Opinion: Justifiable Pessimism Over Obama Hype

Dan Fitzpatrick

As a student of history, I am not "moved" by the things that are happening in Washington ... nor do I believe that the present programs being hailed by so many commentators and rabid fans of the new president (well, I repeat myself) will even work, except to drain more money and opportunity from the very people who are supposed to be helped.

THE SECOND COMING ... OF FDR

If you are listening to CNBC or any of the other networks that have commentators fawning over our new "rock star, hip president", I caution you in the strongest terms to remain objective. Simply put, the belief that this trillion-dollar money-printing job will work is tantamount to saying "2 + 2 = 5." It's just mathematically impossible to make the kind of monetary changes currently being sold by the hucksters as "change" and avoid the irrefutable law of unintended consequences.

I'm being pragmatic here, folks. Pessimistic, sure. But it's defensible pessimism.

Franklin D. Roosevelt enacted the same kind of "shovel ready" projects that Obama is now focusing on. It got FDR re-elected 3 times, so it makes sense to repeat a successful political strategy. Actually, FDR's last successful bid for re-election was more due to global conflict than the economy, which was actually made worse in 1938 by all of his "efforts" to help the economy. Oh, and if you look at those who were advising FDR -- all quite brilliant people -- it is a virtual "Who's Who" list of socialists who expressly disavowed capitalism and were advocates of "central planning" and government controlled business enterprises. Sound familiar? This is not my opinion; it is documented fact...and I wouldn't even debate anyone on it -- I'd just refer them to the plethora of reference sources on the subject. You can start here.

As for the current push for "shovel ready" projects, here is a query: Are you going to pick up a shovel? Do you know anyone who will be picking up a shovel? The beneficiaries to all this money will be a small group of folks with big lobbying budgets who are located in swing states. (And those that are publicly traded will receive our continual attention so that we can indirectly make money off this impending fiasco. Specifically, I'm looking at the companies who transport the stuff to locations where other companies build the stuff that we are now spending money that we don't have. Railroads, basic materials, etc. We can participate along with these folks as they capitalize on the government's largesse).

SEPARATING ECONOMIC OUTLOOK FROM MARKET DIRECTION

But as I often say here, we've got to separate the market from policy. We will indeed make money off the economic stimulus package...but I seriously caution anybody who is buying into this hype and forming long-term investing decisions based on the promise that "this time will be different". It won't. As I write this, I hear the words "change, reform, accountability, new sense of responsibility" repeatedly bantered about in the latest "Presser". But there is no evidence that these concepts have ever been adhered to by the person making those comments. Rather, there is simply this tacit acceptance of the media that "this time will be different."

Right.

Just step back and think for a minute. If it were easy to fix the types of problems that face us, then why would they have even arisen in the first place? None of this stuff has ever worked before. It's fine to ruminate and muse about a new future where everyone gets along and all are prosperous, happy and satisfied.

Sigh. My heart is all aflutter. A new beginning! The new dawning of the Age of Aquarius!

EXPERIENCE? WE DON'T NEED NO STINKING EXPERIENCE!

Now, the rhetoric has morphed from "experience" to "change". But here's the problem -- Mr. Obama has the same tools at his disposal. Nothing has changed because nothing is new under the sun.

Do you really...really think that an entrenched Washington establishment is going to fold up its tents just because a charismatic Chicago thug is now in the White House? If so, I've got good news for you -- there are only 351 days until Santa Clause comes down your chimney and leaves your new toys under the tree. Don't forget to bake those cookies.

Our new President has the least amount of experience of any President in history (except George Washington, I guess). So it defies logic that an inexperienced Commander-in-Chief, irrespective of how hip he is, or how many magazine covers he has graced, will be able to address the most troubled economy and socio-political conflicts in our lifetime, if not in our nation's history.

Contrary to the wishes of so many otherwise-intelligent people, this is not an issue of optimism. ("Oh Dan! Stop being so pessimistic! You're just bitter because...whatever.") I'm not bitter (I did not vote for the other guy either). I'm a patriot who is concerned and troubled about our collective inability to learn from history.

Also, and importantly, I am very, very hopeful that the next administration will be successful and prove my skepticism to be completely unfounded. A successful administration benefits us all. It's not personal -- again, it's pragmatic. But "hoping" for a successful administration should not lead to blind acceptance of that administration's policies. To fall back on that old IBM slogan: "THINK!"

This is beyond any pessimism. It is pragmatism. And pragmatism must be a part of your overall investment thesis if you wish to remain above the fray.

DO THE READING; DO THE WATCHING ... THEN DO THE WORK!

Do the work yourself! Do your own thinking; and then make a decision as to whether you believe the folks on TV and in print. Most are full of crap. Most are so enamored with themselves that they have completely lost objectivity -- and ironically, most viewers/readers are looking for them to provide that objectivity that they so clearly lack.

And as you hear various commentators talking about returning to the prosperity of the 90's, I'd urge you to consider three defining developments that trump any policies of the 90's that supposedly contributed to our prosperity:

1.Intel's (INTC Quote) Pentium Chip;
2.Microsoft (MSFT Quote) Windows; and
3.The Internet.

We have no such technological developments now. Battery-powered cars and solar panels aren't the panacea that most folks seek. Nor are new bridges and roads (unless you're a bridge or road builder).

Focus on making money off this impending fiasco ... but if you believe that it is going to hasten the economic recovery, then you are likely smoking something illegal and only occasionally used for medicinal purposes.

Is the market going to zero? No! Absolutely not. Perhaps we've even put in THE bottom. This year will be volatile, with ample opportunities to make plenty of money on the swings of the market. Be bullish on the despair-ridden pullbacks; Be skeptical on the enthusiasm-ridden ramps. As Buffett says: "Be greedy when others are fearful; be fearful when others are greedy." Again, do your own work...do your own critical thinking. And believe in yourself rather than buy into what others (including me) are saying!

Markets anticipate economic cycles. The economic cycle will expand and contract as it always does. Things will get better. But all this sleight-of-hand stuff will not hasten that recovery. It is tantamount to standing on the beach in the afternoon and waving your hands while chanting "Tide! Come to me." When the tide comes in, it's not your accomplishment. It's the work of the moon.

WHERE DO WE GO FROM HERE? (We avoid the Obvious Mistake)

Continue to separate the economic outlook from the market outlook. They are different. If you blend the two, you are destined for one of two fates: You could either be an analyst on Wall Street and lose other people's money, or you could lose a lot of your own money.

THE REAL SOLUTION THAT WILL NEVER HAPPEN

Let's cut to the chase in very simplistic and general terms. While this may offend those who either envy those who are rich--or those who are rich and feel guilty about it--the best economic stimulus results from allowing more rich people to keep their money...not on giving poor people a $500 check so they can put it toward a big screen TV.

When rich people have more money, they get even greedier and expand their businesses to make even more money. This creates the very jobs that most folks are so concerned about.

When poor people have more money, they spend it. They do not save it. And that is why they are poor. Period. This may sound harsh, but most truisms are harsh. They don't need free money. They need opportunities to make their own money. And rich people provide those opportunities. That is why they are rich.

We are enabling those who are doing the wrong thing, and we are penalizing those who have the most to contribute to the very things that the poor people need: JOBS!

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