The Coast is Clear

With the US & Iraqi elections behind us and the most recent FED FOMC meeting over, the equity markets are back to the business of self promoting and rising on "nothingness". After a miserable January that was plagued with mediocre economic data and uncertainty regarding the aforementioned events, investors have seen fit to buy up the very stocks that just a few days ago were being sold down. Mutual fund flows are streaming in and equity managers are comfortable placing more chips on the table and hoping for the best. Economic data has continued to come in less than anticipated, yet our government officials and FED governors recite ever more optimistic slogans of prosperity and good times to come.

A recent comment from one of the FED Governors, a.k.a. financial bubble blowers, was the following...Fed's Gramlich: "Sees Upside, Downside Risks To Economy"...now boy isn't that helpful.

To try and put things in perspective seems futile, but I feel it is my civic and professional duty to remind people that all is not right in sin city. The US government is still running a record fiscal deficit. The US trade deficit with our very generous trading partners is huge and poses serious risks for the value of the US$ and interest rates. The War on Terror, taking place in Iraq, is costing $1billion per week and continues to result in death and casualties on a daily basis. The FED is raising rates at their prescribed "measured pace" which will undoubtedly slow some very important economic engines that have floated the US economy for the last 3 years, namely housing, refinancing, and auto sales. Unemployment rate aside, as that data point is a fraud perpetrated on the American public, good paying American jobs continue to be shipped over to India and China at a staggering pace as US businesses are forced to cut costs to stay competitive. Most, if not all, of the new hiring is at lower paying jobs at the lower end of the employment spectrum. Nothing to get excited about, especially since wage growth has been stagnant if not declining.

Now thats the reality. Bush Administration propaganda aside, 2005 will be a very difficult year for the economy and the political enviroment. The economic recovery has been floated by 0% interest rates and payback tax cuts for the rich and famous. Both of those life preservers are losing their air and will need to be replaced by "real" economic strength. The Dems are in no way ready to cave in to President Bush's so called "mandate" to lead the U.S. to wherever he and Carl Rove think it should go and that will set up a stagnated governing process. Iraq is sure to be a sore spot even after the widely renowned success of the election held under marshall law.

My sense is that most people are confused and weary from all thats has been going on. Might as well be involved/invested and hope for the best. If the President thinks private accounts are good for my Social Security money then I might as well have all my other savings there too. Scared to miss out on another banner year of equity market gains and if things go kaphlooie, at least I'll be in good company. Don't want to miss the train, and willing to be miserable if I am not the only one. I guess thats as good a strategy as any.