Obama versus Mrs. Goose

Message from the Stock Market

Mike Scruggs

Having been a “stock broker” for over 20 years with a major national financial firm, I am painfully aware of how difficult it is to forecast the economy and stock prices. I personally found it futile to give much weight to short-term stock market forecasts against longer-term financial objectives. Most people who try to “time” the market are less successful in the long run than people who concentrate on picking solid growth opportunities at reasonable prices.

When I first went to work for E. F. Hutton in 1984, picking good investments was less complicated. More recently, the prevalence of trading “derivative” securities and the mindless programmed trading of millions of stock shares without regard to specific equity prospects or valuation can hand you your head on a platter in the short-run. Sticking with a good stock for the long run is now more dangerous. In addition, the emphasis on immediate earnings results has made the weeks before a company’s quarterly report a time of fearful anticipation. Any minor short-term shortfall or nuance of future uncertainty can be a personal disaster for stockholders—a good reason for not having all your eggs in one basket. American business would be much better off, if it could concentrate on long-term issues rather than the next quarterly report.

I never worked for Merrill Lynch, but I have been “bullish on America” in the past because, despite the bumbling of politicians, our strong free enterprise system and market economy drive good returns on the stock market in the long run. So far, American politicians have not been able to kill the goose that lays the golden eggs. However, at times they have been able to frighten or discourage the goose into laying fewer and smaller eggs, and this has made America poorer. Lyndon Johnson’s Great Society War on Poverty was supposed to cost $60 billion per year, but the actual cost adjusted to 1966 dollars is running over $600 billion per year. It sounded to many like a sweet thing to do for the poor, but it has only flushed several trillion dollars down the toilet and has reaped no favorable results. It has resulted in a declining American work ethic, millions of fatherless homes and children, and millions of illegal immigrants exploiting the benefits of free babies and healthcare—but the costs of these are so high that no one can estimate them.

Moreover, the politicians have business so regulated that no one can estimate the costs. It has been good for many big businesses, however, because it has made it hard on smaller competitors and new business start-ups. I am of the philosophy that we should treat the golden goose with more love and respect. It is Mrs. Goose, you see, and not the likes of Barack Obama, who can produce the golden eggs that result in millions of good jobs. Indeed, President Obama appears to have a strong grudge against Mrs. Goose and insists that she lay green eggs.

On Friday, July 27, the U.S. stock markets gave us a strong clue regarding what is necessary to improve the economy. Economic reports were generally dismal. The latest Bureau of Labor Statistics reports indicate that the economic “recovery” is slowing to less than two percent annual growth with little prospect of creating real jobs. The Consumer Confidence Index has fallen to its lowest level this year. Only 25 percent of those polled believe the economy is getting better. If you look deeper into the usual government statistics on employment and inflation, things are much worse than commonly reported by popular media. The European economies are still struggling from the results of many years of government overspending and high taxes. Several are on the verge of fiscal collapse. Yet on Friday, the Dow Jones Industrial Index was up 187.73 or 1.46 percent to 13,075.66, and the Nasdaq Index was up 64.84 or 2.24 percent to 2958.14. Why are the markets up when the economic news is so discouraging?

I believe it is because the Rasmussen poll just released indicates that Mitt Romney has moved up in their daily polls by about 4 percent and now has a 4 percent lead over President Obama. The vast majority of sophisticated investors—indeed, anyone with much economic, business, or common sense—knows that Barack Obama is not a friend to Mrs. Goose. He does not appear to know anything but Marxist demagoguery about economics, business, and the every day struggles of business owners and working families. Barack Obama is not your grandfather’s Democrat. His cultural and economic Marxism is difficult to distinguish from the European Union socialist parties responsible for Europe’s troubles. No intelligent and knowledgeable voter outside of a madhouse or the core constituencies of the Democrat party believe that Barack Obama is good for the economy, jobs, or the stock market. The market is rising on the hope that the reign of Obama will be over next January. Public confidence is firming that Mitt Romney is much better qualified in intellectual competence, hands-on economic and business knowledge, and leadership to halt America’s social and economic decline and put her on the road to prosperity and global leadership again.

However, the election is three months away, and popular opinion is not necessarily well-informed opinion. If Romney is elected, we will still have many of our current stock market problems, especially those related to Europe, but I am confident that the long-term trend will be up as free markets and free enterprise are unshackled, and Mrs. Goose increases the size and frequency of her golden eggs. If Obama is re-elected, Mrs. Goose may be forced to take early retirement, and investor confidence is going to have its back broken.