If history does repeat itself, can it happen in a mirror image?  Consider the strange similarity (in reverse) between Barack Obama and Ronald Reagan.  They are distinct mirror reflections of each other, and if that continues, we just might see a major Obama market rally – in about six years.

There are a number of minor mirror image attributes about Obama and Reagan.  For example, Reagan was the oldest president in U.S. history while Obama at 47 is fifth youngest.  And both were outsiders but in different ways: one because of his prior career as an actor and the other because of his race.  But there are much more significant mirror attributes than those.

Both Reagan And Obama Called For “Change” Except In Directly Opposite Directions.

They each had good cause to run on the concept of change.  In the most recent election, some 80 percent of the electorate believed the nation was going in the wrong direction.  When Reagan campaigned against incumbent Jimmy Carter, the “misery index” was at about 20, its highest level in history (the index is simply unemployment plus inflation; in February 2009 under Obama it was 8.34; the lowest recorded was 2.9 in July 1953).

But most significant is the mirror image of how they appealed to the middle class.  Reagan painted a bright picture for the middle class with the idea that if the government adopted policies that favored the wealthy – primarily capitalists and investors – their increased prosperity would cause prosperity to “tickle down” to all others.  Thus, the keystones of Reagan’s economic agenda as he assumed the White House were:

1. Reduce the growth of government spending,




2. Reduce income and capital gains marginal tax rates,




3. Reduce government regulation of the economy,




4. Control the money supply to reduce inflation.

Among the most significant results of this approach was that the marginal tax rates under Reagan fell from 70 percent to 28 percent.  Capitalism, wealth, investing and finance were glorified.  The American Dream of success as measured by wealth and materialism was restored.

Look into the political mirror and you’ll see Obama reflected in reverse.  Reagan told the middle they could dream of living like the wealthy; Obama told the middle that Reagan’s dream was fake.  In his nomination acceptance speech, Obama laid out the case this way:

“Tonight, more Americans are out of work and more are working harder for less.  More of you have lost your homes and even more are watching your home values plummet.  More of you have cars you can’t afford to drive, credit cards, bills you can’t afford to pay, and tuition that’s beyond your reach.”

Who and what were to blame, according to Obama?

“For over two decades — for over two decades, [McCain has] subscribed to that old, discredited Republican philosophy: Give more and more to those with the most and hope that prosperity trickles down to everyone else….  Well, it’s time for them to own their failure. It’s time for us to change America.“[Emphasis added]

And here’s how Obama’s mirror image of Reagan is being executed:

1. Increase the growth of government spending,




2. Increase taxes on those who benefitted most under Reagan policies; give tax breaks for the middle/working class,




3. Increase government regulation of the economy and engage directly in corporate strategic decisions such as who should be the CEO of General Motors,




4. Pump massive cash into the economy, even if it means increasing the risk of inflation for the sake of solving short-term needs.

So What Does That Mean For The Market?

Remember October 19, 1987?  Commonly known as “Black Monday,” it is the day the Dow Jones Industrial Average dropped by 508 points to 1739 – a drop of 22.6 percent, the single biggest drop in market history and almost double the record falls of 1929.  That was followed by “Terrible Tuesday,” the not so-well known event when the financial markets around the world came within an hour of a true meltdown.  It was saved only by the vigorous and unprecedented involvement of the Fed, and, because it happened just a little more than a year before Election Day, it marked the beginning of Reagan’s long period as a lame duck president.

The simple-to-see mirror image (thus far) between Obama’s and Reagan’s market is that a bust came as Obama was beginning rather than exiting his presidency.  But there yet may be an even more critical mirror image than that – we’ll have to wait to see if it happens.

Is It Possible That Obama And Reagan Share The Same Irony In Reverse Too?

The big Reagan irony is that a capital market meltdown on Terrible Tuesday was solved only by the type of massive government involvement that he abhorred and the crash worked against the interests of his constituency of the powerful when their wealth eroded with the market.  And here’s the prospective mirror image of irony for Obama:  Imagine that after several years of pumping money into the economy, building infrastructure, elevating the nation’s education system to produce a more competitive workforce, etc., the market could take off with a rebirth of earnings, allowing the upper class – the capitalists and investors – to ride a booming market back up for a restoration of wealth.

If that did occur, the transfer of wealth from the wealthy to the not-so-wealthy that Obama told “Joe the Plumber” would be a good thing, would be fleeting and temporary if it happens at all.  But those Obama has called “shameful” and “greedy” would be well-served by an Obama market boom.

Reagan and Obama:  mirror boom and bust (or, for Obama, bust and then boom), and mirror ironies.  History repeating itself – in reverse.

* The original title of this post has been changed to reflect the editorial change made by seekingalpha.com