When it’s time to justify an asset allocation plan, a stock pick or a prediction – investment consultants, analysts and gurus alike are masters at leveraging the past. And while stock market history can certainly be instructive, there’s always room to doubt whether the market of tomorrow will indeed mimic the market of yesterday. But when it comes to the challenges presented by a 10% unemployment rate, history leaves virtually no doubt in terms of what the government can, or not, do to improve the situation.

Yet at the time of this writing our President is conducting what he’s titled a “Jobs Summit” – implying that we need a strategically-assembled think-tank to devise a solution to our employment woes. His guest list is comprised of an interesting collection of CEOs, Economists and Labor Union Representatives (yeah I know – labor union reps at a jobs “creation” summit, what could be more oxymoronic?). Suspiciously missing from the party are any representatives from business associations, such as the Chamber of Commerce and the National Association of Manufacturers. But that’s okay, because on the other side of the aisle another “Jobs Summit” is being held by Senator Jim Demint. Now that’s funny, the Republicans billed the Jobs Summit as nothing more than a photo op for a President whose opinion rating isn’t what it used to be. But isn’t Mr. Demint doing essentially the same thing – i.e., countering the Administration’s photo op with a photo op of his own? I tell ya, the spin from both directions makes me dizzy…

Now here’s the thing; in my humble (historically supported) opinion, one Jobs Summit, let alone two, is a profound waste of time and tax-payer money. If the government truly wants to help, it simply needs to get the #&%* out of the way. But since we know that ain’t happening, what then, if anything, can Uncle Sam possibly do without making matters worse? Well for starters, the White House needs to recognize who or what actually creates legitimate, lasting jobs in the first place. Then it can simply focus its resources (what’s left of them) there.

So, let me think… who creates jobs? Economists? No. How about Unions? Nuh-uh. Politicians? You’re kidding, right? Private Industry? Yes! Business owners hire people.

Okay then, all joking aside, let’s just do the obvious. For one, let’s table any pending proposals (Healthcare-Reform, Cap and Trade, etc.) that would keep businesses on the fence in terms of hiring. Make no mistake, employers, especially the small to mid-sized ones (who happen to employ mass quantities of humans), are scared to death about what these programs would mean to their bottom lines. Next, let’s not mess with the current capital gains and dividend tax rates (vs. raising them after next year, as planned) – a lower tax on gains and dividends fosters investment in job-creating businesses. Now those two items alone would improve the landscape noticeably. In fact we could stop right there and do just fine.

However, with a whopping 10% unemployment rate and mid-term elections just around the corner, perhaps a little extra is in order. So what else can our elected officials do on their, I mean our, behalf? How about cutting the corporate income tax rate? You’d sure think we could, since ours is the second highest on the planet. And aside from creating jobs, a cut in taxes would ultimately, as it always has, lead to an increase in tax revenue.

I know what you’re thinking – how in the world could a tax cut lead to greater tax revenue? It’s really quite simple; you see when businesses have more income, they expand, become more profitable, pay more taxes, hire more people, who make more money, who pay more taxes, who spend more money, creating more revenue for businesses, who pay more taxes, who hire more people, who make more money, who pay more taxes, who spend more money, creating more revenue for businesses, who pay more taxes, who hire more people, etc., etc., etc…

So there you have it – government invests a little in private industry, unemployment goes down, revenue goes up, budgets get balanced, voters reward the smart-thinkers, and we all live happily ever after…

Yes I know, far too business-friendly for today’s Washington. But don’t sweat it; even though our capitalist foundation gets shaken every now and then, it has always held up just fine. And there’s absolutely no reason to believe this time will be any different.

Have a wonderful day!
Marty

While a huge number of shoppers gave up hours of sleep last Friday to hit the ground running (one report tells of an early-riser who was in such a hurry to get to the mall that he wiped out a fire hydrant and a tree in his very own driveway), the market turned what should have been a snoozer of a trading day into a virtual rollercoaster ride.

News that Dubai, the largest (in population) of the United Arab Emirates, got way ahead of itself in terms of leverage sent the Dow (at one point) down more than 200 points. The announcement that Dubai World (the emirate’s investment company) would not make its debt payments on time served as a reminder that we may not be entirely out of the woods (no pun intended) just yet.

And that would be the question; is Dubai World’s inability to make its payments an after-shock of the recent global credit crisis or is it a warning that another tsunami is about to hit? While it’s of course too soon to tell, as CNBC guest Ron Insana pointed out Monday afternoon, we do know for sure that “Dubai was over-built, over-leveraged and under-utilized”. And for now it appears that there isn’t nearly the degree of derivatives exposure that characterized last fall’s credit market freeze – and that’s a very good thing (i.e., no Fed airbag to deploy). If nothing else (again, too soon to tell), this serves as a prime example of the degree of risk one (banks included) takes when investing in certain fast-growing emerging markets. Fortunately the U.S. Banking sector has minimal exposure.

I’m sure there’ll be more fall-out, or lack thereof, to report on in the months ahead – but for the time being I’d like to make this observation; the U.S. dollar (you know that beleaguered currency we’re all so worried about) rallied heartily as the Dubai news hit. So apparently, in spite of America’s waning rep as a (the) global superpower, her legal tender is still where the world runs (as it did last fall) when it fears the worst.

Also note that the market was at its trough last Friday when the dollar was at its strongest. Then, when things settled down and the dollar pared its gains, the market pared its losses. This negative correlation has been the single most prevalent theme throughout the now nine-month old rally in stocks.

For an understanding as to why the stock market continues to love a weak dollar, read Minnie Mouse, the Market and the Dollar …

Have a great day!
Marty

What’s your devotion? Are you Catholic, Protestant, Jewish, Buddhist, Hindu, Rastafarian, Republican, Democrat, Global-Warmocrat?

Politics and religion – the two most discussed topics that supposedly nobody’s supposed to discuss. I honestly think that politics and religion in the same sentence presents a just association. I’d go so far as to say (based on the red-faced passion I’ve witnessed) that for some, politics is religion. Now if that mere suggestion finds you the least bit flushed, well then… my point exactly.

So why is Global Warming on my list of fundamental pursuits? It’s just my observation, but if one isn’t careful, one’s identity can easily become vested in one’s cause. Just tell a Global-Warmist that you believe it’s a cyclical phenomenon, or worse yet, that it’s all a hoax (I honestly don’t have a strong opinion by the way), and he’ll attack with the rage of a republican at a healthcare-reform town-hall meeting – or a democrat at a social security-reform town-hall meeting. And speaking of those town-hall meetings, etc., you have to wonder, would Republicans be on the attack if this same health-care reform plan were a Republican initiative? Or would Democrats favor it if it were a Republican proposition? Or would Democrats have attacked social security-reform if it were their plan? Or would Republicans have backed it were it a Democrat plan? Please, don’t pop a vein – I’m only asking.

Personally, as a (supposed) grown-up, I’d like to think my thinking is independent of the political influences of my youth – but sometimes I wonder. I seem to consistently find myself on the same side of certain issues. Am I truly against the whole healthcare-reform notion because I believe it’s a bad idea – because private insurers can’t compete with a public option – because people from countries with socialized medicine come to America for their healthcare when they really need it – because thirty years after England went that route there were fewer hospital beds and hundreds of thousands of people in line – because the champions of the four-figure (paged) proposal that will cost the tax-payer thirteen figures don’t seem to understand it themselves – because we’re not a socialist country – or is it my politics?

Am I truly against the government controlling our financial industry because I believe it’s a bad idea – because these jokers (republicans and democrats), who blow money like politicians (I know, but even drunken sailors don’t spend like politicians), want to tell our banks how to handle their business – because they won’t accept a modicum of responsibility for their own contribution to last year’s meltdown – because our founding fathers warned us specifically about the perils of big government – because legislating away risk-taking unequivocally sets the most dangerous precedent I can imagine – or is it my politics?

Please forgive me if I’ve struck a nerve – I understand the risk I run. I would surely alienate no one were I to simply report on last week’s market, but where’s the fun in that? Politics, that’s the subject my friends – and it is indeed pertinent here, because I am a staunch believer in the business cycle and free-markets. And the greatest risk to both, in my humble opinion, is political risk – regardless of the party “in power”.

Two weeks ago I included the following Daniel Webster quote; “There are men in all ages who mean to govern well, but they mean to govern. They promise to be good masters, but they mean to be masters.” Our founding fathers clearly understood human nature – that men and women who find themselves in positions of power will forever seek to expand their powers – even with good intentions (but we all know what they say about the pavement on the road to perdition).

I’ll let them take it from here:

“A government big enough to give you everything you want, is strong enough to take everything you have.” Thomas Jefferson

“I believe there are more instances of the abridgment of the freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.” John Madison

“An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation.” John Marshall

“The spirit of resistance to government is so valuable on certain occasions that I wish it to be always kept alive.” Thomas Jefferson

“Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.” Benjamin Franklin

Have a great day!
Marty