2009

From an investment advisory letter: By Tom Dyson: “President-elect Obama makes his inaugural presidential speech on January 20. This speech is going to determine the direction of the stock market for the rest of 2009. Sentiment is the reason this speech is so important. Right now, America is feeling pessimistic. People are worried about their jobs, their houses, and their finances. No one is spending money. To get the financial system working, the government needs you to start shopping again and it needs you to start making risky investments again. In other words, the government needs America to start feeling optimistic again. The financial system we use today is a simple confidence scheme... a Ponzi scheme. To survive and grow, our system needs a constantly increasing river of capital. As long as more capital enters the system than leaves it, the system functions. As soon as new capital shrinks, the whole system breaks down. Debt is the reason. As long as we can find new capital to cover the interest on our existing debts, the system works. When capital dries up and we can't make our payments, the system crashes. This is what happened to Wall Street in October. On January 20, in his inaugural speech, Obama is going to announce a gargantuan government spending plan, probably around $750 billion in size. Obama's plan will make the problem worse. Every dollar the government spends must come from the revenues it receives from taxing Americans. Essentially, Obama will borrow money from the future and spend it today on investments the free market is unwilling to make. This wasted money will hurt our economy for years to come.” There are a few things here that make sense. However, I feel that if you get something for your money, the money is not wasted – no way. The country will get infrastructure, different types of economic engines, and improved efficiencies, out of its investment. If the private sector won’t do it, then a government subsidy is the only way. Or, maybe the country can save for the next twenty years until it can pay cash for everything? I’m no financial guru, but my guess is that that’s not going to happen. Sorry.