Voting with their Feet

In the old days of the Soviet Union, when someone defected, it was frequently described as "voting with their feet." We're seeing that process in the financial markets this week. The battleground state polls released Monday afternoon showed McCain closing the gap. (The national polls released their final--more accurate than I hoped--numbers over the weekend.) On election day, the market rallied. Since then, not so much.

In fact Obama's first two days as President-elect have brought us a decline of over 900 points--nearly 10% of the value of the Dow Jones Industrial Average gone! Why? Because the smart money people know what's coming. If Obama does what he said (an open question to be sure) and crams a capital gains tax hike through the Congress his party controls, it's going to wreck the economy. People are getting out while the getting is still good.

One could hope that the economic crisis will limit Obama's tendencies to expand government at the expense of prosperity, but somehow that doesn't seem like a very good bet.