Think of this as Volume 14, Number 20 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.
The best time to sell optimism is when everyone is pessimistic.
That's when it gets the best return. The absolute best opportunity to buy stocks in this country's history was probably in October, 2008, when everyone was going around like chickens with their heads cut off.
This is an important political message. It was the secret to Ronald Reagan's success, to that of FDR, and it is going to make Barack Obama a great President.
Optimism. It's the secret ingredient to any success in politics.
Now it's true that your optimism needs to be borne out by events in order to have the right effect. George Bush's optimism about Iraq just became a collection of Friedman Units, and LBJ's about Vietnam spawned his credibility gap.
But in this Administration's case it is justified. The stock market is up by anywhere from 50-75% (depending on the average you want to use) since the Inauguration.
Validation is also important. Europe has basically just copied the Tarp strategy that worked so well. (Replace the Confederate money, put it into hands who can get a quick return on it.) Rinse and repeat.
The health care law is going to be the rinse and repeat. Obama looks set to see some quick results on obesity, and buried in the health care bill is a process by which government can quickly overturn adverse decisions by insurers.
The best part of the coming economic growth is it lets the President pivot into being a deficit hawk. He never pretended for the action against the Great Recession to be a constant in our lives. The punch bowl must be pulled.
The question becomes how. The idea of "more tax cuts" has no credibility, given the results we've had with the Bush cuts now expiring. Sure the wealthy are paying 50% more of the taxes than before. But their incomes have gone up 200% or more! Everyone with half a working brain cell knows that's not fairness.
There are three components to the deficit problem.
- We have to pay for the wars. Putting their cost into the budget is just the first step. Money must be raised not just for this year's costs, but for the last decade's.
- The hole left by the tax cuts must be filled. The deficit exploded during the era of the Bush tax cuts. Nothing ever trickled down. The Laffer Curve, in its original form, always showed a point at which lower rates meant lower revenue. The money must be paid back.
- The Obama stimulus. Paying back Tarp is part of the solution here. But we did spend $900 billion we didn't have, and that too must be put back.
The problem, of course, is you can't do this all at once. You take $3 trillion out of the economy all at once — whether by tax hikes, spending cuts, or any combination — and we're back into the soup. What matters to the markets is the total deficit as a percentage of GDP — it goes down as GDP goes up — and the annual deficit's direction, which needs to be downward.
There are ways to get there, but none that people of any political persuasion are going to accept easily. That's why the President's defiance of the Netroots is just as important as his rejection of the Tea Party. Triangulation is the only way to make pain acceptable, and that's why he is engaged in it. It's not because he loves Joe Lieberman or Ben Nelson or Arlen Specter. It's because his actions must be credible to the broad mass of the public.
The other, most important way through, is with optimism. President Obama ran an optimistic campaign, and he has run an optimistic Administration. Every speech he makes calls on people to be optimistic. He's very consistent, rhetorically.
When things get better — even a little — people who were fearful will buy optimism the way a thirsty man buys water. Give people small reasons to be optimistic — some good job reports, some stories about people getting better insurance coverage or living healthier lives, continued low crime rates — and people will be happy to lend you their support.
This is true in business too. It's why so many companies try to "manage to expectations," withholding profits through accounting when times are too good, in hopes of reversing the trick when times are tough to keep investors mollified.
But it also works in politics. And this Administration, so far, is working out pretty well. Despite the daily headlines.
Dana,
You seem to have a case of fact-denial on your hand. You mix up wishful thinking with facts on the grounds. Some examples:
a) Calling Europe’s near-financial crisis (caused by debts) a validation for USA’s exploding debts;
b) “The deficit exploded during the era of the Bush
tax cuts.”. Sure the deficits increased. But Obama multiplied them many times, and that in just 1 year. The stats are readily available.
Nice write-up about ‘optimism’ though. But what counts are facts on the ground. And that fact is that the USA is on it’s way to ‘Greecification’ itself. You can only borrow so much…
Anyway. November is coming soon. Nice to see that all elections between Obama and now have seen non-sissies win. A sign of things to come. Obama will be neutered as of November, and that’s a good thing for America, especially for the working middle class who have to cough up all his tax grabs.
Dana,
You seem to have a case of fact-denial on your hand. You mix up wishful thinking with facts on the grounds. Some examples:
a) Calling Europe’s near-financial crisis (caused by debts) a validation for USA’s exploding debts;
b) “The deficit exploded during the era of the Bush
tax cuts.”. Sure the deficits increased. But Obama multiplied them many times, and that in just 1 year. The stats are readily available.
Nice write-up about ‘optimism’ though. But what counts are facts on the ground. And that fact is that the USA is on it’s way to ‘Greecification’ itself. You can only borrow so much…
Anyway. November is coming soon. Nice to see that all elections between Obama and now have seen non-sissies win. A sign of things to come. Obama will be neutered as of November, and that’s a good thing for America, especially for the working middle class who have to cough up all his tax grabs.
The hen is the wisest of the animals. She only cackles after the egg is laid — A. Lincoln
The hen is the wisest of the animals. She only cackles after the egg is laid — A. Lincoln
The failed hippie is the less wise of the humans. She wishes things into being – and then whines that reality doesn’t conform to her wishes. F. Rostbite
The failed hippie is the less wise of the humans. She wishes things into being – and then whines that reality doesn’t conform to her wishes. F. Rostbite