DEAD CAT BOUNCE?At some points for some of us "small investors" it just seems like a bad joke. A really bad joke. Save your money, but it in equities and bonds, the best place you're ever going to put your money. The American dream, work hard, buy a house, pay your bills, take care of your property. All seemed like it was working well for the middle class. Even those that chose to get overextended on credit cards had some modicum of control, pay it off with your home's equity.
We even began to buy into an ownership society, almost entertaining some craziness of letting social security go into the stock market. Wow, what a difference a year makes. I don't want to compare loss of home price, losses in retirement funds, losses in mutual fund or other brokerage accounts with someone in danger of losing their home or had lost their job or even worse is homeless, slapped in the face by a "changing economy." There are true victims here, a lot of us middle class folks will be working a few more years or cutting back a bit but for many they are truly be left behind.
It's hard to find out where the bottom is. Are we here? The wrangling of blame is insane, who caused this crisis? Big financial companies who created crazy, impenetrable instruments and derivatives? Folks who overspent and overcharged and overbought homes, assuming they would always keep going up, using their homes as ATM's to live Vanderbilt lifestyles on Lucy Ricardo incomes? An overspending, taxcutting government who gave itself little room to respond to a financial crisis during wartime and instead creating an even bigger deficit and debt when times were good? Was it Barney Frank (play your favorite right wing race card here) whose mean, bully government cruelly made banks make loans to people who couldn't afford them? Is it an economy that has become too focused on services and consumer spending and not industrial capacity? Don't know, maybe it's just Clinton's fault.
So what's the way back out? No economist knows for sure, my buddy clubba always said, "why do you invest in stocks, why not savings bonds." And to think I laughed at him. I'm not a rich man but with the money I lost, I could be driving a Range Rover.
THE STIMULUSThere's only one thing I know, my grandfather knew more than any of these economists. He saved his money, had a stack of savings bonds thicker than an unabridged dictionary on his desk, tons of liquidity. Once the bank said he missed a mortgage payment, he went down and paid the small mortgage off rather than deal with someone who would be so disorganized with his money. On his deathbed, he talked about my own interest rates with me, well that and about Pedro getting in a fight with the Yankees. He had what few of us have, control over his own financial life. Few of us do because the economy has become much more complicated. We're squeezed by debt, student loans, consumer debt, high mortgages. By energy bills, child care, elder care and then funding our own retirement.
So when the "perfect storm" of economic distress hit, a credit crunch, stock market crash, real estate crash and even more damaging unemployment very few of us feel safe. A local police chief got laid off. Who's ever heard of that? And so comes on the federal stimulus package. The public is scared and at the same time very angry. They see huge amounts of money going to TARP funding with the stories of huge, politically tone deaf executive bonuses being a part of it. They don't perceive any benefit, it is very vague if this money is trickling down to alleviate the credit crunch. So how does some nearly 800 BILLION dollars in spending affect the American economy.
800 Billion is an incredible amount of money. More than the entire defense budget. It's enough for a bunch of tax cuts to pay off people who do have jobs to feel like they "got their bailout," pay for food stamps and unemployment, some infrastructure and a some aid for states, etc. In some ways, there is something for everyone. Suddenly, some Republicans have found some fiscally conservative roots that they lost for the past eight years. Now I actually agree that the bill is making OMNIBUS really OMNIBUS and probably should be seven to eight different bills covering important physical and non-physical infrastructure but hey let's welcome back those fiscal conservatives from wandering the wilderness since Billy Clinton graced the South Lawn.
It's hard to tell if these Republicans are just being political, trying to reposition themselves as having an actual position or if there is general concern about this spending. Or maybe just being jackasses thinking that there is a good chance to say "I told you so" when the stimulus has little effect but a bandaid. Most of these conservatives come from states that are really hurting and ironically these states tend to be poorer and get more net dollars from government than they pay in.
I don't like the idea of having our grandchildren and children pay for our mistakes of today. I personally don't like tax cuts when you're running a huge deficit. I've never understood this Reaganomics construction. It's not like I like to pay taxes but people want services, they want good schools, they want a strong military, they want their roads plowed, they want an ambulance to pick them up when they have a heart attack, a cop to come when they feel threatened, all this stuff shockingly costs money, all these services happen 24 hours a day, 7 days a week. In these times, once you cut taxes, it's hard to have the political stones to raise them back again, so the debt grows and grows.
I'm a strong believer in infrastructure. It's what government is intended to provide. But in the same way it is difficult for my wife, myself, my siblings and their spouses and hell throw in all my buddies to build a bridge over a river, it is also difficult to provide other essential modern infrastructure such as health care or education. People tend to scream at "socialized medicine", some of those actually benefit from government provided healthcare. Very few poor people are against "socialized medicine". It's difficult to pay for an MRI with a chicken and some fresh milk as much as Ron Paul would like it so. If this is in fact, an infrastructure bill, I guess you could buy that these types of things are added in. In fact, the nation would have been better off with this as separate transportation bills, health care reform and education reform bills.
The key to the bill is confidence. Part of this confidence is that government is back for the people. Not invisible TARP funds, but money going into research and roads and buildings. Funding is there so mommy or daddy will be able to collect unemployment and not lose their homes or have to take that $8 an hour job and lose his healthcare at the same time. It's a quick fix, a bridge to something better. A shot of whiskey before the bar fight. It's certainly not going to get the job done, there is no magic Obama wand.
There are many steps after this. Regulation that works for everyone, business and the investor, a sense of transparency. Wealth will always be built on risk, but that risk should be known. Capitalism should serve democracy and not the other way around. There are some that will cry "socialism" and I imagine in just a few years, Wall St. will be screaming for the government to get off their back. There is great opportunity in crisis.
