By DAVID MOON, Moon Capital Management, LLC
September 7, 2008

My friends are convinced that if he is elected president, the negative impact on the economy will be immense. Stock prices will suffer for another four years. Deficits will skyrocket. Tax breaks will become 'tax favors,' simply handed out as political pandering.

Short version: His election will spell doom for the U.S. economy.

Who is the candidate? John McCain. And Barack Obama.

It depends on which of my friends is making the predictions.

Plenty of historical studies will support whatever conclusions you would like to draw concerning a president's political party and the economy. After today, readers will send me emails referring to one study or another, depending on whatever point they are trying to make.

The problem with these studies is that they simply measure correlation ' that is, what happened. They do little, if anything, to explain why.

Presidential politics and economics can be a frustratingly complex pair of topics. Many things that happen simply make no logical sense.

The polling folks at Gallup tell us that 56 percent of the voters with postgraduate college education favor Barack Obama. Yet these are among the folks most likely to be among the top ten percent of wage earners and presumably the targets of the repeal of the Bush tax cuts that Obama wants.

BIGResearch, a consumer retail consultant, has discovered that Wal-Mart shoppers overwhelmingly prefer John McCain.

Neiman Marcus would have been my prediction.

I have a postgraduate degree and I love Wal-Mart. Maybe I'm supposed to vote for Libertarian candidate Bob Barr or perennial candidate Ralph Nader.

Presidents get credit and blame for things over which they have little influence and zero control. Should a president get credit/blame for the economy while he is in office? Or is there some lag between his stupid/genius decisions and their impact on the economy? Six months? Three years?

The stock market has, in total, performed terribly during George Bush's presidency. Since he took office in January 2001, the Dow Jones Industrial Average has increased about two percent a year.

How much of that performance, however, is because stocks were overpriced in 2001 and still in the beginning stage of a bear market that started nine months earlier?

Does Ronald Reagan get credit for the 128 percent increase in the Dow during his eight years in office? Or was some of that a function of historically low P/E ratios at the start of his presidential tenure?

During Bill Clinton's eight years, the Dow increased a whopping 226 percent. My Obama friends credit Clinton's economic policies and a reduced budget deficit during that period.

My McCain friends thank the Republican-controlled Congress for Clinton's second-term budget surpluses.

I think stocks increased so much during those eight years because they were cheap to start with.

Like quarterbacks, politicians get way too much credit and blame for what happens while they are on the field. Tax policies obviously have an impact, but other than being a cheerleader, a president has limited tools to manage the economy.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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