Michael E. Lewitt is the editor of The HCM Market Letter and a money manager.
There are a few reasons why the stock market continues to drop like John McCain's poll ratings.
First, there is no sector enjoying the kind of good news that could lead the market up. In fact, most sectors are suffering from bad news at the same time, pushing the market down. There is no place to hide.
Second, the stock market has the patience of a flea. The government's Herculean intervention into the markets will do what they are supposed to do--lead U.S. banks to start making loans again and reignite economic growth. But U.S. stock markets continue to be driven by "hot money"--failing to see money market rates plunge immediately, they conclude that these key lending rates won't drop at all. This is short-sighted and self-defeating. The government's actions will take some time to work, but they will work. The laws of economics were not repealed on the upside--that is why the markets crashed. But these laws were also not repealed on the downside, which is why these radical steps will work sooner rather than later.
Third, America is suffering from a leadership vacuum. A lame duck President and two candidates whose proposals to fix the economic mess are obviously designed to preserve votes rather than effect real change. One calls himself a "maverick" while the other touts "change." All I see is a lot of empty words. The only real change came from the Bush Administration after it was forced to abandon free market principals or be left in the dust by Europe.
Tonight's debate would be a great chance for Obama or McCain to articulate a bold new vision to rebuild America's economy. Some suggestions: rebuild our physical infrastructure; restructure the American auto industry around less fossil-fuel dependent vehicles; invest in education, particular math, science and basic reading skills; and invest in healthcare, medicine and technology.
Finally, why hasn't either candidate suggested reinstituting the 55 mpg speed limit on federal highways? This would cut fuel consumption by a significant amount as it has done in the past.