6 – “I’m from the government and I am here to help!”
Those were Ronald Reagan’s nine most terrifying words. Not a new worry, but the biggest risk to the financial markets and economic recovery is politicians running even more amuck, especially with the hugely important election this year here and others around the globe. Before long, all of the talk will turn to the two presidential candidates, Barack Obama and likely Mitt Romney with their dizzying array of media blitzes with half truths and partial facts. Unfortunately, politics and the financial markets are forever linked. With the power to tax and spend, the government has the ability to restrict and stimulate.
The problem isn’t as much a lack of intelligence as it is the strange fog that clouds their judgment at crucial moments. No sooner does Congress get elected than they start campaigning for reelection and paying back their debts to special interest. The best solution would be to extend their terms to 8-10 years, but not allow anyone to run for reelection. That way, no one is worried about campaigning or beholden to lobbyists.
As sad as it is, the stock market typically performs best with gridlock in Washington. That comes in the form of a split Congress or the Executive Branch from party and Congress from the other. The most rewarding investment period of the modern investing era began when Newt Gingrich and the republicans won Congress in November 1994 and worked with Bill Clinton, not against for the next 6 years.
The President and Congress both moved toward the center, from the left and right respectively and the American people were the big winners! In 2012, it’s unlikely that either party’s leaders will have learned their lessons from ObamaCare, the debt ceiling debate or the Bush/Obama tax cut extensions. True bipartisanship is absolutely needed to get America going again.
