Obama Speech September 8 – Big Disappointment
The Obama speech today September 8 was a huge disappointment for the US economy. So what did Obama say today in his speech? See my previous post regarding Obama’s speech regarding my expectations of the president’s speech. The white house has a live stream of the question and answer session following Obama’s speech.
Basically the Obama speech today really fell short of what was needed to save the US economy.
What did Obama say in his speech today?
Firsly, the Obama speech today focussed on tax cuts. These tax cuts were related to small business tax cuts regarding payroll tax. The Obama speech indicated that businesses that added jobs or increased employee salaries would benefit from payroll tax cuts.
Barak Obama then addressed in his speech a plan to put people back to work. Obama said in his speech that he will focus on putting disadvantaged long term unemployed back to work. The groups Obama focused on in his speech included veterans and teachers as well as particular disadvantaged communities.
The third component of the Obama speech today related to rebuilding infrastructure. Exactly as I predicted Obama expects that building infrastructure such as roads and bridges will stimulate the economy to growth.
Effect of Obama Speech Today
Obama has proved in his Obama speech today that he is a weak president and that he is unable to pull the US economy out of the deep hole that it is in.
The tax cuts that Obama is planning to introduce are laughable. The tax incentives will undoubtedly be insufficient for employers to go out and make a meaningful dent on unemployment. Perhaps employers will increase salaries which will lead to inflation and will have a similar effect to quantitative easing in terms of battling deflation.
The Obama speech focus on infrastructure is totally off course. These initiatives will lead to very transient effects on the economy and will not lead to meaningful change. Maybe the roads will have less potholes and the bridges will look a bit nicer. However unfortunately people won’t be able to buy cars in order to enjoy the shiny new infrastructure.
Obama’s other initiatives regarding aiding disadvantaged groups and to cajole people into employment are nice and socially admirable. However again the effects of the initiatives introduced in the Obama speech today will NOT pull the US economy out of recession.
What Obama needs to Do
As I wrote in my previous post what Obama needs to do is to focus on initiative an entrepreneurship in order to revamp the US economy. The government should be pouring money into building industries, technological start ups and on leading the world into a brighter technological future. The focus of the government should be on increasing exports in order to bring more money into the US economy and to decrease the crazy levels of US debt.
Obama receives a big “Fail” after his speech today. He has proven himself weak in economic terms. He shouldn’t be surprised if Republicans guffaw at his initiative and don’t give him an easy time in congress.
Trading around the Obama speech
Tomorrow I expect the market to show severe disappointment following the Obama speech today.
Already the future indices are pointing at negative levels. S&P 500 future are -0.25%, Nasdaq 100 futures are at -0.2%. I expect these levels to head much lower.
Tomorrow it might be effective to use options to sell volatility if the markets open sharply lower. Option traders should trade with extreme care and pay attention to risk management.