This blog post originally appeared on RealMoney Silver on June 25 at 7:52 a.m. EDT.
Something Jim "El Capitan" Cramer said on the first segment of "
" rang very true to me last night.
Jim exclaimed that "everyone is selling stocks without reference to how the underlying companies are doing in reality ... sales, profits and cash positions are being ignored."
I couldn't agree more.
As I wrote yesterday, recent economic releases suggest a trajectory of moderate economic growth, not an economic double-dip.
So, as Jim expressed last evening, there are clearly other contributing factors at work that have dulled investors' appetites for stocks.
My view is that a
contagion in confidence
is the proximate cause for the recent market weakness and falling valuations.
More specifically, my vote for the reason behind that loss in confidence is the increased recognition that our politicians are inept and partisan.
This week's political antics regarding the legislation attempting to overhaul financial reform, the administration's continuing weak and dubious handling of the
oil spill, President Obama's (apparent) emerging personnel problems and the
utter disregard for the high-frequency trading strategies' disproportionate and artificial impact on stock prices (and the volatility of stocks) underscore my view that the general perception that our politicians are inept and partisan (now mentioned twice for emphasis!) has possibly eclipsed fundamental economic concerns in investors' eyes.
Make no mistake, investors' rage and contempt against our politicians' lack of judgment (that borders on foolishness) runs deep -- and is bipartisan. It originally surfaced in the Democratic Tsunami in the November 2008 elections and morphed into a repudiation of many incumbents (Republicans and Democrats) in subsequent elections.
Here is what I recently wrote in "
" on the subject of politics -- it bears repeating:
The last point, inept and partisan politics, was prominent in my mind yesterday as I watched the House Energy and Commerce Committee grill BP CEO Tony Hayward. When I was growing up on Long Island in the 1950s and 1960s, there were three television stations ( ABC, NBC and CBS); there was no CNBC, Bloomberg, HBO, CNN or C-Span. During this period (40 years ago), Americans had the deepest respect for politicians, and by the time President John F. Kennedy was elected, you could say politicians were idolized, viewed with awe (at times) and put on a pedestal. Our politicians were not that visible in days of old. Interviews in Life Magazine revealed their personal lives, but, like The Wizard of Oz, they remained very much behind a curtain of secrecy. Of course, that was a half century ago. In the interim interval, the three stations morphed into nearly 1,000, as cable television, satellite TV, the Internet and other influences changed the communication landscape. In the process, our politicians became much more visible. Congressional hearings were featured live on cable, and those politicians' strengths and weakness were slowly revealed. In time -- just as the Tin Man, The Cowardly Lion, The Scarecrow and Dorothy found out -- we began to get a more complete picture of our politicians as the onion of reality was peeled more and more through that greater exposure, and what we have seen in this disclosure of our legislators has increasingly become (at best) disappointing and (at worst) downright scary. The peeling of that onion has naturally revealed a group of politicians that are human (like all of us) but who, in many cases, seem to reside in a governmental ivory tower and appear to lack a complete understanding of business and economics. Unfortunately, what we have seen in these televised hearings over the past decade is governmental grandstanding and political partisanship, which was further demonstrated in yesterday's aggressive inquisition of Tony Hayward. Let me make it clear, in many corners of our business community, some stupid, reckless, irresponsible and even fatal things have happened over the past few years, but the process of skewering cultural/business villains (such as bank managements a year and a half ago and BP yesterday) is nonproductive. This is all of particular concern in 2010 as our government (in order to take us out of the Great Recession) has taken a greater hold on our lives than ever economically and financially. Our representatives have failed in a number of important long-term policy decisions and hardly ever take responsibility for their actions. Cutting out dependency on foreign oil came to my mind yesterday. Going forward, it seems to this observer that it is too easy (and likely) for our representatives to make policy mistakes given their lack of collective business experiences and partisanship. I am worried about a continued contraction in P/E multiples.
Doug Kass writes daily for
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At the time of publication, Kass and/or his funds were long BP, although holdings can change at any time.
Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.