Recapping the First Half of the Year

The Federal Reserve. Fed critics blame Greenspan & Co. for allowing the bubble to overinflate, only to ultimately be forced to pop it in 2000 as the economy overheated. Then they blew serial bubbles in bonds and residential housing. When the Fed started a rate-hiking cycle four years ago, I think it raised rates too far too soon.

The Fed acted quite appropriately for once, at least when compared to Japan's central bankers. Unlike 2000, the Fed telegraphed the measured upcoming quarter-point increase and has allowed the markets to adjust to a new tightening cycle.

Postwar Iraq. The neoconservatives who pressed for the invasion of Iraq failed to create an adequate strategy anticipating the postwar period. They disbanded Iraq's military and the civilian bureaucratic infrastructure. This was a colossal blunder. It created an opportunity for insurgents to wreak havoc and cause mayhem in various towns outside of Baghdad. This caused increased U.S. casualties and deaths, and made Iraq appear to be slipping from the U.S. grasp.

Poor planning also led to a series of political embarrassments -- from the torture case to running low on ammunition to an insufficient number of troops on the ground.

With the handover to the Iraqi Ruling Council a couple of days early, the planners have gotten one right for a change. As a result, the insurgents have been denied an opening to thwart Iraqi sovereignty. Although the original postwar planners were grossly incompetent, the new strategists seem to have their act together.

Presidential polls. President Bush has taken a beating in the polls over the past six months. One embarrassment after another drove his approval ratings to the lowest levels of his presidency. Starting with the nondiscovery of weapons of mass destruction to the Fallujah insurgency, the Abu Ghraib torture scandal, and the 9/11 Commission's declaration that there was no link between Saddam and 9/11 or al Qaeda, the incumbent has seen his approval ratings erode for all of 2004.

Recent polls show President Bush regaining a lead in some surveys. This improves the odds of his not being a one-termer like his father.

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Barry Ritholtz is chief market strategist for Maxim Group, where his research and market analysis are used by the firm's portfolio managers and clients in the U.S., Europe and Japan. He also publishes The Big Picture, his macro perspectives on the economy and geopolitics, entertainment and technology industries. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Ritholtz appreciates your feedback and invites you to send it to [e-mail].

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