Alphabet Soup Spells Blah

I'm getting lost. There's old programs like the FDIC insurance program to protect bank depositors. There's the new Obama Stimulus Package. And then there's TARP, TALF, EIEIO (no, wait, that's a song from kindergarten), along with seemingly dozens of other new catchy-named programs emanating from the nation's capital. All are intended to reverse the economy from its current downward death spiral.

 

Yesterday, Warren Buffett was pontificating on CNBC that the economy had "fallen off a cliff" but would eventually recover. Well, duh ... yeah, even Jimmy Buffett could have said that.

 

There's universal agreement that the stock market is a leading economic indicator. It almost always starts its recovery six months prior to economic upturns. So the question that I would have liked Warren to answer is "When will the recovery take place?". Once we know that magic date, a monkey could throw darts at the stock market listings and pick winners, just as long as he tosses those darts six months earlier.

 

An old stock market adage is: "They don't ring a bell at the bottom (or top)". This is really too bad; it would make things a whole lot easier. As I write this, the stock market has just rallied for the first time in weeks. Is this the bottom or just a "dead cat bounce"? Who knows? Check back in several years and we'll be able to figure it out.

 

So what's the average investor to do? Just listen to the experts and when you think that enough of them agree on a common course of action, immediately do the opposite.

 

Failing that sure-fire piece of advice, it seems to me that the Obama Administration and Congress can help jump-start the economy and the stock market with one simple action above all others. Reduce or eliminate the taxes on dividends and long term capital gains. This single action will pump huge amounts of cash into start-ups and the stock market, revitalizing the economy and creating jobs.  Obama is scaring the bejesus out of potential investors worldwide because he's talking about raising these taxes instead of lowering them.

 

One other thing. It might be a good idea to hold gold or some other hard assets in your portfolio. While I know that the current concern is deflation, at some point, the massive creation of money is going to set off a jumbo-sized round of inflation.

 

No! I don't have any idea when that magic date will occur. I sure wish I did.

 

The Logic of War

What's happened to wars? Genghis Khan, Alexander the Great and Attila the Hun wouldn't recognize today's version at all. It used to be that if you won, you looted the country, enslaved its people and renamed cities. No questions asked. That was the way war was. It was simple and straightforward. War was a logical (although very brutal) method of settling disputes and/or increasing a country's power and wealth. An added bonus was that it also served as a pretty effective method of increasing the pool of potential brides for the victors.

 

No more. Starting somewhere around World War I, wars became much more complicated endeavors. Instead of the pure simplicity of being a conqueror, the winner suddenly was faced with the prospect of taking care of the losers and rebuilding what they had just destroyed. Wars actually cost the victor power and wealth. What a loony concept!

 

After World War II, the U.S. celebrated its victory by creating the Marshall Plan, under which it spent a fortune building up Germany and the rest of Western Europe so they could compete with the U.S. Similar support was given to Japan. This activity was a fabulous success, as denoted by the loss of the American car manufacturing industry among its other achievemnents. Some might quibble that rebuilding Western Europe and Japan was necessary to fend off the Russians from taking over, but it still seems crazy that the winner would pay the losers.

 

As I write this, the U.S. is fighting wars in Iraq and Afghanistan, while the Israelis are devastating the Gaza Strip. In none of these three conflicts will the likely victor win anything as simple as land and slaves.

 

The U.S.eradicated the Saddam dictatorship and now just wants to get the heck out of Iraq after spending 7 years, several thousand American lives and more than $600 billion first destroying and then trying to rebuild the place. The initial assault and its follow-on insurgency, along with a civil war among the entirely insane Islamic Sunni and Shia, has killed tens of thousands of Iraqis and generally turned most of the rest of the world against the U.S..

 

In Afghanistan, the U.S. is trying to erase the nutty Taliban, probably leaving a bunch of warlords to rule in its place. Given Afghanistan's history of swallowing up the British and then the Soviets, the U.S. will be lucky to extract itself from there anytime soon. How much it will cost in lives and treasure is anyone's guess; but no matter what the cost and how badly the Taliban are crushed, the odds are pretty high that Afghanistan will slide back into the 12th century rather than become the 51st U.S. state.

 

In Gaza, the Israelis are beating the pulp out of the insane Hamas zealots. The Israelis say they just want Hamas to stop firing rockets at them. They haven't yet publicly said that they want to totally eliminate Hamas, but that's what they really desire. The Israelis will probably not fully achieve either objective once they're forced by the rest of the world (but mostly the U.S.) to settle for one more in a seemingly never-ending number of cease fire agreements. Actually, a simple cease fire in Gaza may be the best outcome for the Israelis. If the Iranians, who are funding Hamas, also free Hezbollah to attack from Lebanon, the costs could escalate to really ominous levels.

 

All in all, war made a whole lot more sense in the old days. Winners won and losers lost. Nothing more, nothing less.

 

Change Beats Experience: Palin is Perfect

With all the hubbub over John McCain's choice of Sarah Palin as his Vice Presidential nominee, I was wondering how it became the norm for the party nominee to select his running mate. It certainly seems odd that after an incredible amount of time and money is spent to determine the Presidential candidate, the Vice President can be picked on a whim.

I found the answer in an article appropriately entitled: "Process of Selecting Vice President Evolved over Centuries. America’s earliest running mates often competitors rather than partners." It's a pretty good summary of all the stuff I used to know about this subject before my gray matter starting turning really gray. Do you remember that it wasn't until after Eisenhower in 1952 that the Presidential candidate unilaterally selected his running mate? I didn't.

Well, what about McCain's VP choice? It seems to me that the GOP pollsters must have determined that they were not going to win the election based on "Experience", or, to put it more directly, Obama's lack thereof. That means that "Change" will be the key factor.

This was a real problem for McCain. Obama says he's the Change guy, with his continuous chant that McCain is nothing but four more years of Bush. But McCain has always prided himself on being a maverick who goes against the straight line of his party to do what's right for the country. He's even compromised with the other side from time to time, acts which really ticked off his "Base".

So, the answer is to select another Change person who can also bolster his standing with the GOP Base. To McCain, apparently Palin is Perfect.

She's first and foremost a politician who changed the game in Alaska when she took on her own party's politicians for their egregious lack of ethics (and, in some cases, lack of legality).

Second, she's a she. Perhaps that will get McCain a few Hillary supporters, hoping that the women will overlook her political positions, which are almost exactly the opposite of Ms. Clinton.

Third, she's an Evangelical Christian and long term member of the NRA. What more could the lunatic far right wing of his Base want?

Fourth, just let those pesky Dems bring up her lack of experience. This forces them to explain just exactly how their number one guy has more experience than the GOP's number two gal. Here's how I presume McCain expects that debate to go: "She's run the largest state in the land, one of the smallest cities in the land, and a PTA. OK, now, it's your turn. Are you going to tell us again how Obama was an "Organizer" in Chicago for a few months. By the way, what the heck is an Organizer? And it was in Chicago. Sure sounds like a job Tony Soprano and his pals handled in New Jersey."

Will this strategy work? We'll have to wait to find out. It's a high risk, but possibly high payoff gamble.

I'll close with an old aphorism. If you don't like the question, change the topic. Whatever you think of his choice of VP, I think McCain did that pretty well.

Marketing the Presidential Candidates 101

The past week has seen an interesting strategy shift in the Presidential race. McCain's campaign must have concluded that they can't win without going negative. So they've put out some PR and ads that attempt to reposition what everyone thought was Obama's biggest strengths into his biggest weaknesses. Never mind that McCain said he would run a positive campaign. That was before the polls convinced him he's losing.

Here are a few examples which show the strategy in action:

1. All the pundits are calling Obama the greatest orator of the new millennium. Therefore, McCain declares that while Obama gives great speeches, words don't matter. Only deeds matter, and Obama has accomplished no deeds that matter. It's not really his fault. He's just too darn young.

2. Obama is as famous as a rock star. He is the Chosen One. So, McCain says that fame is not what's important. As McCain's ad points out, Paris Hilton and Britney Spears are famous. But, would you vote for either to be President? (Maybe, it depends on who they're running against).

3. Obama visits all the world leaders and they just love him. The Germans go completely ga-ga. They even wave American flags while Obama lectures the world on how we should just all get along with each other. Obama makes no major gaffes (except not visiting wounded soldiers) and looks quite Presidential. This results in McCain suggesting that Obama is celebrating his victory with a world tour even before the poor American voters get a chance to give their opinion on who they want to lead the Free World. How arrogant of Obama, they say.

4. And finally, Obama's greatest strength is that he is Black. Oops, wait, that used to be a real negative. But just how cool would it be if the US elected a Black President (not to mention one whose father is a Muslim)? The rest of the world would simply swoon with new respect for the US of A. McCain's response is to accuse Obama of playing the Race Card when Obama said he doesn't look like the other Presidents on the dollar bills. How tacky of Obama to inject Race into our color-free society.

Well, all this is really quite familiar. It's an old marketing adage: if you can't fix it, feature it. This tactic usually works. The latest polls say that the race is tightening.