Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 8/10) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.

It’s a darned good thing that President Obama has access to excellent health care. He appears to be suffering a severe case of "tin ear," and clearly needs help.

With Congress mercifully in recess, the country should be enjoying the political silence that normally accompanies the dog days. Instead, the airwaves are full of ranting and shouting as Americans attempt to question proposed health-care legislation. The more the Obama administration and its allies in Congress deride and belittle the outbursts at town halls across the country, the angrier people get. They don’t see "right-wing operatives" or "an ugly campaign" on their TV screens; they see gray-haired Middle Americans who are anxious about their futures.

The Obama camp casts the uprising as the mischief of cable TV shows, or something akin to Hillary Clinton’s infamous "vast right-wing conspiracy." Nancy Pelosi, feeling at one with the common folk as always from her GIV, described the outbursts as un-American. The upshot? The president’s entire program is now on the ropes.

While a tamer White House, and possible political gridlock, is probably good news for investors, the sense of dismay across the land is almost palpable. It turns out that "transparency" in this administration has its limits, that lobbyists are as shakable as barnacles, that reaching out to despots like Kim Jong-il or Hugo Chavez is like inserting your fist in a bear trap, that managing your own party is no walk in the park and that turf wars in Congress can trump almost any meaningful regulatory reform. Somehow, briefly, we suspended our disbelief, and for at least a moment we saw this president as different from all who had gone before.

Most Americans acknowledge that we have serious challenges. We need to cut back on energy imports, we do need to freshen our infrastructure – our airports, tunnels and subways – we need to seriously confront the shortcomings of our public schools if we want to compete around the globe, and we need, after all, to rein in health-care spending.

Unhappily, Obama’s approaches to these problems have not been popular, and now they are stymied. At the same time the economy is, to use Fed Chair Ben Bernanke’s idiom, "leveling out," so the sense of urgency to some of the president’s initiatives is fading. My prediction is that the administration will work hard to pass a watered-down health-care bill, but very little else will get done.

Where does that leave us? There will be some tinkering around the edges of financial sector regulation, granting the Fed increased oversight responsibilities and passing a diluted consumer protection bill. These measures will not keep Wall Street from dreaming up new exotic money-making schemes, nor will they prevent the next investment bubble. Excess is as inevitable as Thanksgiving turkey; just not as savory.

Cap-and-trade, legislation that already embarrasses those environmentalists who endorse the concept and that is bitterly opposed by coal-state Democrats, will languish. The administration can’t possibly dive into immigration reform – a third-rail topic if ever there was one. And gay marriage will be left at the altar indefinitely.

While the stock market rejoices in the prospect of the status quo, significant covering by short sellers – those who bet the market will decline – has also fueled gains. Also, news that John Paulson invested heavily in Bank of America last quarter lifted expectations for the financial sector. It was Paulson who made a billion dollars betting against the subprime mortgage market; if he says the worst is over for banks, I believe him.