Berk's Blog

Upper Middle Income Americans’ Support for Prez Rapidly Declining


It was predictable. The same independents who got caught up in the class warfare message of the Democrats. Who felt guilty about their millionaire next door status. Who were looking forward to a very nice retirement in dignity. These are same people who are dropping away like flies from support of the new president after just 30 days or so on the job.

At Berk Advisory we manage our friends, neighbors and family’s wealth in the stock market. As many of you know, I do not like government much, especially the kind that intrudes from on top of Capitol Hill. I am an unabashed capitalist, who does not believe that free markets by themselves solve everything or even many things for that matter. And that is because I believe that the progress of humans over the last 200 years or so has underperformed the evolutionary processes embedded in our brains. Human beings are not perfectly rational as classical economists and too many small thinking Republicans believe.

Humans, when dealing with economic decisions, have a long legacy of ingrained biases that have been chronicled over and over again by modern decision theorists, economists and psychologists alike. No need to go into this now, but suffice it say that I am never certain about anything when it comes to the economy or the stock market.

The system is way too complex for one man or a small group of men and woman to predictably plan. That’s why Socialism does not work. And that’s why President Obama’s dream of “trickle up” economics will not work. Income (and even more so wealth) inequality is a necessary condition of a healthy capitalistic system. Growth is the engine the helps humans self organize and create really terrific things. People on the bottom need to believe that they can make it to the top through many and increasing virtuous paths.

The moment the wealth distribution shrinks and too many citizens are clustered around the middle, incentives to grow are diminished. None other than a Chinese Communist leader Deng unleashed capitalism on the Chinese by saying “It is glorious to get rich”. So far our President has explained just the opposite: It’s glorious to be “middle-class”. And in unprecedented speed their revolutionary change message has hastened the collapse of the upper middle class like no other policy we have seen.

Just today, Nancy Pelosi is going to push cram down legislation through Congress. What’s that? Oh nothing except letting individual bankruptcy judges create his or her own policy concerning the breaking of mortgage contracts by imposing their will on the mortgage holder! And in the process, put undo pressure on existing asset backed securities like car loans and credit card loans.

Until the President reigns this in – no-one will want to transact in the stock market or the economy. Will the real leaders step up please. Those that you convinced to hate Bush – the ones that would have voted for McCain – well they are getting fed up fast. Do you think that when they are out of work they can organize too?

This comes from the Gallup organization today:

The only other substantial change seen in approval of Obama among demographic subgroups is an 11-point drop among upper-middle-income Americans (those making from $5,000 to $7,499 per month), from 69% approval in Obama’s first week as president to 58% in his fourth. This could reflect variations by household income in Americans’ reactions to the economic stimulus bill (Gallup’s Feb. 10 survey on the stimulus bill found the least support for it by income among this group). Nevertheless, overall, support for Obama remains quite high among all income groups.

$20 trillion of lost wealth in the housing market and stock market is enough to get anybody spooked. But the young and inexperienced double talker from Chicagoland promised hope and change. He promised that he would put away “the childish things” like partisan bickering and he would of course be pragmatic and listen and take the best ideas.

Bullshit! There has been not one PRO GROWTH policy initiated by this President and he persists on his path of redistribution regardless of the economic crisis he likes to remind us he inherited. He talked about tax cuts for small businesses and cutting the corporate tax rate – not in that bill beause Queen Nancy wasn’t on board.

There’s a reason that Gold is at $1000 per ounce. There’s a reason investors are fleeing into governement treasuries. There is a reason that the stock market tanks after another policy is revealed (concealed) or changed. We do not know what these revolutionaries are going to do from day to day.

Who’s in charge if Senator Dodd can “slip” a paycap on the major finanical institutions that guarantees the best and the brightest will not be around to help fix this mess!

The stock market is down some -30% and bank stocks down -65% since President Obama was elected. We got a rally when his picks to his cabinet became known, but then inauguration ruined that as uncertainty and obfuscation became the change we got.

Oh yeh – a tax cut is not a tax cut unless the entity pays taxes – everything else is just a stimulus check.