Sushi Money

I took a week off to catch up on, and reflect on, a few things.  Those of us who didn’t vote for President-elect Obama may be feeling a little out of touch these days.  Generally I look at life in a hopeful and constructive manner, living each day in a positive manner. Most of us do, and I don’t think that’s going to change in the months and years ahead.

But I think there are different considerations now, especially if you don’t agree with certain actions or the economic philosophy of our political leadership.  If we’re not careful we may find ourselves caught up in a negative cycle of news and frustration.  Whatever direction the nation takes politically however, I have to believe that the leadership, by and large, has the best interests of the American people at heart.   And even if I don’t want to pay attention, we must stay involved and aware of the changes that will take place ’cause it’s going to affect us most in our wallets. 

The stock market has been wavering dramatically in recent weeks, even ringing up the worst post-election loss in history.  Say what you will, a lot of folks are realigning their portfolios based on perceived (and real) threats of increased taxation at both the personal and the corporate levels.  We have even seen that based on fears of an Obama administration, firearm and ammunition sales have skyrocketed as never before in history.  And why not?  President-elect Obama may not “take our guns away,” but the Democrats in Congress can certainly make it difficult, and very expensive, to purchase ammunition. 

So will potential tax hikes and increases to capital gains and income taxes affect the stock market?  Absolutely.  But hopefully not right away.  Yet the real significance for tax policy at the individual level is the affect it has over the long term on wealth creation and investment. It may not affect the average investor now, or in two years.  But over a working lifetime it’s a huge impact. If there’s one thing President-elect Obama can do to strengthen the nation economically, and the investment climate, it would be to not raise taxes on anyone, anywhere.  Heck, we’re still facing too many uphill financial challenges, so I’m sure the Democrats are smart enough to wait for a while.  Well, I’m not sure but I sure hope so.   

“Speaking in terms of individual taxpayers’ bills, that’s good news for high-income earners. “I don’t think there are going to be any tax increases in the next year or so,” said Len Berman, director of the Tax Policy Center.” 

But you watch- the Democrats and Obama will “cut taxes” in a few months and shout from the rooftops that they’re giving Americans a tax cut for the middle class.  It will be there somehow, even if most of us don’t get it or notice it.  Yet Alan Reynolds from the CATO institute thinks taxpayers have short memories. 

“Armed with that lucrative blank slate as the looming new baseline, a Democratic president and Congress could magnanimously agree to preserve only the fiscally wasteful “feel good” aspects of the original Bush bill–the hugely expensive 10% tax rate and child credit, for example–while letting more than just the top two tax rates go back up, and lifting the estate tax rate, too. All in the name of fiscal responsibility, of course.”

“Higher tax rates always fail to raise the revenue their proponents are counting on. When that happens, we know where Democrats will look to raise more. And that is to reach even deeper into the pockets of any remaining profitable businesses or (even rarer) successful investors.”

“For those looking beyond one year, the biggest risk to both individual and corporate taxpayers is not that the new president will make good on his promises to raise a few tax rates and close a few loopholes. The biggest risk is that he will make good on his grander promises to enact all those tax-based entitlement programs disguised as “tax credits.”

“If millions more voters become accustomed to paying nothing for government (not even for their own Social Security benefits), and instead to receiving a bundle of Treasury checks, it will become almost as difficult for any future president to end those programs as it will be for taxpayers to pay for them.”

And how are we going to pay for those programs over time?!  There’s only one way… those who add spending programs must get the money from somewhere.  That somewhere is the U.S. taxpayer.

Certainly those of us in the middle class may see a tax cut over the next couple of years, at least if you don’t earn too much, or have too many investments, or even entreprenurial thoughts…  Maybe a larger child tax or other credit. But Obama has stated he wants to see an increase of tax on income and dividends from investments.  I’ve read some as high as 40% tax on dividends and income!  Can you imagine?  How will that help folks save and invest for retirement?  Not something we’ll see over the short term, but that’s a “heck of a dinger” for retirees down the road.

“Still, tax hikes are coming – eventually. Obama’s plan is to allow the Bush tax cuts to expire for high-income earners in 2010, but make those cuts permanent for taxpayers in the lower tax brackets. That means the top income tax rate will likely rise to 39.6% by 2011.”

“According to Deloitte’s analysis, a married couple with two children under 17, household income of $1 million ($500,000 of it from capital gains or dividends) could see their tax bill rise by $34,900. “That’s a real increase,” Stretch said, with that couple’s effective tax rate rising to about 28% from about 24% now. “It’s higher than the Bush years but where it was in the Clinton years.”

“Eventually, higher-income taxpayers “will definitely be paying higher taxes,” Baker said. “I can’t imagine [Obama] turning back on that.”

“Obama has also said he’ll increase the capital gains tax rate for higher earners to 20% from the current 15%, though many agree that won’t happen soon. “If he decided to raise capital gains tax rates right now, the financial markets would probably go crazy,” Berman said.

But not raising taxes is not very likely in the years ahead.  Even the Terminator in California is proposing huge tax increases (and spending cuts) because they have to.  Realistically, we’re going to face some large spending cuts and tax increases as well.   Within the next year, President Obama and the Democrats may simply say, “We’ve tried to get by without tax hikes, but we really need to raise them now…”    How will that affect older investors and retirees?  Maybe not much at first, and we could even see some quick action in key areas:

“One tax perk related to the financial crisis is expected soon for retirees: Some form of help to avoid required minimum distributions from their individual retirement accounts. “We think there will be a very serious effort to put some provisions in [a new stimulus bill] to take care of the RMDs,” said Clint Stretch, managing principal of tax policy for Deloitte. “People are very sympathetic to the plight of retirees who are forced to take money out at the depths of the market.”

“Another tax change expected in 2009: The estate tax. Under current law the estate tax completely disappears in 2010, so look for Congress to act in 2009. Lawmakers may opt for a quick solution — a one-year patch that holds this year’s exemption amount and tax rate in place – or they may put in place a permanent estate tax law. Obama’s proposal: A permanent estate tax rate of 45% and a $3.5 million exemption.”

Remember President Bush’s efforts to remove the estate tax altogether?  Forget about it- that’s history.  Kind of a shame in my view, not that I have any reason to benefit from it!  But at least we’ll keep a lot of financial planners, estate tax lawyers and CPA’s in business for years to come.  Somehow I think the tax code is going to become a lot more complicated rather than less complicated over time.  And overall I’m not excited about the direction of economic or tax policy.

Call me crazy, but I can’t help but think that the Democrats economic and taxation policies will provide long term disincentives for entreprenurialism, investment and market gains over time.

Let’s hope the focus of our new political leadership is first and foremost on the economy.  What I’ve read lately however does not inspire confidence.   Giving U.S. dollars to international agencies for “family planning” (i.e. abortions),  giving civil criminal trials to foreign terrorists on U.S. soil, jeopardizing national security through drastically cutting defense spending and procurement… we may see a laundry list of policies and executive orders that a lot of folks were unprepared for. 

Overall, I don’t know how an Obama Administration will affect the average guy on the street, or in the market, but I’m willing to give it the benefit of the doubt for now.  Historically the market has done very well under Democratic administrations, and maybe it will again.  The nation, and the economy, will eventually gain traction and once again the business cycle will return to a more profitable footing, with job gains instead of losses.  Unfortunately that may take a while, and the taxation picture for the years ahead looks pretty bumpy. 

My next goal?  Try to figure out an ideal portfolio and investment strategy that minimizes taxes while protecting (and growing) long term wealth.

It’s an amazing day as President-elect Obama sweeps to victory, winning both the largest and the key states in the nation.  The electoral vote signaled a huge margin even as the nation still faces the red-blue popular split that divides much of America.   Yet winning the Presidency is an historic moment filled with change and promise as never before.  His victory speech was positive, hopeful and strong.

“I just received a very gracious call from Senator McCain. He fought long and hard in this campaign, and he™s fought even longer and harder for the country he loves. He has endured sacrifices for America that most of us cannot begin to imagine, and we are better off for the service rendered by this brave and selfless leader. I congratulate him and Governor Palin for all they have achieved, and I look forward to working with them to renew this nation™s promise in the months ahead.”

President-elect Obama framed his victory describing his vision for the future in bright, hopeful words.

“What began twenty-one months ago in the depths of winter must not end on this autumn night. This victory alone is not the change we seek “ it is only the chance for us to make that change. And that cannot happen if we go back to the way things were. It cannot happen without you.”

“So let us summon a new spirit of patriotism; of service and responsibility where each of us resolves to pitch in and work harder and look after not only ourselves, but each other. Let us remember that if this financial crisis taught us anything, it™s that we cannot have a thriving Wall Street while Main Street suffers “ in this country, we rise or fall as one nation; as one people.”

We don’t know where the nation is headed, but for many voters, change is the key, and the new President has called for a great new direction.

“…This is our chance to answer that call. This is our moment. This is our time “ to put our people back to work and open doors of opportunity for our kids; to restore prosperity and promote the cause of peace; to reclaim the American Dream and reaffirm that fundamental truth “ that out of many, we are one; that while we breathe, we hope, and where we are met with cynicism, and doubt, and those who tell us that we can™t, we will respond with that timeless creed that sums up the spirit of a people:”

“Yes We Can. Thank you, God bless you, and may God Bless the United States of America.”

There is much to be proud of in America. Not only the wonder and strength of our democracy and the free electoral process, but for the hopes and dreams of so many, for so long. Regardless of our disagreements, we must continue trying to work together for a better future. Congratulations President-elect Obama!

In these last days before the election I find myself amazed at the emotions and tactics of the political candidates and their followers, on both sides of the aisle and at both the national and local level.  This surely is one of the most fascinating, if not important elections we have faced in decades. Today I’m stepping out of the financial discussion to share a few thoughts on the election.  This may frustrate or disappoint some of you, and it may please others.  Whether you agree or disagree, that’s fine.  I respect your views and the choice that’s right for you.  I’ll even try to put up a guest post with opposing views if someone sends it in.  But for today, here’s mine:

Who am I voting for?  McCain.  Why?  Primarily because I believe he has a better vision for the future of the nation, as well as a philosophy that strengthens rather than weakens the foundations of society over time. 

I’m voting for McCain not only in terms of my views on national security or economics, but more importantly in considering the basic elements of what one believes about freedom and democracy.   At the heart of these beliefs, for me, is an understanding that the individual in society is the strength of that same society. Whatever we do to help grow, foster, improve and assist that individual in realizing their potential and expanding their ability to contribute to society is essential both for them and the nation as a whole.  

One of the growing socio-economic buzzwords is the term human capital.  Human capital refers basically to the inherent skills and knowledge that an individual may possess in order to contribute to society and produce economic value both personally and for that society.   One of the hallmarks of America has been to establish a foundation of freedom that allows this tremendous drive by individuals to grow and succeed, personally and professionally, and to seek ”…life, liberty and the pursuit of happiness.”    I prefer to think of it the same way as Benjamin Franklin:

“All the constitution guarantees is the pursuit of happiness. You have to catch up with it by yourself.”              

The expansion of human capital through the economic fabric of our free American democracy has arguably fostered the greatest revolution of invention and creative genius in history.  Yet it isn’t perfect.  What society is?  Even with the current economic challenges we face, the grand experiment of American democracy has been an incredible success story that continues to foster industrial, technological and environmental change throughout the world.  More importantly it places people first, acknowledging both the value of human rights and the value of human life.  Something that far too often is forgotten about most of the world in which we live.

We owe that strength and genius not to the nation of America itself, but rather to its people.  And the only way we are going to continue fostering the strength of the American nation over time is to continue empowering people as individuals, and not as recipients of government programs and largesse that increasingly demands adherence and holds their future hostage. 

I read a message on one of the news sites today that was interesting.  I think it’s a creative story and not a real event, but it makes an interesting point:

“Today on my way to lunch I passed a homeless guy with a sign that read “Vote Obama, I need the money.” I laughed. Once in the restaurant my server had on a “Obama 08″ tie, again I laughed as he had given away his political preference- just imagine the coincidence. When the bill came I decided not to tip the server and explained to him that I was exploring the Obama redistribution of wealth concept. He stood there in disbelief while I told him that I was going to redistribute his tip to someone who I deemed more in need–the homeless guy outside….”

Maybe the waiter would actually smile, and say “Good idea!” if this were to happen.  Probably not however, because few of us like having our money taken from us and being told we must give it to others.  Choosing to do so is one thing.  Not having that choice is another.

I believe Obama’s vision of change and “economic justice” to be lacking in understanding for the basics of freedom and democracy, and that it devalues rather than empowers the individual in society over time.

And quite frankly I would rather politicians work to legislate for structural  economic foundations, with evolving regulatory approaches, that support free enterprise rather than redirecting the hard work and success of some to those that may do little to earn it.  I believe the dreams, creative vision and efforts of hard-working Americans actually lift up the nation over time, and that if we make taxes too burdensome, and focus on re-distributing the products of their success to those who do not earn it can only serve to undermine the fabric of the nation.

I do believe we must give and share with those who may not ever be able to achieve or survive on their own, or without help in so many areas.  But giving of your own volition is one thing.  Having your money taken and being told that you must do so is another.  Rather than government deciding who are the deserving among society to receive the wealth of others, we must foster a nation that lifts up the poorest and those who are struggling. 

We can teach, train, volunteer, and give of ourselves in so many ways, and government can help establish programs and structures to facilitate those goals.  But economic justice is far more than being “neighborly” by taxing the rich, and handing out money to the poor.  It’s a balance to be sure, but Obama’s views- and those of Pelosi, Reid, Frank, Dodd, etc., are balanced much too far to the left.

Essentially I think America needs McCain more right now than we need Obama. 

Yet from the polls, media blitz and just about every other indicator, it looks like Obama has some incredible force that may sweep him into the Presidency this election.  If so then perhaps I’m voting with the minority.  Maybe the nation needs a pyschological shift of energy or some zen-like aura of charismatic change that Obama seems to bring for so many people.   But I just don’t see it.  I would rather focus on McCain’s experience and practical approach to moving the nation forward, rather than some lofty, unscripted vision of change. 

In the car this morning I actually heard two religious hymns being sung with Obama’s name in them, holding him up even as “holy.”  I have to admit that was a little shocking to me, and I’m not even an ardent religious observer.  I have to wonder if in times of national challenge or crisis that people might be flocking to someone new, someone they want to believe in and that can “save” America?  Have many of our fellow Americans replaced their religious views with a secular perspective that is looking somewhere for hope, and are they now looking toward Obama to provide that level of dramatic change?  Maybe so.  Whoever wins the Presidency, I do think the country will be fine.  But it’s going to be a very interesting ride depending upon the direction we take.

Spent a great weekend mostly outdoors enjoying some beautiful Autumn weather.  Don’t you just love this time of year?  The leaves are changing colors, the air is crisp and cool, and it gives us a chance to catch up on things we’ve put off for too long. It’s also just plain fun to explore the countryside and get out a little more, especially with lower gas prices! We even marched in a parade this weekend, listening to the sounds of a high school band.  For all the challenges the nation faces, it’s great to see people involved in the community and enjoying the timeless traditions each year.

Gas prices in our area have fallen drastically in recent weeks.  You can sense relief at the pump when filling up.  It’s all part of the great unwinding of leverage.  The more we read about the financial mess it appears that hedge funds and other large insitutions have caused much of the drop in share prices through liquidation of investments in order to raise cash.   Some people believe this unwinding will continue with more downward pressure on stocks.  Others believe we’re close to a bottom, and even Warren Buffet is pitching to buy stocks right now.

As for oil prices, we don’t see those “experts” talking about $200 or $300 oil anymore. In fact, many people believe oil could fall below $60 a barrel for some time, and OPEC is scrambling to put production cuts to shore up prices.  

“OPEC, supplier of about 40 percent of the world’s oil, may pare output by 1 to 2 million barrels a day in stages to stabilize prices, said Chakib Khelil, the group’s president. Deutsche Bank AG lowered its 2009 crude oil price estimate by 35 percent to $60 a barrel, citing the possibility of a “major world recession.”  

Maybe they’ll succeed for a time, but how anyone can say that consumer demand was the primary reason for the runup of oil prices is beyond me.  Yes, there is huge demand for oil- too much demand as the U.S. is dependent on foreign oil and prices rose sharply. But that is only because supply was so restricted, and speculation by investors also impacted demand.  Speculation has played an enormous role in our oil markets in recent years and now we’re seeing prices stabilize with the unwinding of leverage and credit crisis impacts. 

But guess what?  Lower oil prices may not last beyond a few months or a year or two because the world’s appetite for oil continues to increase and we’re still not producing enough here in the U.S.

There is real demand for oil globally, and there are only so many places we can get our oil from. So yes, the price we pay for oil will be driven by the demand and the supply of oil we can produce or import over time.  Investors will also return to the oil markets and at some point we’ll see prices rise again.  Let’s hope that between increased production in the U.S. and reduced demand through higher mileage and alternative vehicles, that prices won’t rise quite as high as they did this year.

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In other news I will say that I was bothered that Barack Obama raised over $150 million dollars during the month of September alone.  That’s more than George Bush and John Kerry raised combined during the 2004 election!   Why does that bother me?  Mostly because he’s taking money from private sources, instead of public funding like John McCain.

With public funding, we know where it comes from, who gives it, and there are detailed records and accountability.  Senator Obama had earlier pledged to stick to public funding, but later changed his mind and broke that promise, taking millions from private sources instead.  Where is that money coming from?  Who are the people and institutions that are “buying their way” into the campaign coffers of one of our Presidential candidates?  

I’m no expert but I thought that campaign finance reform was supposed to reduce that type of thing?  In any event, Senator McCain is not lacking for funding either, although he’s behind Obama.  McCain received a big chunk of matching dollars to help finance his campaign:

“Helping Sen. McCain keep up was the one-time, $84.1 million in taxpayer matching money he received in September. Sen. Obama won’t get such a one-time payment because he opted out of public financing after first suggesting he would participate, a decision that has cost him some political points.”

“Public financing gives candidates taxpayer money for their campaigns, but it also requires them to hew to spending limits and essentially stop fund raising for themselves during the general election. The parties can continue raising money for the candidates; however, much of their spending must be conducted independent of the presidential campaigns. By opting out of public financing, Sen. Obama is free to spend as much as he can raise.”

“McCain spokesman Tucker Bounds said the campaign can overcome the fund-raising mismatch. “We are going to be competitive because, despite Barack Obama’s best efforts, this is an election not an auction,” he said.”

“The Obama campaign has also fielded criticism from Republicans for what they say is a lack of donor transparency. Federal rules don’t require disclosure of donors giving less than $200. Small donors account for about half of Sen. Obama’s 3.1 million contributors.”

I will say that I’m tired of being bombarded with tv advertisements for the candidates. We don’t watch much tv, but do have it on in the evenings.  The “I’m so-and-so, and I approve this message” line is getting really annoying.  I find myself hitting the mute button, regardless of which candidate’s advertisements are playing.

I do have a preference for one candidate over the other at this point, but I would rather not make this a politically focused discussion.  I will say that I think the nation is so much greater than any one candidate, President or their administration.  If I have any concerns, it is more about a possible Liberal Supermajority taking over the nation’s highest offices as President and in Congress.  I don’t think either party should have a lock on both Congress and the Presidency.  That gives the politicians nearly free reign to pass whatever legislation they think is okay. 

Yet regardless of who is elected this year, I think we’ll be fine.  Both Senator McCain and Senator Obama should be able to gather effective representation within their party to lead the country through the recovery over the next four years.  It may be a little more painful in some areas such as taxation or spending cuts, but we’ll get through it.  I think the nation’s political focus also goes in cycles.  It may be time for more change than many of us are prepared for!  But in another four years we can revisit the process once again.  Have a good week.

So who’s going to be better for the country next year? How will Republicans or Democrats affect the economy or your portfolio? Asking those questions is a little like opening pandora’s box, but I can’t go into that voting booth without really looking at the candidates. Yet when it comes right down to it there’s a likeability factor that has to be there too. If I can’t identify with a candidate in some fashion, then it’s really hard to try and understand their views or beliefs on the issues.

Right now for example, a lot of folks have been swept away with the Obama movement. But are they really looking at the issues? Personally, I don’t think so. And neither does Matt Gonzales who writes The Obama Craze: Count Me Out. His expostion is one of the best examinations of Sen. Obama’s views and voting history that I’ve read to date. And I find myself appreciating his conclusions:

“Once I started looking at the votes Obama actually cast, I began to hear his rhetoric differently. The principal conclusion I draw about œchange and Barack Obama is that Obama needs to change his voting habits and stop pandering to win votes. If he does this he might someday make a decent candidate who could earn my support.
For now Obama has fallen into a dangerous pattern of capitulation that he cannot reconcile with his growing popularity as an agent of change. I remain impressed by the enthusiasm generated by Obama™s style and skill as an orator. But I remain more loyal to my values, and I™m glad to say that I want no part in the Obama craze sweeping our country.”

I just figured out today why he has shared those thoughts, considering Ralph Nader has asked Gonzales to be his running mate.  He sounds like a very principled individual however, and I appreciate his views.

Honestly, I do want to know what “change” means, not only for the economy but also personally. I want to understand how a potential candidate will affect my family’s future financial well-being over the next decade as much as the nation’s economic strength.   And admittedly I want to know how my portfolio could be affected by changes in tax law.

On the investment side, Mick Weinstein put together a brief summary of viewpoints on how investors might fare under the next White House leadership. Lots to consider but the comments were pretty interesting too. One reader named “Gianni” writes:

“I think Obama represents hope and change. Fidel Castro represented hope and change. He got the change part alright, but he ruined Cuba. President Jimmy Carter represented hope and change, and sure enough he changed a lot of things for the worse. The American economy was in the toilet while he was president and it took Reagan a few years to straighten things out. So hope and change sound good, but think carefully before you invest in hope and change. And consider the possibility that those big evil corporations are doing a fine job of providing us with our high standard of living…”

Think I prefer a more analytical approach to the issues, but I also agree that if the Democrats are elected we’ll probably see much higher taxes on both income and capital gains. Tax law just isn’t clear for 2009 and beyond. Will the next administration be investor friendly? Will individuals and families pay a lot more taxes? Of course any legislator thinking of raising taxes when the country is on the verge of a recession, inflationary pressures and housing bottoming out would be asking to be voted out of office.

Tax increases are on the horizon for a host of reasons including social security and medicare funding shortfalls as thousands of Boomers enter retirement for the next two decades. But if we think economic conditions are challenging right now, just wait until congress decides to raise individual and corporate taxes. It would be far better to do everything possible to make investing and growth favorable for business here in the U.S.A.

Whichever political party wins the election this year, they’ll also have an incredible opportunity and responsibility for affecting the nation’s economic future. All things being equal I favor a conservative approach to business and tax climate.

But change is certainly in the air. I’m just not sure what all that change means at this point.

We need an administration that constructively supports investment and growth over the long term. If the Democrats are elected, I only hope they think long and hard before saddling the nation with an enormous tax burden that will take years to overcome.

Whichever candidate takes the helm in 2009 will face an enormous balancing act. If they can succeed with a balanced, functional approach over the next few years, then that will be a real change. Who knows… we could even see the launch of a new bull market that will bring incredible opportunity for a decade or more.

Famed author Toni Morrison endorses Barack Obama in a letter to the Senator, citing “something not seen in other candiates.” She continues saying, “That something is a creative imagination which coupled with brilliance equals wisdom…”

“Wisdom is a gift; you can’t train for it, inherit it, learn it in a class, or earn it in the workplace ” that access can foster the acquisition of knowledge, but not wisdom.”

Did I understand that correctly? Wisdom is only a gift, and not something one can acquire through their lifetime? Only knowledge can be gained? If that is so, then I submit that most of the world’s human population is doomed to a life of knowledge without wisdom and its accompanying virtues.

Which of course I do not believe for a moment. Wisdom most certainly may be a gift to some, but it is also something borne of experience, learning, judgement and reflection. Of this I agree- Knowledge does not equal wisdom.

“Knowledge and wisdom, far from being one, Have oft-times no connection. Knowledge dwells In heads replete with thoughts of other men; Wisdom, in minds attentive to their own. Knowledge, a rude, unprofitable mass, The mere materials with which wisdom builds, Till smoothed, and squared, and fitted to its place, Does but encumber whom it seems to enrich. Knowledge is proud that he has learned so much; Wisdom is humble that he knows no more.” William Cowper, English Poet, 1731-1800.

I firmly believe knowledge, shaped and gained through experience may lead to wisdom. Hence wisdom is more than a gift to an individual. I think it is a gift obtainable by most, and recognized through the journey of life and time should one choose to abandon the limits of fear and ego, and to embrace humility while examining the limits of mere knowledge.

And wisdom, according to the Merriam-Webster dictionary, is defined in part as:

• 1 a: accumulated philosophic or scientific learning : knowledge b: ability to discern inner qualities and relationships : insight c: good sense : judgment d: generally accepted belief

• 2: a wise attitude, belief, or course of action

Perhaps I interpret too literally the prose of the author in speaking of wisdom as a gift. I would certainly not disparage Ms. Morrison’s letter to Senator Obama, or the wisdom with which he may be gifted. But I do believe that many, many others are equally gifted, and have the capacity to possess wisdom at some point. Someday, I hope that may include me… especially when it comes to financial matters.

So this is how it’s going to be… the markets start the year off with steep losses. Many analysts predict we’ll see a 10% correction (or more) before the market regroups, and we’re well on the way. Obviously a lot of factors influence the market action, and it’s not simply “jobs data” or the recession bogeyman. Even oil at $100 a barrel was a fluke by someone out to grab a piece of history. Of course we may see oil at $100 again, but its effect on the economy is not as large as some may think. It does however show how there’s a host of traders and specialists sitting on the edge of their seats waiting for news- mostly negative news. And you know what? It seems like Emerson’s quote: “Be careful what you set your heart upon, for you will surely have it.”

I’m not saying that a bunch of investment professionals really want the market to crash per se… but I think a whole bunch of folks wouldn’t mind a little clarity. If we’re going to have a recession… then let’s have it and be done with it. If the market’s going to correct, then let’s get going. And if the credit markets are all screwed up, then… well, uh… Oh. Maybe we just don’t know if all the bad news is out there, and that’s part of the problem. Once we identify problems, our nature is to fix them. So far there has been little progress in identifying and “fixing” anything regarding the credit and subprime mess. The market indeed hates uncertainty, so that’s the biggest issue even in the face of challenging real estate markets across the nation.

By the way, Briefing.com has written an excellent Market Outlook for 2008 with a clear-minded view of the issues the economy faces. It’s a cautious view overall, but I appreciate the pragmatic approach taken by Dick Green in weighing the challenges ahead.

My view is much the same- I think it just takes time. With time, we’re going to get tired of the negative news… it’s going to fade and change will happen. And a whole bunch of people and companies are going to look for ways to make more money than they’re making right now. Best of all, this is an election year! A few of the presidential hopefuls are going to make a real impact on the hearts and minds of Americans. And that’s not a bad thing… a little hope and idealism goes a long way. Huckabee and Obama? Sounds like a pretty good race to me.