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July 04, 2008


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The inconvenient truth is that the US markets have been selling off due to the diminished prospects for growth in earnings, the tight credit market conditions making rasing the debt capital needed for expansion difficult, and the difficullty of getting M&A deals and buyouts financed by those same contracted credit markets. US competitiveness is further hurt by the fact that the price of oil has gone up more in the US than it has for Europe (currency effects) To coin a phrase, the US is a soft spot surrounded by many rocks, and there is no quick and easy way out. That said, the US is not currently in a recession regardless of the words to that effect from the overrated Sage of Omaha. Likewise, we are not in my opinion, likely to enter a recession for the forseeable future. GDP growth will slow and unemployment rise but that will be it.

All of this begs the question of how should one manage the personal portfolio. I really can't answer that because it depends so much on individual circumstances such as age, risk tolerance and a host of other factors. However, I believe the economic scenario that is likely to ensue after this November's election is one of brighter growth prospects, due in part to cyclical factors. The markets will also react positively no matter who is elected, if for no other reason than the uncertainty meter will have moved to a smaller reading. I believe in the short run, should Obama be elected, the market will have more upside than a McCain presidency--liberal euphoria and the exhuberance of youth will drive consumption. The expectation of dramatically higher government spending will also give the market an upward kick in the short run, before the reality of having to pay for that government spending sinks in. Taxes will be higher which in the very short run means more consumption which means greater growth in corporate earnings. Long term, the higher taxes will dampen enthusiasm of risk taking--read stock market, venture capital, and new business startups--those are very negative prospects but will not immediately be felt. So the First year of the Obama presidency might look reasonably rosey until it all begins to hit the fan. Then we'll see what happens. He could be a Carter-like one termer.

I agree with comment #1. Although he/she uses the term "pragmatist", I'd settle for politicians who looked at the big picture (rather than an unending trail of pork barrel projects) and just plain used some common sense. Unfortunately, I do not see either characteristic in EITHER party!

We here in the "fly over states" cannot believe that the two coasts, who claim to have the majority of intellectuals, have not figured out that the War on Terrorism has been won by the folks in the Middle East. The Middle East understands that they are not capable of winning militarily but they are definitely capable of winning economically. They are purchasing our property with money we give them for oil, they are crippling our economy with oil prices which drive up the cost of food, heating and gas for the average guy. The other result of the cost of oil is that we lose more jobs because industries have to cut back in order to survive. Our balance of trade is in the tank. Yet, the coastal intellectual folks, refuse to drill for our own oil. They refuse to use nuclear energy and talk about having alternative fuels in place in 30 years. The Arabs must be laughing all day long. In 30 years (or less) we will be owned by the Middle East...lock, stock, and barrel. It won't be enough to figure out how to invest during the "Obama years". Unless we get a pragmatist as President and throw out the liberals in Congress, we don't have a chance!

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