The conventional explanation for Friday's stock plummet -- the Dow Jones industrial average closed down a shocking 394 points -- the sharp bump up in the unemployment rate, and the absolutely scalding $11 dollar pole vault in the price of crude oil to a new record high.
But don't be fooled. The real reason for the panic is Barack Obama's clinching of the Democratic nomination for president. To understand this, all you need to do is read Brett Arends' personal finance column in Friday's Wall Street Journal, "How an Obama Win Would Affect Your Pocketbook."
I wasn't initially inclined to believe Arends' declaration that "This is not a political column," but, upon review, he makes sense. It's an absolute no-brainer that an Obama presidency would let Bush's tax cuts expire. And as Arends points out, "Senator Barack Obama has already acknowledged that he may be willing to raise the top rate on long-term capital gains still further, to 28 percent."
The current capital gains tax rate is 15 percent.
So what does that mean?
Cash in any big capital gains on stocks or mutual funds before the end of this year.
Sell! Sell! Sell!
So if you are sitting on a huge profit in, say, your Apple stock, if the Democrats win in November you might want to cash it in before the end of the year. "Go ahead and sell it" says Benjamin Tobias, a financial planner in Plantation, Fla. "Pay the 15 percent tax, and put a happy face on the check to the IRS because you're only paying 15 percent.. Next year, who knows what you'll be paying?"
So clearly, after reading this column, America called its broker. Cue "Black" Friday.
Of course, there's one little problem with this thesis. If Hillary Clinton had clinched the nomination, you could make pretty much exactly the same argument, although I don't think she's been pinned down on how high she might take the capital gains tax rate. So unless you want to make the case that Wall Street thinks Obama is the more formidable candidate for McCain than Clinton, perhaps it would be better, after all, to focus on record oil prices and growing stress in labor markets as the explanation for investor unease.