The primary reason for this blog is to present my clients, potential clients and others with a sample of the main concerns, issues & opportunities confronted by money managers. The articles & writings are intended to represent various views and perspectives on financial markets. At times I will agree with these views and opinions, other times I won’t.
A secondary reason for this blog is to create a historical record. A record of opinions—mine and others—that is permanent and that can be referenced at any time through the archived pages on this site.
Yesterday, I linked to an article titled, The Next President is Lucky. In it, the author argues that whoever were to win the election on Tuesday would be presiding over a growing economy over the next four years and look like a genius. I completely agree with the spirit of this opinion (some of the specifics, not so much). In fact, I’d argue that because Obama won the election, the biggest losers in this election will ultimately be those who favor supply-side economics. In my view it has less to do with a deficiency in this economic theory (versus the more liberal Keynesian economic philosophy) and more to do with the greater power of the economic and business cycle.
In a typical recession, economies usually exhibit healthy & vibrant recoveries within 12 months. However, in credit-infused recessions like the one we just experienced, recovery times can take up to 10 years. Given that our recession started in 2007, the second half of the Obama presidency will take it close to the 10 year mark.
There are certainly major headwinds. We need to begin to pay down the debt, World War III must be avoided, Europe cannot fall into the abyss and China must not turn out to be a Madoff-like house of cards. Unlike the consensus, I’m confident in positive developments with these obstacles over the next few years.
I think that some consensus will eventually be built on how to pay down the debt. It’ll be ugly, but it’ll happen.
Readers of mine know my thoughts on Europe—it’s a mess but at each crisis over the next few years the leaders will resort to money printing initiatives that will stave off Armageddon for the time being (eventually, the union will implode, but I think were a long way off from that). I wouldn’t hold any direct exposure to European equities for now, but our domestic economy can grow if European headline risk is removed.
A large and involved war is certainly a concern, but with our economic malaise, it’s less so. And China…well that’s anyone’s guess but it’s at least relatively less of a worry than the other issues.
Yes, in my view, the economy will continue to bumble along for the next 12-18 months. Slowly recovering out of this huge ditch that we’ve dug. And so long as we bumble along, confidence will eventually return. It always does no matter who’s at the political helm.
Mark this one for the records, but I do agree that Obama will be considered a genius by the end of his four year term—whether he deserves the moniker or not.