Timing America's Comeback

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- You can't believe anything you hear in August anymore. Hedge funds are intent on manufacturing an August low through the manipulation of stock prices and the indirect manipulation of the media. Europe knows it, which is why they banned short selling for the remainder of the month. We know it, which is why we sold the portfolio to 80% cash at the beginning of the month.

As volatility increases in the modern age, so does the importance of managing the calendar. Hedge funds expose any weakness they can find and the low volume/vacation month of August has become a favorite. Anyone who thinks otherwise does so at their own peril.

In the most absurd development of the month, S&P President Deven Sharma announced that he is stepping down, only a few short weeks after his kamikaze mission to downgrade the credit rating of the United States of America.

The downgrade hasn't worked out very well for S&P or obviously for Sharma. His move to downgrade the United States of America below France, Canada, Germany, Norway, Sweden and Switzerland was borderline insane. It highlights an error in judgment that economists have been making since the study of macroeconomics became entirely focused on the small (GDP) and forgot about the big (total assets) back in the 1930's.

No attention is paid to the capital base, or balance sheet, that makes it possible to produce the goods and services measured as GDP. Any significant analysis of the United States of America that only focuses on spending or budget deficits, without accounting for the balance sheet, is certain to be misguided. How quickly could the United States of America get rid of its entire $14.6 trillion debt that everyone is so worried about? Let's take a look at a few of our assets:

1. With the explosion of wireless demand, the United States through the FCC is reportedly increasing the wireless spectrum by 300 MHz in the next five years and 500 MHz in the next 10 years. The value of the 300MHz is reportedly $120 billion . With demand expected to increase by 35x over the next 10 years it is feasible to assume the U.S. wireless spectrum alone could surpass a $1 trillion valuation.

2. The Mineral Management Services estimates that the U.S. Atlantic shelf holds 7.2 billion barrels of oil and 27.5 trillion cubic feet of gas. Of the 6 trillion barrels of oil stored in shale in Utah, Wyoming and Colorado, 1.6 trillion barrels reside in recoverable deposits greater than the minimum threshold of 15 gallons per ton. Oil priced at $80 a barrel and natural gas priced at $4 per cubic foot puts total U.S. oil and gas holding in the $100's of trillions range. The MMS estimates that there are currently 85.9 billion barrels of oil and 419.9 trillion cubit feet of natural gas that are technically recoverable from all federal offshore areas.

3. Peter Orszag, director of Office of Management and Budget, estimated in 2010 that the Federal government owns 14,000 buildings that are categorized as excess and another 55,000 buildings that were under or not utilized. Camp Pendleton in Southern California is 125,000 acres of beachfront property, valued in excess of $50 billion. Eglin Air Force Base in Florida is more than 400,000 acres with 30 miles of prime beach frontage. It is estimated that the Federal Government owns 42% of all United States land.

These real estate holdings are so expansive that it is near impossible to apply a value. Needless to say, the value of U.S. owned land extends into the $100's of trillions. The National Parks System manages about 83 million acres. Yellowstone has 2.2 million acres of land valued at more than $4 billion. What about the value of U.S. embassies abroad? What billionaire wouldn't want to own the U.S. embassy compound in London? You get the point. How much would the privatization of Washington DC yield?

4. Apple is projected to have $150 billion in cash by 2013. President Obama announced that U.S. corporations have $2 trillion sitting on their balance sheets . The monetary indicator, M2, which is mostly cash, checking accounts, savings deposits and retail money market funds has soared up 24.2%, or $500 billion, in June and July as European capital makes its way to the safe haven of the United States. Total M2 is $9.3 trillion. The United States is awash with liquidity everywhere you look.

5. The United States owns the world's largest gold reserve as Fort Knox is believed to contain 8,965 tons which is presently valued near $500 billion.

6. During FY2010 the Federal Government collected $2.16 trillion in tax revenue.

7. 2010 U.S. GDP was $14.52 trillion.

8. The Federal Reserve monetary base is $2.6 trillion.

The next time you hear a media whore like Dick Bove or Jon Huntsman declare that the United States of America is bankrupt, I suggest you take a step back and consider the source. The gospel of fear is being preached from east to west in this country and yet the actual fundamentals are largely ignored. Don't get me wrong, I'm a huge proponent of getting our fiscal house in order, I'm against excessive government spending and I think a free market is the only market...I'm as Reagan Republican as you can get which means I also believe in the gospel of optimism.

I'm sick and tired of hearing lesser countries like China criticize the United States and I'm especially sick and tired of watching our own opportunistic politicians damage the credibility of the U.S. economy because of their small-minded perceptions of what the United States really is.

We are freedom fighters. We take care of our sick, our poor, and our elderly in a manner that is well within our means. We lead the globe in innovation. Do we have problems? Of course we do. But should those problems command 99.9% of our attention? Heaven forbid.

A breakdown of the majority of our $14.6 trillion in debt reveals that we owe ourselves $5.7 billion (social programs), we owe foreign investors $4.4 trillion and we owe business investors $1.2 trillion. In the grand scheme of things, that size of debt is inconsequential. We could balance our budget within 24 hours if we wanted to, but we don't want to. Our debt is completely elective.

Total assets of the United States are conservatively valued anywhere from $300 trillion to $600 trillion. The United States is worth more today than at any time in its past. Those assets have appreciated at a much greater rate than our debt.

Yale's Robert Schiller adds additional light on the subject: "The fundamental problem that much of the world faces today is that investors are overreacting to debt-to-GDP ratios, fearful of some magic threshold, and demanding fiscal austerity programs too soon. The lesson is simple. We should worry less about debt ratios and thresholds and more about our inability to see these indicators for the artificial, and often irrelevant, constructs that they are."

As hedge funds financially exploit each and every perceived crisis, somehow the United States always seems to bounce back. The recovery off the August 2011 lows will be no different. As long as government debt remains the bearish variable of choice, we will be forced to deal with volatile swings, but don't discount the ability of the market to rally in a major way as soon as political short-term policy is changed to appease short-sighted investors.

The foundation of America is strong. We have 91% employment and it looks like we could pick up a few more percentage points with Obama's plan that will be announced after Labor Day. When was the last time you heard anyone refer to our employment situation as 91% employed? Is the glass half full or half empty?

Contrary to popular opinion, I still believe that we are in the midst of the greatest technological revolution in the history of mankind and once this market heals itself from the contagious spread of fear, the next cycle of the bull market should surpass the artificial run of the dot-com bubble. We're not as far away from that kind of generational rally as you might think.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.

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