This post is slightly overdue. It's been simmering in my mind for a while, but I finally found some time.
The big take home for 2009 is the death of free markets. We weren't truly free markets to begin with, but government spending will be the biggest game in 2009. Our markets are going to start looking like the "Chinese Markets" with its government involvement. I can't say with absolute certainty what the next administration will focus it's capital on, but I feel confident in saying they will spend/spend/spend because we are fighting a Depression. There, I said it.
What we're seeing are economic policies reminiscent of FDR's New Deal era. The merits of New Deal spending are highly debatable. If Barrack was to give me a tap on the shoulder, I'd tell him straight up the answer to our economic problems. Nobody really asks me anyway, but the solution is EDUCATION. As abstract as it seems, pour money into human capital and real economic growth will follow. Forget the handouts that lead to a culture of morally hazardous CEO beggars. The growth of our civilization and economic being is predicated on innovation and new ideas. These new ideas usually come from knowledge acquired through education. The creation of new industries from new ideas is the only real engine to economic growth.
The counter is that we need to address the rising unemployment, declining GDP, and all other bad stuff. What good is giving people an education when they're starving, unemployed, and homeless? At this point, I usually tell people to shut the f* up and that they don't know anything. We can't put off long term planning, because of short term thinking. This situation really is akin to an overweight individual putting off weight loss until tomorrow, next week, or the following year. It's hard wired in our brains to not maximize our wealth appropriately by valuing the short term more than the long term.
That's about as far as I'll go with my economic soap box. The proposed government spending is going to counter-balance the depression. This should lead to a softening decline in the GDP. This might even lead to 0% growth, which is better than negative growth. Follow the chain from there and see what investment ideas follow. The problem with using the government as a remedy is that its spotchy. Certain industries will benefit more than others. There's an averaging out so it doesn't look bad overall, but the benefits of government spending will be concentrated.
Just a guess. I'd gamble that we've bottomed out. For the next 1.5 months, Dow 8500 is good enough. Dow 8000 a bargain. I might be either over-estimating my confidence in the upcoming administration or under-estimating the depression spiral, but the Obama inauguration seems like a good enough turning point as any. Along the way, I'd watch out for earnings land mines.
The big take home for 2009 is the death of free markets. We weren't truly free markets to begin with, but government spending will be the biggest game in 2009. Our markets are going to start looking like the "Chinese Markets" with its government involvement. I can't say with absolute certainty what the next administration will focus it's capital on, but I feel confident in saying they will spend/spend/spend because we are fighting a Depression. There, I said it.
What we're seeing are economic policies reminiscent of FDR's New Deal era. The merits of New Deal spending are highly debatable. If Barrack was to give me a tap on the shoulder, I'd tell him straight up the answer to our economic problems. Nobody really asks me anyway, but the solution is EDUCATION. As abstract as it seems, pour money into human capital and real economic growth will follow. Forget the handouts that lead to a culture of morally hazardous CEO beggars. The growth of our civilization and economic being is predicated on innovation and new ideas. These new ideas usually come from knowledge acquired through education. The creation of new industries from new ideas is the only real engine to economic growth.
The counter is that we need to address the rising unemployment, declining GDP, and all other bad stuff. What good is giving people an education when they're starving, unemployed, and homeless? At this point, I usually tell people to shut the f* up and that they don't know anything. We can't put off long term planning, because of short term thinking. This situation really is akin to an overweight individual putting off weight loss until tomorrow, next week, or the following year. It's hard wired in our brains to not maximize our wealth appropriately by valuing the short term more than the long term.
That's about as far as I'll go with my economic soap box. The proposed government spending is going to counter-balance the depression. This should lead to a softening decline in the GDP. This might even lead to 0% growth, which is better than negative growth. Follow the chain from there and see what investment ideas follow. The problem with using the government as a remedy is that its spotchy. Certain industries will benefit more than others. There's an averaging out so it doesn't look bad overall, but the benefits of government spending will be concentrated.
Just a guess. I'd gamble that we've bottomed out. For the next 1.5 months, Dow 8500 is good enough. Dow 8000 a bargain. I might be either over-estimating my confidence in the upcoming administration or under-estimating the depression spiral, but the Obama inauguration seems like a good enough turning point as any. Along the way, I'd watch out for earnings land mines.
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