Politics or Markets?

A couple readers expressed a similar sentiment regarding my last post. Politics have fallen to their backburner and they're keenly focused on the market. So let's start there:

The backfilling I thought was mostly over last week continued in earnest this week. Call me superstitious but I find the S&P 500 chart (closing prices) a bit too perfect to expect a big rally from here. Jason Goefert is talking about many sentiment divergences, but in order for those to play out in textbook fashion, we'll need to see a new market low first. But who knows? We could see a picture-perfect double bottom. In either case, I still believe we're close (within 4%) to an intermediate bottom. Unfortunately I'm a lot less encouraged about the duration and extent of the next leg up.

Now for politics:

I realize many you are sick of politics, especially after being subjected to the longest POTUS campaign of all time. That said, I don't think all politicians are corrupt, although I agree most politicians will do what's in their own short term best interest, as well as what's in their constituent's short term best interest. Unfortunately both of these are usually NOT in our country's long term best interest.

Like it or not, political decision can have an impact on both the economy and the markets, and that's one reason I write about politics on this blog. Secondly, I grew up as a son of a commercial plumber who started his own company as a contractor. I saw first hand the sacrifice, the long hours, the personal financial risk, and the insanity of government policies that almost seemed designed to punish anyone who attempted to run a company and create jobs. And God forbid if you made a profit - Uncle Sam was right there with hand open and arm extended.

Most people believe the economic impact of political decisions are immediate. They erroneously judge the success or failure of presidents and their policies by looking at job, stock market, and GDP growth from inauguration day until new drapes are hung. This is ridiculous of course, but try telling that to the dolts in the MSM.

Here are a couple examples:

1. Our country has yet to pay the piper for entitlement programs, programs that began decades ago with the FDR administration. Since then, both parties have ignored the actuarial tables and sold Americans a mathematical lie. There's no way in hell future generations can keep this system solvent without a massive overhaul. And the Medicare situation is worse. To many Americans, especially older Americans, FDR is seen as a savior and Social Security has enormous political support. Even politicians who believe the system is fundamentally flawed and see an impending day of reckoning don't dare speak the truth in public. I find it ironic the same people who are wringing their hands about the current banking/mortage mess (e.g. Bill O'Reilly) are so willing ignorant and disinterested in the impending entitlement implosion.
2. Ronald Reagan was roundly critcized by the media and Democrats for boosting defense spending during '80s, but for a few leftist historians, most agree that his build up played a role in greatly reducing the military threat of our then arch nemesis, the Soviet Union. Fast forward to the Clinton administration, who Democrats and the media applaud for generating budget surpluses in the late '90s. Clinton supporters never point out his administration cut military personnel from 2.1 million to 1.6 million. Of the 305,000 employees removed from the federal payroll during the Clinton years, 286,000 (or 90%) were military cuts. Could he have made such cuts were it not for Reagan's policies? Forget the tech bubble and the Revolution of 1994, Clinton cashed in the peace dividend and is now seen as an economic Houdini.

Barack Obama believes a bigger government and more spending is the answer to every problem. I do not. I'm deeply concerned that we no longer have any policy or ideological checks and balances in this country.

Most Americans aren't news, market, or political junkies. They get their news from Katie Couric and political advice from Oprah. They watch David Letterman and listen to the politics of Bruce Springsteen. They drink from the trough of an unending stream of leftist professors and watch movies that lambast conservatives at every turn.

Mark my words: The policies we're about to witness will result in a mountain of debt which will eventually result in economic circumstances that will effect our market negatively.