- Market Commentary & Insight -

August 25, 2010 (FinancialWire) (By Dr. Joe Duarte) (Go to http://www.financialwire.net/?s=cmmtry for all recent commentaries.) — The S&P 500 SPDR ETF (NYSE: SPY) and key blue chip tech stocks such as Apple, Inc. (NASDAQ: AAPL) took some deep cuts on August 24.  And as the commentary, and the attitudes of investors sinks into further gloom, there is a much broader picture to examine, that of the relationship between the Washington establishment, the everyday people, and the financial markets.

For those who are scratching their heads as to what's going on in this country, one pollster, Scott Rasmussen seems to have an answer. It's not about political parties, it's about the divide between "political elites and the people."

This interesting conclusion comes from an editorial/reporting piece by The Wall Street Journal's conservative pundit John Fund, who calls Rasmussen "America's Insurgent Pollster." To be sure, the use of the title "insurgent" may sell some papers, but what Rasmussen has done is to figure out a key dynamic which may change the way America governs itself in the next decade. Yeah, we think it's that important.

Here's the bottom line. Rasmussen looks at the political "haves" and the "have nots" in a different light. Instead of looking at America's power structure in terms of political parties, he contends that there is "a significant division among the American public that he has tracked for the past few years—a division between what he calls the Mainstream Public and the Political Class." In other words, there is a different way of looking at the "us vs. them" model that eventually defines politics.

Rasmussen contends that "Before the financial crisis of late 2008, about a tenth of Americans fell into the political class, while some 53% were classified as in the mainstream public. The rest fell somewhere in the middle. Now the percentage of people identifying with the political class has clearly declined into single digits, while those in the mainstream public have grown slightly." And to arrive at his numbers, his automated calls to likely voters ask three questions: "Whose judgment do you trust more: that of the American people or America's political leaders? Has the federal government become its own special interest group? Do government and big business often work together in ways that hurt consumers and investors?" He then classifies his answers based on how the questions are answered, with those "Those who identify with the government on two or more questions" being "defined as the political class."

According to Fund, Rasmussen's "recent polls show huge gaps between the two groups. While 67% of the political class believes the U.S. is moving in the right direction, a full 84% of mainstream voters believe the nation is moving in the wrong one. The political class overwhelmingly supported the bailouts of the financial and auto industries, the health-care bill, and the Justice Department's decision to sue Arizona over its new immigration law. Those in the mainstream public just as intensely opposed those moves."

And this set of findings is crucial for several reasons including "the way polls are conducted and how their results are interpreted." For one thing, the questions asked are as important as the method used to ask the questions and the answers given. For example, Rasmussen told Fund: '"Many pollsters have asked voters whether policy makers should spend more to improve the economy or reduce spending to cut the deficit. But I found that 52% of Americans think more government spending hurts the economy and only 28% think it helps." That means that the pollsters may have asked the wrong question, thus arriving at conclusions that were of no help to those who commanded the poll. This in turn, could theoretically contribute to the disconnect between the politicians, and the political class, with the mainstream public. The politicians are more interested in how to spend the public's money, while the public doesn't really want the politicians to spend their money in any other way than the most basic.

As Fund writes, this makes sense: "Mr. Rasmussen argues that Mr. Obama misread the data from early on in his administration. People remember from his 2008 campaign that he promised to cut taxes for 95% of all Americans," he says. But Mr. Obama's stimulus package only grudgingly included modest tax cuts as part of an effort to secure Republican votes in Congress. "The week it passed, our poll found 62% of voters wanted more tax cuts and less government spending in the stimulus," he says. "We shouldn't be surprised people now think the stimulus has failed."

What makes this interesting, is the lag time between what Rasmussen's poll results show and how long it takes Washington, after it's done something to figure out that it's not working. According to Fund: 'President Obama also bungled his message on health-care reform because he misread the polls, says Mr. Rasmussen. "He kept citing Congressional Budget Office projections that his plan would save money and cut the deficit. But our polls showed people didn't trust the elites: 60% thought it would raise the deficit and 81% thought it would cost more than CBO projected." Democrats pushed the bill through anyway, convinced that voters would warm to it. Yet this past week, key White House allies conceded that hasn't happened. "Many don't believe health-care reform will help the economy," concluded a PowerPoint presentation put together by Families USA, a leading liberal group.

Here's what's most interesting. Rasmussen told Fund that 'understanding the tea party is essential to predicting what the country's political scene will look like. "This will be the third straight election in which people vote against the party in power," he says. "The GOP will benefit from that this year, but 75% of Republicans say their representatives in Congress are out of touch with the party base. Should they win big this November, they will have to move quickly to prove they've learned lessons from the Bush years."

Rasmussen declined to answer Fund's questions about his own party affiliation, telling the columnist that he mostly rooted for his polls to be correct, regardless of who was ahead. We have found Rasmussen's polls useful in our own analysis, and have been reporting on them for several years.

It's not so much that they, the political class, don't get it, as much as they will never get it, at least not in a timely fashion, or before doing things that complicate situations further it seems. And they don't get it because of the way they go about their business. They have an agenda, based on political preferences, rather than proceeding with a blank page that is gradually filled by the needs of the times and the people.

This is because they are out of touch to start with. And their out of touch status is made worse by their pollsters also being out of touch, and asking the wrong questions from the wrong people. Since Rasmussen assumes that "likely voters" will actually pull the levers in elections, he only asks questions of this group of responders, what he calls "political junkies."

That's why the November elections will be hugely important. The likely voters are sending a clear message, which is being ignored by both parties. If the Republicans win, just as the mainstream public expected Obama to deliver, so will the public expect something significant and tangible from the Republicans. And they will expect it quickly.

The Republicans in power, don't seem to get that anymore than the up in the clouds Democrats at the top of the political heap at the moment. That's because they are more interested in their personal and political agenda instead of doing the right thing for the voters.

That's not a partisan statement. That's a fact, and a point that we've been making here for a long time.

Where it all comes together is in the financial markets, where people vote with their money. And the fact that $33 billion dollars of small investor money has been moved away from stocks to bond funds in the first seven months of 2010 is a clear sign of the public's skepticism of the current system of government, and of the stewardship of their hard earned money.

The problem, as we see it, though, goes beyond that. There are no new ideas in Washington or elsewhere in the U.S. that make sense, or that don't smell of extremism, on the left or on the right. That turns most people who work for a living and have to live in the real world off. And there is no new big thing to capture anyone's imagination or to provide the next wave of employment growth, especially since i-phones and other gadgets are mostly made in China, and elsewhere in the world.

All that there seems to be is a bunch of people in all areas of power, governmental and corporate, who are too busy protecting their own skins to see anything beyond that. And that's why people are pulling money out of the stock market, and smart hedge fund managers are closing their doors while the getting is good.

Contrarians would usually start salivating at these signs of potential capitulation. The problem is that, despite what in the past could have been signs that the end of the down side is near, there is no such feeling, or evidence of it at this point.

Here's a final thought. So many people have now read "Atlas Shrugged," that the similarities between fiction and fact are blurring to the point where it's not difficult to become cynical and to get the uneasy feeling that you know how this story is most likely to turn out.

(Go to http://www.financialwire.net/?s=joe+duarte to see more commentaries by Dr. Joe Duarte, and go to http://www.financialwire.net/2010/04/22/about-duarte/ for more about Dr. Duarte.)

Equity research on any public company is available through the Shareholders Research Alliance (go to http://www.investrend.com/synd0004 for more information).  Real-time, streaming research for companies and funds mentioned in FinancialWire(tm) news is available via the Investrend Research Syndicate (at http://investrend.stocksmart.com/ss/html/hpcompany.html).  Current valuation analysis research for companies and funds mentioned in FinancialWire(tm) news is available via the Investrend Research Syndicate (at http://www.valuengine.com/rep/searchsrep?pid=42&srchfor=).

FinancialWire(tm) is committed to serving the financial community through true journalism and providing relevant resources to investors. Standards-based, independent equity research on numerous public other companies is available through the Investrend Research Syndicate (http://www.investrend.com/reports) written by FIRST Research Consortium (http://www.investrend.com/FIRST) member-providers. Free annual reports and company filings for companies mentioned in the news are available through the Investrend Information Syndicate (at http://investrend.ar.wilink.com/?level=279). FinancialWire(tm), in cooperation with the Investrend Broadcast Syndicate, also provides complete, daily conference call and webcast schedules as a service to shareholders and investors via the FirstAlert(tm) Network’s “FirstAlert(tm) Daily” (at http://www.financialwire.net/news-alerts/).

FinancialWire(tm) is a fully independent, proprietary news wire service. FinancialWire(tm) is not a press release service, and receives no compensation from subject entities, companies, equities, or representatives thereof, for its news, opinions or distributions. Further disclosure is posted at the FinancialWire(tm) website (at http://www.financialwire.net/disclosures.php and http://www.financialwire.net/2010/04/23/safe-harbor/). Additional resources for investors are also accessible via the FinancialWire(tm) website (at http://www.financialwire.net/2010/04/23/investor-resources/). Contact FinancialWire(tm) directly via inquiries@financialwire.net.

Copyright © MMX, FinancialWire(tm); All rights reserved.

[ssryrsyr] [cmmtry] [mrktqr] [mrktqrspcl] [drtjby] [djdrtreg] [exctrdfnd] [frscrrcnsp]

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.