Nice chat with the WSJ today regarding Iraq, the President, the Deficit and looming tax increases:
Finding out what’s behind the recent stock-market selloff is tricky. The running line so far has been the two-headed monster of crude oil near $40 a barrel and a likely rate increase from the Federal Reserve as soon as June. But that’s not it, says Barry Ritholtz, chief market strategist at Maxim Group in New York.
“I fell off my chair this weekend,” Mr. Ritholtz said, alluding to the widespread belief that the stock market’s selloff is tied to higher interest rates and oil prices. “Everyone expects higher rates at this point. The market is a future-discounting mechanism – it doesn’t look backwards.”
There are four factors he cites for the widespread havoc in financial markets: that the situation in Iraq is going from bad to worse; that the incumbent presidential candidate is being perceived as vulnerable; a backlash against U.S. companies overseas because of the prisoner-abuse scandal; and Fed Chairman Alan Greenspan’s warning about the deficit being an obstacle to growth.
The abuse scandal is damaging; European businesses think the U.S. “has gone off the rails. They are going to ask themselves, ‘do I buy Boeing or Airbus,’ ” Mr. Ritholtz said. “And now along comes Mr. Greenspan. He was very sanguine on tax cuts and deficits last year, but now he is warning the market there is a realistic possibility that taxes are going up,” Mr. Ritholtz said.
“The market is throwing a tantrum because of the number of unpleasant things in the next six months,” he said.
Iraq, Budget, Rates and MoreTrigger a World-Wide SelloffDow Industrials Close Below 10000; Tokyo’s Nikkei 225 Plunges 4.8%By BRIAN R. FITZGERALD and KATE SCHLEGEL
THE WALL STREET JOURNAL ONLINE
May 10, 2004 4:49 p.m.