Sunday, November 4, 2012

Sell on Wednesday, Two Certain Futures and Sandy’s Gifts

Sell on Wednesday

As many members of this blog community may suspect, I am a contrarian. This streak in me comes out when I hear from the talking heads on TV or the Internet, or in the destroyer of trees (print media) or the pontificating attendees at weddings and other social gatherings. The force of these opinions expressed as certainties rests on a cursory view of popular history and feeding off of the same limited and biased media resident on the two US coasts. There is a similar unhealthy reliance on media and news bureaus from major capital cities and global financial centers.

This post is being written on the Sunday before Tuesday’s US presidential and Congressional elections and after a harsh visit by the storm named Sandy. Our pundits assure us that come Wednesday morning, we will know completely what the next two, four, and possibly eight years will produce from a relatively small gang that will occupy the temple-like buildings in Washington, DC. Because of the election’s supposed removal of uncertainty, markets around the world will rise. If this occurs, I recommend selling.

A careful examination of history suggests the following reasons to doubt the expected policies of the Washington gangs:

1.     Rarely do politicians carry out much of what they say in getting elected because other events and problems take precedence. Remember to get votes, a politician will forcefully address current pressing problems with easy to understand simplicity solutions.

2.     When there is a near split in the Senate, some members effectively switch sides to benefit their personal agendas.

3.     Unless there is a change in the leadership of both parties in the US Senate, we will not get forceful leadership that will be able to exert tight discipline.

4.     The rest of the world will unlikely give the US leaders a pause in attempting to solve their own problems in ways that will significantly impact the US, either economically or militarily.

5.     Technology and Science will pose new issues and opportunities to be disruptive within the US and elsewhere.

6.     Much of the data and intelligence used by the government is faulty or misleading.

7.     We have a political structure made up humans susceptible of human frailties.

I am sure that there are any number of facts and events which will change the expected paths of our next government that I have not thought through.

Two certainties

We are not dealing with the big issue. The big issue that we share with many developed and an increasing number of developing countries, is our structural deficit with the popular demand for government services pitted against our unwillingness to fully pay for them. Making government a larger part of society through various manipulations of supply and demand has not worked in the long run and is unlikely to permanently solve deficit problems. We are rapidly reaching a point where this generation can pick one of two certain outcomes.  We can either accept the trend to a lower standard of living and change our spending, saving, and productivity habits or spend the rest of our lives paying off the deficits that have been accumulating for at least fifty years. (Like with the symmetrical 7 fat years followed by 7 lean years from our original economics textbook, the Bible, we may have to spend the next fifty years to permanently reduce the deficits around the world.) If we do not accept the fifty year sentence we may have guaranteed that our children and grandchildren will have little to no chance of living as well as we do. This kind of brutal decision-making is not going to come from most politicians these days, but we are running out of time. One should keep in mind that we are fighting the power of compound interest on our debts, both at the government and personal levels.

We will start to see what the administration and the Congress can begin to agree on no earlier than March of 2013. Thus, if one is a policy investor, what makes sense to me is selling into the enthusiasm this week with the thought that practical political policy will become more evident in the spring of 2013.

Sandy’s gifts

Americans quickly organize public and private support for those in perilous conditions; e.g., the food cart distributing free food, a local church feeding three meals a day to those without power and providing electrical charging facilities and Internet connections. Private homes have had signs offering free charging stations while small business competitors are sharing gasoline and other vital commodities.

A healthy  competition has occurred between government and private sector agencies helping out those affected by the vast destruction and aftermath of the storm. The First Lady of New Jersey, Mary Pat Christie is leading the  Hurricane Sandy New Jersey Relief Fund.   Mrs. Christie urges us to “Support our friends, neighbors and communities impacted by the storm. They need our help and need it quickly.” Ruth has offered her help which has already been graciously accepted.

Walmart has pledged $1.5 million to its aid partners American Red CrossSalvation ArmyFeeding America, and has contributed generators and other essentials as well as half a million bottles of water to NJ (with another half million bottles for New York City). 

USA Today has reported that Proctor and Gamble's “Tide Loads of Hope” truck, which provides laundry services for residents and recovery workers, arrived in Eatontown, NJ on Saturday morning and collected 300 bags of laundry in the first two hours. Duracell's "Power Forward" centers gave Hurricane Sandy's electricity-less victims the chance to charge phones, as well as to grab free batteries for flashlights. These generous gifts are not only helping the hardest-pressed victims but are also providing inspiration to those of us who were merely inconvenienced by Sandy. (Our home lost electricity for almost a week.)

A Florida resident claims that many in the northeast are not as prepared as Floridians in terms of storm preparation.  With the large number of generators, pumps and other repair supplies sold this week in the northeast, the preparation factor might be different for next year's storm season.
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