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Why the Stimulus Bill Won't Work... And Three
Strategies You Should Implement Right Now to Protect Your
Portfolio
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Published:
February 24, 2009
The Dow ended last week just a scant
165 points above what I believe is a
critical support level of 7,200.
The non-stimulus bill has passed and
the mortgage bail-out is underway.
That's close enough for government
work, which is my way of saying that
I just don't think these money
give-away strategies will work soon
enough to matter.
It is time to get more Bearish.
Our government had the opportunity
to make a real difference with a
real stimulus bill... one that would
actually stimulate the economy...
such as a two-year federal tax
holiday. But, our now
one-party system of representative
government has decided that it is
more interested in political
preservation than economic
preservation. Here's some of
my thinking on the subject... you
decide...
Virtually nothing in the $800
billion so-called stimulus bill is
actually stimulative to the economy.
My interpretation? The
recession will be deeper and last
far longer than it should.
This is the same mistake made by
Roosevelt where he exacerbated the
Great Depression by not actually
stimulating the economy.
Virtually all of one party voted
for the bill and virtually none of
the other party voted for the bill.
If it was truly a bill designed to
"save our economy," why such a
party-line split? My
interpretation? We now have a
rubber-stamp congress that is now
representing its party rather than
representing the people. This
is very bad for our country and our
economy.
No one in congress read the faux
stimulus bill. According to
their own accounts, not one senator
or one representative read the
entire bill. It is more than
scary that so much money is taken
from our future to pay for things
that may well not be beneficial to
our economic recovery, without
anyone actually reading and debating
the details of the bill. My
interpretation? Pork, pork,
pork. Not stimulus, stimulus,
stimulus.
The President's $275 billion
housing bailout plan is deigned to
reward people who made bad decisions
on buying a house and punish the
rest of us. Where is the
punishment? Well... in
addition to massively growing
government deficit spending (which
we taxpayers must repay at some
point), all of our homes have lost a
lot of value in recent years.
All of us are suffering in this
recession. Why aren't the 92%
of homeowners with mortgages that
are being paid on time, just as
deserving of tax dollars as those
who refuse or can't make their
mortgage payments? That would
be real stimulus. Why does it
make sense to keep people in homes
that they cannot afford? One
reason why people live in apartments
is because they either don't want to
own a home or cannot afford to.
What's wrong with that system?
Home ownership is NOT a
constitutional right. My
interpretation? This is
another 3rd of a trillion dollars
being spent that is NOT stimulative
to the economy. The net effect
is negative on the economy... not
positive.
And, to top things off... President
Obama is now reporting that he
intends to raise taxes to pay for
the deficit. Has no one in
Washington ever conceived of the
idea of cutting spending and
reducing taxes, to spur economic
growth and generate more real tax
dollars? Why is the solution
always to raise taxes? Since
we are approaching a time when most
people in the U.S. won't pay taxes,
I am sure this idea of taxing the
rich (again) will get rave reviews
in the focus groups.
And... Not only are we getting to
the point that we can't trust our
government to do the right thing...
we have to rely on extremely biased
propaganda machines, also known as
the mainstream press, to get our
news. The so-called free press
is supposed to give us the facts
from which we can draw conclusions
and make our own opinions.
But, much of the 'news' is nothing
more than thinly veiled editorial
commentary that is almost always
biased toward one agenda or another.
For decades, we have been
recipients of a growing volume of
propaganda being thrown at us under
the guise of news; sort of like
washtubs of lies containing thimbles
of truth. We have to sift
through the propaganda to find the
truth and it is often impossible to
find. We have to draw,
hopefully intelligent, conclusions
from data that is tainted, biased
and/or completely contrived.
This is not easy. This
propaganda machine is also how so
many bad politicians continue to get
voted into office. There is a
saying that you never know who is
swimming naked until the tide goes
out. Well, the tide is going
out and there are a lot of naked
politicians and greed-driven
big-business moguls out there.
I just hope enough people see them
for what they are.
What has this got to do with
investing in the stock market?
Everything...
It now appears that the eastern
European financial system is
collapsing and some say the 50-to-1
leveraged banks of Western Europe
are teetering on bankruptcy.
Chris Dodd is telling us that the
President wants to nationalize the
big U.S. banks (later somewhat
retracted from the White House).
Most of the money in the so-called
stimulus bill is designed for
anything but stimulus and much of
what is stimulus won't come in to
play until a year or more from now.
No one in the U.S. government is
exhibiting much in the way of true
leadership. The great American
dream of accomplishing anything if
you work hard, are creative, honest
and smart, is crumbling while our
government continues to reward
stupidity and avarice while building
up a voter base.
This week I was talking with one of
my clients. He is considering
the merits of opening another
location for his successful small
business. It would mean he
would have to invest a sizable
amount of money and take on
additional risk, but he has the
resources and the business risk is
acceptable. However, he is not
going to move ahead with his
expansion because he is afraid that
the additional income from the new
location will push the income he has
now into a higher tax bracket and he
believes that his existing taxes are
going to be increased by the current
administration. So... he has
decided to wait.
This is what is likely happening
all across our nation as we move
dangerously close to a socialized
state that punishes those who pull
the wagon and rewards those that
ride in the wagon while encouraging
even more to ride. This is a
wholesale sellout of individual
initiative and capitalism to
socialism or worse. Want some
more? Check out this
spontaneous commentary from
Rick Santelli of CNBC.
Rick wants to start a Tea Party in
Chicago... I'm ready, Rick... give
the word.
So, what's my investment plan?
I am shifting to cash and more
Inverse ETFs. Here is my
strategy:
First of all, I am not making a lot
of changes immediately. I am
still very hopeful that the worst is
behind us, but I can no long ignore
the possibility that it is not.
So, I am moving slowly back to cash.
I am raising stops and selling off
equities to move to 60% cash.
I cannot take the chance that the
various closed-end funds that I hold
will not be impacted negatively.
I was hopeful that we could ride
this out in some stable closed-end
funds, but even that is turning out
to not be a completely safe haven.
Next, I will be buying more Inverse
ETFs and precious metals.
For 40% of the investable dollars, I
will continue to keep globally
invested, but will have a Bear bias
for Europe, the U.S. and Emerging
Markets.
I regularly mention that I have a
"forever investment strategy based
on one-week-at-a-time." This
week, the market took on a decidedly
more Bearish stance at what I had
hoped was the bottom. The
market has now broken down below
that low and is giving every
indication that it could move much
lower. The seriously big
problem is that our government is
not doing anything to really help
stimulate the economy and the rest
of the world is sinking into a much
deeper recession. We have to
move to where cash is king and keep
our bias on Inverse ETFs.Good investing!
Mike Turner
Special Contributor
StreetAuthority.com
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