A Geithner Put? – Kudlow Spins the Rally

Whenever the stock market falls, CNBC’s Larry Kudlow reliably blames the Obama administration’s allegedly anti-business policies. But when the market was rising on Obama’s watch, Kudlow generally did not talk about it.

On tonight’s show, he took a different tack. He repeatedly asserted that the market has recently rallied not only on strong corporate profits, but also because Tim Geithner announced (on The Kudlow Report no less) that the Obama administration wants to cap US dividend and capital gains tax rates at 20%.

Kudlow’s thesis is that American shareholders were selling, or going to sell, stock this year to realize capital gains before higher tax rates kick in next year. By mitigating this tax incentive to sell, Geithner’s announcement supposedly bolstered the stock market.

There is a small problem with Kudlow’s thesis: half of the recent rally occurred before Geithner’s announcement. The S&P 500 bottomed at 1,023 on July 2. In just two trading days after the US holiday weekend, it gained 37 points to close at 1,060 on July 7.

Geithner appeared on The Kudlow Report on the evening of July 7. Over the four trading days since then, the S&P gained a further 35 points to close at 1,095 today.

If anything, the rally decelerated after Geithner’s announcement. And almost half of the gains since then occurred today, in response to yesterday evening’s strong earnings reports.

I am not suggesting that Geithner actually slowed the market. But it is ridiculous to claim that his promise of continued light taxation for stock income drove the rally.

CNBC’s evening stock-market commentary should be left to Jim Cramer. That would help Kudlow stay focussed on attacking Obama and advocating tax breaks for the rich, untethered by potentially inconvenient data.


  • Ehhhhhhhhhhhhh. I cannot tolerate this guy. Sometimes I have CNBC on in the morning, as I don’t mind the early morning show but if I somehow leave the TV running and either forget to shut it off, when he comes on, he will say a few things that I must say remind me that I am listening to a doorstopper or fencepost, (I think making commentary during the early afternoon), and I will finally just shut the TV off.

    He is so full of hot air it is pathetic.

  • The press invests a great deal of time in creating a narrative for the daily rise and fall of the stock market. Their “explanations,” of course, are often arbitrary–such as Kudlow’s–and quite silly, based as they are on the idea that the “market” is a single entity that thinks and responds with one mind. Using this logic, one can attribute just about anything to the movement of the market–a financial report, a speech by Geithner, a disaster in the Gulf. But one could just as easily say that the market rose (or fell) because I slept in today. There is little evidence for any of these explanations, which is why they are so tantalizing to media stars like Jim Cramer.

    Millions of people make trades every day, for literally an infinite number of reasons. Reducing them to a handful of random explanations is simplistic and unserious–as are the people who traffic in them.

  • Conveniently for this post, the S&P 500 closed essentially flat yesterday and today. Therefore, the above figures are still current.

  • Robert Reich had a good bit on tonight’s Kudlow Report: “If there is any morsel of evidence in America to refute Keynesian economics and resurrect Herbert Hoover, you are going to find it . . . it’s like a treasure hunt.”

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