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How President Obama Won The Stock Market

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Step aside stockpickers, there's a new guru In town.

March 3, 2009: "Obama Says Now May Be a Good Time to Buy Stocks" - Bloomberg

From the transcript of the press conference:

Question: Thank you, Mr. President. The stock market has fallen to lows it's not seen since 1997 this week, and an undercurrent of these declines is the fear that your plans to fix the banking sector might not work.

President Obama: Well, let me say this: I'm absolutely confident that they will work. And I'm absolutely confident that credit is going to be flowing again, that businesses are going to start seeing opportunities for investment, they're going to start hiring again, people are going to be put back to work.

What I'm looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing. And, you know, the stock market is sort of like a tracking poll in politics. It bobs up and down day to day, and if you spend all your time worrying about that, then you're probably going to get the long-term strategy wrong.

Now, having said that, the banking system has been dealt a heavy blow. It has to do with many of the things that Prime Minister Brown alluded to: lax regulation, massive over-leverage, huge systemic risks taken by unregulated institutions, as well as regulated institutions. And so there are a lot of losses that are working their way through the system. And it's not surprising that the market is hurting as a consequence. In fact, I think what we're seeing is that as people absorb the depths of the problem that existed in the banking system, as well as the international ramifications of it, that there's going to be a natural reaction.

On the other hand, what you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it.

S&P 500 Index Closing Price, March 3, 2009: 696.33
S&P 500 Index Closing Price, February 23, 2011: 1307.40

Return: 87%
POSITION:  No positions in stocks mentioned.