already been factored into the market? In other words, isn't there an argument that yesterday's market change was the result of an expected win from Obama -- at least as much as today's change is a result of the action win?
11.5.2008 4:40pm
Observer:
Of course the investors pondered the likelihood of an Obama victory ahead of time. Presumably, Wall Street anticipated the odds of an Obama victory at around 90% (similar to what Obama was trading on Intrade on Tuesday morning). This is why the Dow Jones only decreased by 5% after the election was determined. Had McCain won, the Dow would likely have increased by 45%. Similarly, if the market had anticipated yesterday morning that McCain and Obama were equally likely to win, the Dow Jones would have been much higher before the election, so that it would have decreased by 25% today instead of 5% (to end up at the same point it ultimately ended up).
11.5.2008 4:44pm
tsotha:
The answer, of course, is AP doesn't ever know why stocks rise or fall. They just kind of make that stuff up based on the day's news. Apparently they don't teach all that correlation-causation stuff in J-school.
11.5.2008 4:45pm
A Law Dawg:
If the election bears any causal connection to today's selloff, I suspect it arises from the composition of Congress, not the White House.

We won't know about Minnesota for weeks, I'm told.
11.5.2008 4:45pm
Oren:
Prof Volokh, I would be grateful to hear how you felt about oral arguments in FCC v. FOX [PDF]. Really, I'd be happy to hear about anything other than election.
11.5.2008 4:45pm
Observer:
If anything, it seems to me the market drastically underestimates what Reid-Pelosi-Obama would do to our economy (and the world's).
11.5.2008 4:45pm
hey (mail):
Buy on rumor sell on news.

Sell short everything, there's no end to the bottom of this hole with Obama in charge.
11.5.2008 4:46pm
Bruce_M (mail) (www):
Big change = uncertainty = Dow goes down

It's temporary.
11.5.2008 4:48pm
Teague:
How does the AP/WSJ/anyone ever know that stocks fell because of specific events? I mean, there are some clear cases (the bailout is a reecnt example of this), but most of the reporting about stock movements is a perfect example of one causal fallacy or another. ("Investors, spooked by rumors of higher inflation, ...")

This reporting is bad, but not really worse than normal.
11.5.2008 4:48pm
John M. Perkins (mail):
Stock traders are mostly addicted gamblers or computers looking at stock algorythms. Most interpretation of rationale of day to day stock prices are not much more than pseudo-journalists needing filler. You don't get what you paid for.
11.5.2008 4:48pm
Eugene Volokh (www):
Observer: "Had McCain won, the Dow would likely have increased by 45%"? Wow! Any more details on why you think this sort of stunning 4000 one-day rise would have happened?
11.5.2008 4:49pm
BP:
It's also entirely likely that investors, while knowing Obama would win, were interested in how much he would win by.

I don't personally think that his margin of victory will have any substantial impact on which policy goals Obama pursues, or how hard he pushes a far left agenda.

But "conventional wisdom" would be:

If Obama had just eked out a victory on Tuesday, it's plausible to think that his policy goals going forward would be more centrist. If Obama won in a landslide, as he did, he may feel sufficiently emboldened to pursue far more unfavorable policies.
11.5.2008 4:50pm
titus32:
The press provides such simple explanations for stock market activity on a daily basis. They always guess. Actually, the explanation I saw in the elevator today was different: investors apparently re-focused on the market after being distracted by the election. Don't ask me how that works.
11.5.2008 4:51pm
josh:
And let me take my typical media-defense position: These stories are generated (and yes, they do teach it in J-school) by interviewing traders, analysts and the like. Is it scientifically the best way to determine causation. of course not.

But if anyone can figure out a way to fill in the "Why" of the "Who, What, When, Where and Why" of this type of story, I'm all ears.
11.5.2008 4:52pm
Potted Plant (mail):
I'm not sure how this fits into the view that the media exhibits a pro-Obama bias.
11.5.2008 4:55pm
Hoosier:
I could be a TV expert on this question in my sleep:

"This was a case of profit-taking, Eugene."

See how easy it is? And tonight, they will all say this. And get paid for it. Groan.
11.5.2008 4:56pm
Hoosier:
Potted Plant

The elction's over, man. They can pretend to be reporters for a while.

[Seriously, I want to avoid hijacking the thread. But take a look at the Pew Journalism project study on the the media's coverage of McCain compared with Obama. The bias is almost tangible.]
11.5.2008 4:58pm
Tony Tutins (mail):
Investors are in the tank for Obama. They drove the market down realizing that a bad economy would make Barack a shoo-in. Once he's inaugurated, the Dow will rebound back to 12,000.

This is the only explanation that fits the known facts.
11.5.2008 5:00pm
tsotha:
But if anyone can figure out a way to fill in the "Why" of the "Who, What, When, Where and Why" of this type of story, I'm all ears.

When you don't know, why not just say "I don't know"? Do you have to provide an answer even if you have no confidence in its validity?
11.5.2008 5:03pm
Curt Fischer:
Isn't everyone a little too critical of the AP headline?

1. "Man drowns as beachgoers watch from shore"
2. "Iceland goes bankrupt as British anger rises"
3. "Volokh writes blog post as NPR plays in the background"

Did the beachgoers cause the man's death? Did British anger cause Iceland to go bankrupt? Did NPR cause Volokh to write a blog post? Nothing about the "x does y as a does b" construction implies causation in my book. I agree the rest of the article discusses a causation, which as Prof. Volokh explains, seems mighty speculative, but the headline at least seemed fine by me.
11.5.2008 5:05pm
glangston (mail):
I used to be able to trust the journalists on the stock market.

They continue to disappoint.
11.5.2008 5:08pm
Gino:
"surely the Obama victory can't have been much of a surprise to investors"

Of course not. This is what we call "noise" trading or "market noise."
11.5.2008 5:10pm
whit:
this is what the talking heads do.

i am a trader. i trade index futures. i LONG ago learned to ignore the CNBC/Bloomberg etc. talking heads. they have less insight into the market than bernanke, and that's saying a lot.

it was clear that the VAST majority of people thought obama was going to win. to put it briefly, the obama win was already "priced in".

the market is chaotic (and I am talking in terms of chaos theory, not in terms of the common definition of chaos). iow, sometimes small peturbations can have big effects, and unpredictable effects, and sometimes big things can be ignored or reacted to contrarily.

also, todays selloff needs to be contextualized. look at how far we have come in the last few days. i bought a fair bit of SKF yesterday near the close (a double inverse short fund invested in financial stocks), not because i THOUGHT/predicted the market would drop today, but because down was the path of least resistance. iow, the market has come too far too fast in the last few days, and in the broader context - it's a bear market.

the market is not merely a sentiment indicator. it's WAY more complex than that. you have to consider where the longs (in various time frames) have their stops - nothing cascades selling into more selling than sell-stops being hit.

today's drop iow says exactly ZERO about whether obama will be good, bad, or indifferent for the market.

the best thing obama COULD do for the market would be to leave it the #$(#$( alone and let the price discovery process play out. being that he's a statist liberal, i fear he won't be able to keep his hands out of trying to micromanage the economy, but one can hope.
11.5.2008 5:12pm
FWB (mail):
My take is that these absolutely no rhyme or reason to the stock market. It is emotion driven without regard to the actual real value of the companies.
11.5.2008 5:12pm
josh:
Hoosier

[yeah, let's not hijack the thread. If you think the Pew study (here: www.journalism.org) showed that "The bias is almost tangible," you're misreading the study.]
11.5.2008 5:14pm
whit:

My take is that these absolutely no rhyme or reason to the stock market. It is emotion driven without regard to the actual real value of the companies.



which is almost as dumb an analysis as efficient market theory, but from the polar opposite perspective.

i'll give buffett a call and let him know that the gig is up. he's wrong, you're right lol
11.5.2008 5:17pm
Oren:

[Wacky conspiracy theory] This is the only explanation that fits the known facts.

I don't think you understand the meaning of the word "only".
11.5.2008 5:19pm
Anderson (mail):
Curt Fischer is correct. My example would be

"Stocks Fall as Mars Orbits Sun."

It's quite true, after all.

Of course, the article goes on to make the implied assertion. Compare the New York Times:

On Wall Street, the selling began early after a report showed that activity at the nation's service industries contracted in October, falling at the fastest pace since records began in 1997.

The index by the private Institute for Supply Management dropped to 44.4, from 50.2 in September, on a scale where readings below 50 indicate contraction, the group said on Wednesday.

It was the latest in a string of discouraging data this week on the nation's construction, manufacturing and service industries, crucial pillars of the American economy that have all suffered this fall.
11.5.2008 5:21pm
Hoosier:
josh

[Are we looking at the same report?

http://www.journalism.org/node/13307

Pew doesn't conclude that the reporters and editors are evil. But that they reinforced their own echo chamber? Yes.]
11.5.2008 5:22pm
John Jenkins (mail):
My guess is that none of the reporters involved have ever heard the words "efficient capital markets hypothesis" strung together, nor have they ever internalized the old saw about correlation and causation. Post hoc ergo propter hoc, indeed.
11.5.2008 5:23pm
Observer:
Professor Volokh,

My math was as follows:

Say x = where the Dow Jones would be after the election if Obama wins.

Say y = where the Dow Jones would be after the election be if McCain.

Assume the market expects a 90% odd of Obama winning. This means that the Dow Jones, prior to the election, would be at x + 0.1(y - x).

The Dow Jones decreased by 5% after Obama was elected, which means that:

x = (x + 0.1(y - x)) X 0.95

x = 0.95x + 0.095y - 0.095x

0.145x = 0.095y

y = 1.523x

In other words, if McCain had won, the Dow Jones would be 52% higher than it is now. My approximation that it would have increased by 45% (instead of decreasing by 5%) was quite close.
11.5.2008 5:23pm
whit:

My guess is that none of the reporters involved have ever heard the words "efficient capital markets hypothesis"


not even the most ignorant ivory tower academic believes in efficient markets hypothesis any more.

traders (those who actually make money from understanding how the markets work) laughed at it from the beginning. it is a paradigmatic example of how stupid academic intellectual THEORISTS can be when trying to fit the real world into their narrow little boxes of precious theory.

the market, is SOMEWHAT efficient. but that's "in the long run" (iow, prices regress to a mean, as price discovery plays out), but that's a far cry from what efficient market morons claim(ed).

anybody who bring up efficient market hypothesis as anything but a running joke, in a discussion on the markets, just hurts his credibility.
11.5.2008 5:29pm
LN (mail):
Observer, you may want to factor in the possibility that the stock market moves for reasons OTHER than the Presidential election results.

Or in other words, you are assuming that the 5% movement in the Dow today is pure signal and no noise (with regards to the Obama election). This is remarkably unlikely to be true. For example, we can look at the day-to-day volatility of the stock market historically. There have been several large movements just in the past few weeks.
11.5.2008 5:35pm
EH (mail):
Later folks, VC's going into the Bainbridge bin. Stay wacky!
11.5.2008 5:35pm
Oren:


anybody who bring up efficient market hypothesis as anything but a running joke, in a discussion on the markets, just hurts his credibility.


On the other hand, disbelief in the efficient market hypothesis is precisely the driving force towards an efficient market. In chaos-theory terms, efficient allocation of resource/prices/etc... is an attractor with a weight inversely proportional to how chaotic investors think the market is.
11.5.2008 5:36pm
whit:

oren, that's clever. kind of.

i tried to respond to your post, but keep getting blacklisted for words that are (supposedly) gambling or medicine related. I spent about 10 minutes trying to figure out the offending word(s) but to no avail. this filter sucks if you can't talk about market dynamics w/o running afoul.
11.5.2008 6:00pm
Nunzio:
The AP's too cheap to do an event-study analysis.

Anyway, as long as we're speculating, maybe investors knew Obama would win but believed he would take a pragmatic approach to the economy, and, then, after hearing his victory speech decided that, after all, he would not.
11.5.2008 6:12pm
PKScott (mail):
Here's the inside story on the change in the market today. When we gathered around the entrails of the goat that was sacrificed before the opening bell, the auspices were bad so we sold. There. Easy. Simple.
11.5.2008 6:20pm
Syd Henderson (mail):
I claim the stock market went down because Bush appeared on television to congratulate Obama and people realized he's still president.
11.5.2008 6:27pm
Thomas_Holsinger:
I'd be a lot more scared of what Congress will do, given a Democratic President, than what Obama will do. Professor Zywicki agrees:
"Indecisiveness is an obvious problem in foreign affairs. But my concern is that it may be a problem in domestic policy as well. I have some concern about Obama's ability to stand up to the old bulls in Congress--Frank, Durbin, Byrd, Schumer, etc. Obama's great attractiveness as a politician is his expressed desire and perhaps ability is to bring people together to try to form a consensus (I say "perhaps ability" because I'm not sure that there is any evidence that he has actually done this, as opposed to saying he is going to do it). But one has to wonder whether he actually has it in him to say "No" to the Congressional Democrats. Again, he has never been an executive. He has never had to say "No" or seriously think about tradeoffs. How does he form consensus among those who aren't interested in consensus?

My fear is that Congress is just going to roll right over him. And that his desire to form consensus and avoid conflict could turn out to be little more than a perception of weakness by congressional and foreign leaders. Consensus and agreement is not a good thing if you elevate that over everything else, and are willing to give away almost anything in order to get agreement.

So that even if he desires to govern as a moderate, he is still going to have to demonstrate the ability to stand up to members of Congress and interest groups who are going to want to push him to the left. I hope he can do that--but it is not obvious that there is anything in his experience or skill set to suggest optimism that he can stand up to these politically savvy and strong-willed congressional leaders who have decades more experience than he does (not to mention some of the ruthless characters on the international scene)."

11.5.2008 6:30pm
PGofHSM (mail) (www):
Did British anger cause Iceland to go bankrupt?

From what I understand, it was a factor. Britons had put money into Icelandic bank accounts that had higher interest rate and thus return on savings than British banks did. Then the financial world went to hell and the Britons read the fine print about how only Icelanders' deposits were insured; foreigners' deposits in Icelandic banks weren't. In retaliation, the British froze (heh) Iceland's assets in the UK, under the rather cheap guise of an anti-terrorism law. In this tense environment, that was enough to kill Iceland's ability to borrow.
11.5.2008 6:33pm
frankcross (mail):
Hoosier, I don't think you can support the echo chamber story with the data.

First, they included horse race articles, since Obama was winning, the fact they talked about how he was winning does not seem like much bias. And they said these were the most pro-Obama stories, which seems reasonable

Second, they noted the tendence for frontrunnering (and I also would add anti-incumbent) coverage to create a pro-Obama effect. And they observed a similar effect, pro-Bush, in the 2000 election. Do you think there was a conservative media echo chamber in 2000.
11.5.2008 6:38pm
Mr L (mail):
Or in other words, you are assuming that the 5% movement in the Dow today is pure signal and no noise (with regards to the Obama election). This is remarkably unlikely to be true.

Historically, the Dow doesn't move 5% in a single day on 'random noise'; it's on par with the AIG collapse earlier this year, or about half the 1929 stock market crash.

But I'm sure it doesn't mean anything. Nothing to see here, folks...
11.5.2008 6:50pm
Tony Tutins (mail):
whit -- don't use words that refer to card games or the Vegas buildings they're played in.
11.5.2008 6:55pm
josh:
Hoosier

[Don't have time debate it now, but, yes, I'm refering to that report, and, yes, you're reading it entirely incorrectly -- although I note that your latest comment ("they reinforced their own echo chamber") is certainly less hyperbolic than your previous one ("The bias is almost tangible.")
11.5.2008 6:57pm
LN (mail):
Oh good grief. My comment was half-tongue-in-cheek, because I can't believe that people seriously believe this shit. But here goes:

Day-to-day movements in the Dow, before today, going back to beginning of October:
+306
-17
+156
+190
-75
+890
-204
-313
+172
-526
-220
+413
-127
+402
-733
-77
+936
-128
-679
-189
-508
-380
-157
-351

Today the Dow was down 486 points. This is the seventh largest movement... in the past month. Wow, it's a liberal conspiracy to prevent you from understanding the truth!

(Don't forget that Obama doesn't really have a mandate, because a lot of people only voted for him because the stock market plummeted and they were scared.)
11.5.2008 7:01pm
Hoosier:
josh--

[If you really want to say I am intepreting the results "entirely incorrectly," then you are not worth any more of my time. Go peddle your wares to someone who is more impressed with your capacity for diversion. And who credits you with some degree of intellectual honesty in this matter.]
11.5.2008 7:52pm
Guest 2L:
I'm not impressed with the evidence that Obama's election caused the stock market to fall. If you were to assume that the variation in the stock market followed a normal distribution, then judging from the last month (as reported by LN), there's a little bit more than a 25% chance that you'd have a change in the stock market as large as the one today w/o any effect from Obama's election. (Or, to be fair, there'd be a little more than a 12.5% chance that the stock market would have dropped as much as it did today.) That isn't evidence to hang your hat on, especially since nobody would even be talking about this if the stock market remained stable today.
11.5.2008 8:07pm
Hoosier:
frankcross (mail):
"Hoosier, I don't think you can support the echo chamber story with the data. "

frank--I've missed you. I don't think I've seen you post on here in a while.

On your comment: I am now having trouble effectively presenting evidence when debating decent people on VC; every time I want to post data, I have our snarky friend jbg and his "methodology" in mind. And I'd like to think that . . . well, that I like to think.

That said, and in no way trying to be snarky, compare you comment bove to the paragraph on the Conclusions page that begins thusly:

"The second phenomenon is an almost instantaneous reinforcing and echoing effect of the press."

See also the discussion of the coverage of McCain on policy, not just politics and strategy--The (ugh!) "horserace" coverage. (Gawd, I hate the metaphor.)

Re: Palin--

Pew doesn't draw conclusions of the type we are debating here. So denial--in the non-psychiatric sense--is certainly a possibility. But what is one to make of this:

"Rather, the most negative element in the press treatment of Palin came from reporters examining her record in office in Alaska, and matching that record to her rhetoric as an ethics and financial reformer. Fully 64% of these stories carried a clearly negative tone versus just 7% (two stories in all)[!!!!!!!!!!] positive. Palin was hurt in the media, in other words, when her pronouncements about saying "thanks, but no thanks" to the Bridge to Nowhere turned out to be problematic, and when details were drawn out about her involvement in the so-called "troopergate" story involving her ex-brother in law."

"Drawn out" in what manner, and with how much accuracy? "Problematic" according to whom? A media that we know to be made up of disproportionately of Democrats. Again, Pew is telling us that stories of the X variety hurt the GOP tickets. But it is not the case that decisions to investigate, interpret, and run stories in that way was an "objective" decision. To say that I am misinterpreting the study, one needs to make such a claim--which Pew does not make.

Skipping a bit in that section, we find that I am not alone in thinking that there was a perceptible bias in coverage:

"Whether based on these media interviews, the Saturday Night Live skits or broader press coverage, the public seemed to think that the press was too hard on the newly baptized nominee. In an early October survey by the Pew Research Center for the People and the Press, the public was more likely to say the press had been too tough on Palin than they were on any of the other three candidates. When asked, 38% of those surveyed said the press had been too tough on Sarah Palin, versus 23% who said this McCain and just 7% of Obama."

38%. 23%. 7%!!!

I just can't see how this means that *I* am wrong on the general significance of this data.

Finally, please have a look at my original hijacking, in which I did NOT claim that the nice people at Pew stated my conclusions. Rather, I said that one should take a look at the study, since the bias that comes out is almost tangible. I ahev read the data that they present I know what we know about the composition of the media. Hier stehe ich. Ich kann nicht anders. Gott helfe mir. Amen.
11.5.2008 8:21pm
Sarcastro (www):
[we need a thread about media bias in the election. Cause I remember from the original Pew thread that the Pew people themselves said the poll meant that the media favors whomever is up in the polls.]
11.5.2008 8:53pm
Elliot123 (mail):
This is really no different than what we see everyday. The standard news story is very simple. "Stocks rose/fell today as investors reacted to XYZ."

So, today's story was, "Stocks fell today as invetsors reacted to an Obama victory."
11.5.2008 11:12pm
josh:
Hoosier:

"Go peddle your wares to someone who is more impressed with your capacity for diversion. And who credits you with some degree of intellectual honesty in this matter."

Aww, geez. Does that mean that because I decided to go home after work and put my kid to bed widdle Hoosier's gonna take his bawl and go hom'???

Don't be so defensive. You cherry picked the conclusion (quoting you thusly: "That said, and in no way trying to be snarky, compare you comment bove to the paragraph on the Conclusions page that begins thusly: 'The second phenomenon is an almost instantaneous reinforcing and echoing effect of the press.') which, when viewing the data that led to that conclusion, doesn't even support your conclusion (that the media is biased).

The sum of the study is that the media is biased towards the candidate who is more succesful in the race and twoards the general horse race. The stories are disproportionately negative about Palin for claiming to have been against the Bridge to Nowhere when she was, in fact, for it, because those stories are newsworthy. Or was it not newsworthy to turn on the tube at any moment in 2004 and catch a snippet of Kerry's "against-it-before-he-was-for-it."

The media was disproportionately negative against Gore in 2000 and against Kerry in 2004, except when he was behind and closing the gap, a la the horse race. (see the same conclusion section you cite for the "echo chamber") It didn't magically swing left in four years.


You're confusing correlation (negative coverage) with causation (anti-GOP). Don't take it personally and start name-calling.
11.5.2008 11:30pm
josh:
And, seriously, courtesy byomtov on another thread, the backstory coming out of the McCain camp now is that Palin didn't even know things such as the countries in NAFTA, or that Africa is a continent.

Had that info come out during the campaign, I'd hazard to guess that there'd be a lot of negative treatment of Palin in the press (and of McCain for picking her). A LOT. Correspondingly, the Pew Study would add to its overall numbers of negative stories about the McCain campaign. But nothing in the study's findings would conclude, as you did, that such increased negative stories were evidence of bias.

You might not agree, and you're entitled, but a lot of people would argue that a VP candidate not knowing that Africa is a continent is a pretty newsworthy factoid. And more newsworthy than Biden saying FDR went on television.

But again, the issue I took with you comment was not whether the press is biased (I don't think it is, at least to the extent any political bias affects coverage). It's whether the Pew Study showed that "the bias is tangible. It didn't. It only showed more negative coverage of McCain.

I think as the post-mortem continues, we're going to see a lot more negative coverage, particularly if the subject turns to knowledge of state capitals.
11.5.2008 11:46pm
Hoosier:
Sarcastro


[we need a thread about media bias in the election. Cause I remember from the original Pew thread that the Pew people themselves said the poll meant that the media favors whomever is up in the polls.]

I don't think we need such a debate. I don't see how left and right can productively discuss this matter.

I don't consider the fawning media coverage of Obama to be the cause of McCain's defeat and Obama's victory. Sufficient cause was the combiation of the financial meltdown and Bush's awful presidency. (And for the record, for the n-th time on here, I voted for George Bush for president a grand total of twice: In 1988 and 1992. What? What?!)

But to deny that the media fawned all over Obama, or that the MSM took substantially--unconscionably-- greater effort when it came to investigating and criticizing McCain and Palin than Obama and Biden? I just can't see getting interested in that sort of discussion any more than, say, debating Evolution versus Intelligent Design. The problem was not that the MSM was tough on the GOP. It was that they were not tough on the Democratic ticket.

We know how disproportionatley Democratic-leaning the reporters for MSM outlets are. The idea that the left would accept the situation were it reversed is not credible. I wouldn't want it that way either. I live with this drastic imbalance in my career on a daily basis: I'm an academic. And I see how the perception--overstated, but not by much--that universities are full of "tenured radicals" has undermined "average Americans' " trust in the only instititions at which I could possibly be happily employed. I love universities, and teaching, and scholarship; producing *and* consuming. But our universities are sick, primarily due to a lack of diversity.

Same story with the media. Same result. The loss of prestige among the "prestige media" can be measured in lost readership and revenue. Those of us academics to the right of center--we do exist, the Monotremata among the more "advanced" mamals-- don't read the Times on a regular basis anymore. We don't email its stories to each other anymore. We don't use it in class. We don't cite it to our students. I don't (personally) know a single GOP in academia who still maintains a subscription. Or who watches network news. Yet I don't know any of us who *didn't* take the Times at least five days a week prior to the Raines years. I went to seven when they dropped the price of the Sunday edition. But the fiasco of their Alito coverage was the end for me--the last holdout from my grad-school cohort.

It's depressing. But it's the facts. End of Jeremiad.
11.6.2008 12:08am
Ricardo (mail):
Eugene writes:

Observer: "Had McCain won, the Dow would likely have increased by 45%"? Wow! Any more details on why you think this sort of stunning 4000 one-day rise would have happened?

Simple. McCain's crack team of economic policy experts includes Kevin Hassett, the man who prophetically predicted the Dow would reach 36,000 back in 1998. And then came out in 2004-6 claiming that there wasn't a housing bubble. With brilliant minds like that advising the would-be President, a 4,000-point rise is likely the lower bound on what the stock market would have done if McCain had won. A 27,000-point increase is more like it.
11.6.2008 12:14am
zforce (mail):
I'd have to say this probably due to folks taking their capital gains. You can say relatively safely, taking any capital for the next four-years will be at a higher capital gain rate. Thoughts?
11.6.2008 12:22am
Cold Warrior:
Obviously there's no clear causal connection between the markets' falls and Obama's win.

But I would expect some more subtle, more interesting effects.

For example: the muni bond market. Given the freaky market conditions over the last couple months, it'll be awfully difficult to isolate "the Obama effect." But I would expect demand for tax-free munis to rise significantly, based on the near-certainty that we'll see a rise in the top marginal tax bracket.

Disclosure: I'm buying munis.
11.6.2008 1:19am
BizBlogged1 (mail) (www):
Prediction may not work out properly and Obama's victory means that industries such as oil and gas producers, utilities and pharmaceuticals may face greater regulation and even taxes, while labor unions and automakers are expected to benefit.

Finance blog, Finance, Economics, Corporate Finance, Personal Finance, Investing and Marketing
11.6.2008 4:43am
Mr L (mail):
LN:

Your numbers are hilariously wrong, but then I don't think accuracy was your objective. Wikipedia's got a list of the worst 1-day shifts in the Dow. Yesterday was #12 pointwise.

From the same page, it looks like you pulled the intraday point change. You think your error would have stood out against the six-day run mentioned in the AP article, but I guess you were too busy being smug and calling people morons to notice.
11.6.2008 9:09am
LN (mail):
Mr L:

How are my numbers "hilariously wrong"? Can you correct them? I took the day-to-day difference of closing prices from the Yahoo finance page (admittedly, without using a calculator).

When you read the Wikipedia list of worst shifts, did you notice that out of the 11 worst shifts EVER, six of them were since September 29, 2008? Five of the 12 BEST shifts EVER also occurred in this time period. We live in interesting times.

Have you also noticed that even after yesterday's amazing drop, the Dow was higher than it was a week ago?

Why don't you try to get a clue?
11.6.2008 1:06pm
LN (mail):
Also, the 6-day run mentioned in the AP article was on the S&P 500 index, not the Dow Jones Industrial Average. You realize that these are two different indices, right? You wouldn't be commenting on this if you didn't have a clue? Right?
11.6.2008 1:10pm
Hoosier:
"Stocks Fall as Investors Ponder Obama Presidency":
"President-Elect Stares Pensively into Middle Distance"
11.6.2008 2:04pm
pireader (mail):
Professor Volokh --

You're posts are consistently fact-based and rational, so I'm perplexed by your starting-point here:

Even if Obama's election would be worse for the economy (or even just the stock market) than McCain's -- something that I do believe

Why on earth do you believe that? ecause the historical evidence suggests strongly that Democratic administrations have been better for the economy tha Republicans.

Since 1952, every Democratic administration has seen greater economic growth than any Republican administration.

Growth rate (% p.a.) in real US GDP per capita

Eisenhower (52-60) 1.2%
Kennedy-Johnson (60-68) 3.5%
Nixon/Ford (68-76) 1.7%
Carter (76-80) 2.2%
Reagan/Bush (80-92) 2.0%
Clinton (92-00) 2.4%
Bush (00-07) 1.4%


I'm seriously interested in why you believe the contrary. Do you have some different empirical evidence? Is it some libertarian thing, about Democratic big-government types being bad for economic growth? Or what?
11.6.2008 4:43pm
Elliot123 (mail):
"Why on earth do you believe that? ecause the historical evidence suggests strongly that Democratic administrations have been better for the economy tha Republicans."

The full effect of any administration is not limited to its term in office. Under that idea, anything at all that happens after Jan 20, 2009 will rest squarely on Obama's shoulders. It will all be his fault. 100%. Are you really going to let the Bush administration off the hook for anything that happens after 1/20/09?
11.7.2008 9:10pm