This column is written in the aftermath of President Barack Obama’s inauguration and inaugural speech. Like every peaceful transition of power in the nation’s two hundred thirty plus years’ history, it was a stunning and emotional event. It was made even more so by the fact that Pres. Obama is the first African American to hold the office of President of the United States.
This transition comes during a difficult time. We remain under attack by a loose alliance of Muslim fanatics who believe that the transition to heaven comes through the random murder of innocents and can only be heighten by the depravity of their methods of torture and murder. And we are suffering what will shortly be one of our longest recessions amid an era of distrust of our financial institutions and the government and managers who have steered us into this economic calamity.
In large part, it is these two forces that have led to the election of Pres. Obama. He capitalized on a desire for change and an abandonment of the people and policies that have brought the nation to where it stands today. (It should be noted that while we have changed the “head” of the nation, we have left the “body” (the Congress) unchanged and as diseased as it has been for the past dozen years.
While I did not vote for Pres. Obama, he is my president and I hope for his ultimate success, particularly in dealing with these two problems. (Frankly, as a conservative I, like many others, could not bring myself to vote for John McCain either.) And as a conservative I was encouraged by Pres. Obama’s inaugural speech.
It is the first and foremost duty of the Commander in Chief to protect the nation and its people and to that end it appears that a very somber and purposeful Barack Obama leveled a steady gaze upon a watching world. The new president called out to the world that while we seek a new cooperation in international affairs, we will not surrender our independence or our liberty to those who measure success by that which they destroy rather than that which they build. The responsibilities of the office weigh heavily on every president.
And as to the economy, it appears that Pres. Obama recognizes that the prime driver to recovery is not the government but rather the health and growth of private industry. The President acknowledged that it is private business and not government that creates jobs, generates wealth and is the horse upon which economic growth rides. And it is upon that principle that I offer my advice.
Whenever I look for clear and clinical advice on the state of the economy and the markets, I look first to my friend Jim Stack, head of Investech Research and one of the nation’s leading “bear analysts.” Mr. Stack warned over a year early of the approaching housing market bubble, the resulting collapse of the credit markets, and the impact on the nation’s major financial institutions and the ancillary impact on main street businesses. It was because of Mr. Stack’s analysis and repeated warnings that I withdrew from the capital markets shortly before their collapse. And it is to him I owe a debt of gratitude that my retirement has been protected during these uncertain times.
And now Investech Research has weighed in on the irrationality prevalent in today’s markets. In his latest newsletter, Mr. Stack notes:
“In retrospect, we were one of the most bearish analysts going into last year, and remained skeptical when many were saying the storm clouds had passed. Yet just as former Federal Reserve Chairman Alan Greenspan questioned the “irrational exuberance” of the late 1990s (but failed to act responsibly to stop it), we now find ourselves questioning whether investor sentiment has reached the opposite end of the spectrum. In other words, has the level of gloom and pessimism reached irrational extremes?”
We have been gaining and losing the same 1,000 points in the Dow as it swings between irrational exuberance and irrational pessimism. In the past, a gain or loss of 100 points in a week was considered a strong tend. We now see that on any given day the market may gain and lose over 200 points. It responds more to rumors, to hope, and to crystal balls than it does to fundamentals of business (profit, loss, growth, job creation and loss, etc.). And the nation’s newspapers and broadcast media, having failed to warn of the coming collapse, are insistent on predicting the continuation of calamity.
One of the most interesting aspects of our past economic downturns, as chronicled by Mr. Stack, is that the media reached its peak of hysteria just as the economy began its recovery. It happened in 1974, 1982 and 1987. In all probability it is happening again today. It is difficult to know whether it is out of an abundance of ignorance or a desire to lower expectations on behalf of a new president in whom the mainstream media is so heavily invested but they have engaged in a constant “Ohmygawd” parade of horribles since the beginning of the year predicting that the recession may last for decades.
They are wrong as are those who believe that government is the solution to every problem including the current economic problems.
The primary enemy of the economy today, this day, is the drumbeat of pessimism about the future. Second only to the duty to protect our citizens, I believe that it is Pres. Obama’s duty to quiet the anxieties and reassure the citizens that the nation’s economy can begin the long climb out sooner rather than later. As President Reagan used his “bully pulpit” to inspire optimism in the aftermath of Jimmy Carter’s malaise, Pres. Obama should use his “bully pulpit” to give courage to America’s small and large businesses to recapture their zeal for growth and innovation. At this point in time, the nations needs less stimulation packages and more confidence that we can regain our footings and again lead the world’s economy.
There is a sense that Pres. Obama has, as other presidents, been engulfed in the enormity of the presidency and where soaring rhetoric may have been good for the campaign trail, sober reality is the measure of his new leadership. In his inaugural address, Pres. Obama noted:
“In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted – for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things – some celebrated but more often men and women obscure in their labour, who have carried us up the long, rugged path towards prosperity and freedom.
“For us, they packed up their few worldly possessions and travelled across oceans in search of a new life.
“For us, they toiled in sweatshops and settled the West; endured the lash of the whip and plowed the hard earth.
“For us, they fought and died, in places like Concord and Gettysburg; Normandy and Khe Sahn.
“Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions; greater than all the differences of birth or wealth or faction.”
It is individual courage, effort and initiative that brought America to where it is today. It was an encouragement that we again rely on those attributes, rather than government, to build for the future. It is, in fact, the standard by which future government actions should be measured.