Every President His Bubble – And Its Aftermath

Wolf Richter's picture

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

During their second term, Presidents become obsessed with “legacy.” One of the yardsticks to measure their success is the stock market. Many people can relate to it. Retirement depends on it. It’s mentioned even on NPR several times a day. Outside of a few shorts, everyone wants it to go up. But President Obama must now be biting his fingernails down to the quick.

The stock market bragging started with President Clinton. In January 1993, while he was unpacking boxes in the White House, the S&P 500 stock market index was at 437. It then zigzagged up until it breached 1,500 in March 2000, a 243% gain. Those were the 500 biggest, most lethargic companies. Nimbler ones bursting with creativity, the tech companies on the NASDAQ, multiplied in value, some of them on a monthly basis.

Many of these gains became taxable events. The wealth effect bamboozled people into borrowing against the fruits of their stock-market wisdom. Some became day-traders. And they all spent some of this money, and it cranked up local economies. Sales-tax revenues jumped. Companies like Cisco used their inflated stocks as homemade currency to acquire other companies, sometimes paying billions for tiny startups. Unemployment dropped below 5%. Income-tax revenues soared. And suddenly there was a mirage on the horizon: a federal budget “surplus.”

Then it crashed. When President Bush was inaugurated in January 2001, the NASDAQ was evaporating, and the S&P was down to 1,342. But for Clinton, it was still up over 200%. Part of his legacy that – unlike the Lewinsky jokes – he never tired of bragging about.

Bush rode the S&P down to 800. Then the recovery started – the first “jobless” one. Wall Street was goosed by the Fed’s easy money, and housing was performing miracles. While waiting for a flight in late 2004, I was sitting next to a chick who was giving instructions on her cell phone to flip the house she’d bought months earlier. She had a day job with a nasty boss who’d dock her pay if she left early to meet her broker.... The housing bubble had just been declared.

Stocks marched upward. “Merger Monday” became part of the calendar. And in early October 2007, when Bush was already working on a rough draft of his legacy, the S&P set a new record, oblivious to the hissing from the housing bubble and the stench around banks. Then on November 7, Cisco CEO John Chambers, during the earnings call, said that growth in the US would be “very lumpy.”

Markets went south. The rough draft of Bush’s legacy went up in smoke. By the time he handed the scepter to President Obama, the S&P was at 831. The government that had for the briefest moment seen the mirage of a surplus at the beginning of his term was running a deficit of over $1 trillion. During Bush’s time in office, the S&P had plunged 38%. A catastrophic legacy.

If the Fed had printed a few trillion in 2007 and 2008 to delay the blowup and drive the S&P to 2,500 or something, Bush would be bragging to this day in a Clintonesque manner about how his economic policies and his two wars had made Americans better off. He would have handed President Obama the bubble to let it blow up in his face.

Instead, on March 2, 2009, less than two months after Obama had become President, the S&P bottomed out. The Fed had been handing trillions to Wall Street to re-inflate asset prices and bail out the banks. Obama had picked the bottom with near impeccable timing. His hallmark. He won the Nobel Peace Prize before he started the surge in Afghanistan.

Now the S&P is once again setting records on a near daily basis. The Federal Government is raking in tax revenues from income and capital gains. It had the largest April surplus since 2008. Even California is stepping away from the brink. Everybody loves a good asset bubble. Particularly politicians. It dissolves tough budget choices and gets them reelected. Now asset bubbles are everywhere. They’ve reached junk bonds, farmland, housing.... Even members of the Fed are pointing them out. And this wonderful stock market of ours, with margin debt at a near record, no longer knows any limits – though corporate revenues have been lousy and employment has barely kept up with population growth.

Obama has nearly four years left. An eternity for financial markets. He must persuade the Fed to keep printing or else he might get Bush-ed. He has already maneuvered devoted money-printer Vice Chair Janet Yellen into position to replace Chairman Bernanke. But Friday, something happened that should cause Obama to bite his fingernails to the quick: Bernanke issued a warning at a banking conference in Chicago.

“In light of the current low interest-rate environment, we are watching particularly closely for instances of ‘reaching for yield’ and other forms of excessive risk-taking, which may affect asset prices and their relationships with fundamentals,” he said in his bland manner.

He, who’d so far pretended to be oblivious to any bubbles, suddenly admitted their existence. His focus would be on “monitoring” – a word he used 28 times. But eventually, “monitoring” might turn into unplugging the money printer. And then the air will hiss out of these bubbles once again – not at all what Obama needs for his legacy. And it might just ruin his aura of impeccable timing.

And the great blue-collar middle-class jobs of yore? Aircraft maintenance was one of them. It required lots of training, but it paid well and came with generous healthcare, retirement, and vacation benefits; and free flights! They were working for icons like Delta, American Airlines, Continental, TWA, or Pan Am. Icons indeed! Read...  When Flight Safety Gets Outsourced To China.

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Vendetta's picture

Its called systemic corruption  ...

steveo77's picture

Kill List - Midwest
Well if the President can have a Kill List, why can't the good guys have a Kill List.

Here are the biggest nuclear threats in the Midwest.    They are some of the oldest, growing up around Chicago and the famous Argonne National Lab who did open air experiments to intentionally make reactors go critical and explode.   Seriously, Mr. Gunderson pointed that one out to me.   See the video at the bottom for documentation of this "Experiment".       Nuke plants can blow up like minor nuclear bombs, the proof is in the video.    The pro-nukers hate this one.

Here is the Midwest map and explanation.

My kill list is, in order of priority, but will take any opportunistic weaknesses that present.

Palisades (Clunker with lots of problems run by Slumlord Entergy, on Lake Michigan)
Lasalle (2 Boiling Water like Fuku, even a lightning strike just took them down)
Cook (On Lake Michigan, 37 YO)
Point Beach (on Lake Michigan, 41 YO, and huge uprate to 118%)
Dresden (2 Boiling Water like Fuku, 41YO and huge uprate to 117%)
Quad Cities (2 Boiling Water like Fuku, 39 YO and huge uprate to 117%)
Monticello (Boiling Water like Fuku, 42 YO)


Winston Smith 2009's picture

He, who’d so far pretended to be oblivious to any bubbles, suddenly admitted their existence. His focus would be on “monitoring” – a word he used 28 times. But eventually, “monitoring” might turn into unplugging the money printer.

And with the Fed's bad timing over the last 30 years due the 19th century garbage economic theories that guide them, that unplugging will occur far too late.

ebworthen's picture

Where are the Presidents who value outcomes versus perceptions?

Or, for that matter, any leader in government and industry who does the same?

Where will it put the country, the company, the employee 20-30 years from now, not what will it look like today or this year.

juggalo1's picture

I disagree with one of the main premises of this article: stating that the Bush economic recovery could have been extended two more years by loose Fed policy.  The economy was already clearly overheating in 2006.  The Fed already started loosening in 2007.  I suppose they could have used unconventional policy in 2007, but I don't know what their reasoning would have been without the financial crisis.  Seems like pretty muddled thinking.

Colonial Intent's picture

An ex of mine used to renogotiate her mortgage 3 months before every election here in the uk as all parties would try to drop the interest rate in the run up to election day.



BeetleBailey's picture

The motherfucker is a turd and disgrace. SOLE "business" experience was as a scooper at BR31...and part time AT THAT.

The Bullshitting crook/disbarred lawyer and his fat assed Piranha-toothed wife need to be run out of town on a rail...but like herpes....the fuck and his cunt will linger as a bad aftertaste in this countries mouth long after the WH is de-fumigated of him and his whoop.....

Fuck You Obama....

MFLTucson's picture

  The most anti-American president of all time!  That is his legacy!

orez65's picture

Used to buy a 12 oz Stella Artois beer for what it now costs to buy an 11.2 oz Stella Artois beer.

kchrisc's picture

For me they all have the same legacy: lies, bullshit, theft and killing.

Must just be me.             hujel

kchrisc's picture

I told many a friend and wrote it here at least once that they would try to spin this into a domestic "terror" thing. Got to get those drones in the sky some how.

It only took the "shoe" and "underwear" "bombers" (CIA false-flags) to get Chertoff's (Israeli citizen by the way) cancer spewing xray machines installed at the airports.      hujel

Element's picture

You can have a semi-auto 7.62mm long-rifle with a night-scope and oversize clips ... but not a metal encased fire-cracker ... because they're apparently so dangerous ... that they kill almost no one, ... because they have an effective range of just 10 meters or so.

I guess the right to bear arms didn't stretch that far.

nmewn's picture

They're workin on it...Senator Lautenberg (cadaverish douchebag that he is) has introduced a brand new sparkling bill to ban/regulate some more shit...its what they do best.


Element's picture

Yeah, they did that to us in oz when I was a kid, used to love crackers, but no more fun now, we can't be trusted with anything. It was a socialist govt that did it of course, for the children's sake.

The children were really pissed off by it.

nmewn's picture

They should just bubble wrap everybody at childbirth, only unwrapping long enough to extract some taxation here & there.

It'd be like some massive global cocoon milking factory...or sumpin ;-)

Element's picture

Think I saw a movie about that once ... and their refuge city was called ... Zion

the grateful unemployed's picture

and HSA didn't even know this plant exists?

q99x2's picture

There are still people that listen to NPR?

juggalo1's picture

I get my news from NPR all the time.  They are very thorough and reliable.

Vendetta's picture

I shut it off after hearing a 'debate' whether insider trading should be legal because its good for the economy .... gibberish for the masses

max2205's picture

We need 2 year presidents and change the title to Business Manager.


Then we might get something done.

Ban KKiller's picture

Obama equals Bush. 

the grateful unemployed's picture

Laura is okay, Michelle is a clothes horse

Tzanchan's picture

Worse, 50x...US citizen "suspected" of sedition? Hellfire missile up your @ss.....that's Due Process."

F. Bastiat's picture

While they both suck, they both suck in very, very different ways.

Pithy nonsense is still nonsense.

the grateful unemployed's picture

somehow you make it seem as though Bush didn't destroy the economy. he did. early in Bob Novak told him to make policy for business, and not 'liberal' stock pickers.

the market went south on inauguration day and continued steadily until the start of the iraq war. corruption, particularly in defense contracts, and kickbacks to campaign funds, through influence peddling (jack abramoff) was off the chart. most of that money was funneled into venture capital groups (phantom internet casinos in the caribbean, for instance) pallets of money were thrown out of the back of pickup trucks in baghdad, making the requirement for a mortgage in the US seem difficult by comparison.

the lesson is this, as POTUS you can redistribute money to your friends in whatever business you want to endorse, like electric cars for instance, and it will do some economic good, but when people just steal the money and hide it in foreign property and accounts, the only recourse left, is for the FEDERAL RESERVE to print up some new money, or suffer through deflation.

of course there is no restitution for the taxpayers who were robbed, you can throw money out of helicopters it won't rebalance things. most of you think there was a financial crisis due to derivatives and leverage and so on. no, money was stolen from the US economy, and that left a hole you could drive an economic depression through. jobs kept vanishing, nobody did anything. the 1% had more the 99% had less, and obama came in and the wheels just kept turning. because he never had the guts to go after the stolen loot, and put a few of these guys in GITMO.

by now the hole in the money supply has been fixed sort of, of course there is inflation because the first trillion didn't disappear. its still out there, but not really in the general economy. to solve this problem they could orphan the current money, and see who comes in to repatriot their old dollars, and haircut them.

a lot of innocent people will get caught up [again], but thats why they invented the guillotine. [and history proves a lot of innocent people got caught in that too] too bad america lost its ways to justice.

orez65's picture

"... the lesson is this, as POTUS you can redistribute money to your friends ..."

No, the lesson is that only gold and silver should be used as money, as stated in the US Constitution.

Market interest rates will then reveal very quickly the scams. 

buyingsterling's picture

Anyone recall how on Sept. 10th 2001 (ironically) Rumsfeld said the Pentagon couldn't account for as much as $2 trillion it had been given by taxpayers? This game has gone on for a long time; they all do it because it's not their money, and we're too cowardly to hold them accountable.

the grateful unemployed's picture

the Fed is just doing their dirty work, this is why Paul wants to open the Feds books back to Nixon, to see who that slush fund was able to write checks on a Mexican bank. then there was Iran Contra. and this rather open admission that pallets of money are dropped off in Baghdad and Afghanistan, indirect payhments to the Taliban to KEEP FIGHTING. Catch 22, the novel,  is too timid by all measures of the truth.


Everybodys All American's picture

Delivery of Gold is the problem Bernanke sees. This will stop all printing when individuals decide they don't want the fiat paper version of gold and the vaults at the banks are emptied.

DavidC's picture

Great article.



Having just had a 'secret, off-the-record' press briefing with the suck-ass press,

seems Obummer is now in full CYA mode regarding the Benghazi cover-up.

The wheels are starting to come off on this atrocity, and with any luck, his

legacity will be impeachment...

OpTwoMistic's picture

Terriorist aliens go to Gitmo.  They have room for him.  He should have closed it  before he made reservations.  If he were native born, we could charge him with treason.

orez65's picture

No need for Guantanamo.

The Military Defense Authorization Act (MDAA) has turned the US into Guantanamo.

Trampy's picture

Obama was native born!  What makes him unqualified to be President is the "natural born citizen" requirement in the Constitution, the purpose of which was to avoid having a president who is the subject of a foreign power.

Obama was born a dual national, U.S-U.K., due to his Kenyan father, which means that he should never have been allowed on the ballot for his first term. 

But none of that matters, because laws no longer matter.  We commit genocide and our president is an avowed serial killer and the only people who are doing the right thing are the suicide bombers.

What we have now is some kind of weird national socialist oligolopy where we're ruled by the banks and corporations.

And Obama goes on TV to brag that he murders our own citizens for preaching on Youtube about the evils of Amerika and the stupid zombie sheeple chant USA USA just like the Germans chanted Sig Heil and looked the other way while their own country is the most evil empire in the history of the world. 

We need more suicide bombers because we have a Suicide Bomber Gap with the rest of the world.


It's downright sickening!

Element's picture



"Obama was native born"

We don't call them 'natives' any more, they're the children of the Matrix of Mother Gaia, a blessing in disguise, spreading darkness in the light, a sort of reverse-colonialism, to right the wrongs, and constitute fairness and payback to all.

holdbuysell's picture

He signed in to law the egregious passages in the NDAA. He's murdering women and children with drone bombings.

That's his legacy. It's already written.

A booming stock market seems quaint in comparison.

Imminent Crucible's picture

He has a couple of other legacies in the works as well: the final shredding of the US Constitution through atrocities like the National Defense Resources Preparedness E.O. and the complete and total destruction of our medical care system through the Patient Plundering and Apportioned Care Act.

But the worst may be his repeal of the 22nd Amendment, imposition of martial law and installing himself as President For Life of the People's Republic of Obama-rama.  At least we'll get more colorful currency and more interesting postage stamps.

RaceToTheBottom's picture

Interesting article.  But the last paragraph seems to stick out.  There is a whole article in that one sentence, not just thrown in here as an afterthought....

Boris Alatovkrap's picture

Health of entire economy is like sheep. If shave sheep, can shave forever, but can only skin sheep once. Current global economy is collapse because if not skin, at least shave so close that sheep is die of nicks and cuts, slowly bleed to death. This is why aircraft maintenance personnel, engineer, teacher, and even doctor is now suffer - bankster is shave sheep so close.

Tzanchan's picture

And so it goes. Used to be able to buy a pound of lead for each ounce of gold. Now it's hard to get either, what with Big Sis buying enough ammo to fight the Surge for 30 years, and panic buying of physical gold while on sale. Silver....

Imminent Crucible's picture

"Fight the Surge"? You mean, 'fight the citizens for 30 years".

"Obama picked the bottom with impeccable timing"....Don't make me laugh, Wolf. The date of the election has been fixed by law since the 1800's.  Most of the timing I see is picked by Obama and his trailer trash cronies behind the scenes.  As for Bernanke's "we're monitoring" blather, it means NOTHING.  The Fed cannot exit, they cannot stop easing, they cannot even taper off the purchases. They're reduced to blaming Congress: "Fiscal policy is holding the economy back."

Obama's real legacy will be Depression and social collapse. After forty years of living farther and farther beyond our means, President Alinsky is presiding over the Last Round of Looting, one that leaves the banking system broken and the consumer without credit to consume on. He is the Ferdinand de la Rua of America. He'll be lucky if he's on the Last Copter Out from the Casa Rosada. I expect he'll take the White House silverware with him.

Boris Alatovkrap's picture

"Pound of lead for ounce of gold"!? Boris is sell you as many pound of lead as can dig up for such price!