I shuddered when he asked me this last weekend:
Driving with my kids in the car, listening to Bloomberg Radio 1130 on XM Satellite. Lowering the volume when talk of the Paris attack comes on, which has been a steady drumbeat of increasing casualties, wondering exactly how old my kids should be to hear about this tragedy. I turn to engaging them with conversations about the different people in the world. Teaching them with stories and life's lessons. As parents know that they are the best teachers for their kids. Tell them too much and they become paranoid. Tell them too little and they become naïve. Reminding myself they're only children; that they'll have plenty of time to consider all the evil in the world. Later on, my 9 year old asked me if this is the start of WW III. He and his friends talked about it. Hard to believe. Hard to swallow. Being a child, he has no idea what he just asked. But I do. I shuddered.
Disney trip ahead in the beautiful Florida November weather, I need to somehow let my kids know how good they have it. Childhood is a modern day miracle; a first world phenomenon. Because so many other needs need to be met before one can have a childhood. All the while I am teaching them how important it is to get along with others. To be confident in their views while staying open minded. That a life of learning is a life worth living. Hoping that when they learn about the state of the world we are leaving them, that they forgive us.
Dusting off an old anecdote from November 2008:
Politics: This is not meant to be political. This is meant to be an objective observation of a pattern that I'd like to point out. It is also the topic of conversation of the day, so it is only reasonable that it should be addressed.
Presidential cycles and economic cycles aren't always congruent and are often only correlated - meaning we can't always easily assign cause and effect to Executive Branch policies and economic conditions. But it would seem that investors have done well to invest for the long term when new Presidents are elected during recessions.
This has to do with the Fed and Treasury actions that took place during the time of the outgoing Administrations. Presidents who seem to have presided over economically good times were Presidents Reagan (following Carter/troubled economy) and Clinton (following H.W. Bush/spent most of his term in office during a recession and real estate bubble burst). Presidents who seem to have presided over economically tough times were Presidents H.W. Bush (following Reagan/strong economy), W. Bush (following Clinton/strong economy).
How about the incoming President Elect Obama? With massive economic stimulus, a weak economy, a stock market down by almost 50% from peak levels, one can make the very simple case that this is a good time for him to become President. The heavy lifting of Fed and Treasury policy has already been initiated. Since history is a repeating mechanism, one could argue that history is squarely on the side of investors. In fact, today's environment is so strikingly similar to that of 1992, from cabinet posts to a severe real estate glut; one can argue that history is not in the making to the extent that we may think. It is actually just repeating itself. To go from correlation to actual cause and effect, the negative economic statistics (rising unemployment, declining earnings, and even bank failures) at the ends of the Presidency's during recessions, as it turns out, are lagging indicators. This may bode well for investors, both blue and red.
Back to now: Today's lagging indicators are near full employment, near record corporate earnings, near record stock market levels, and an end to stimulative monetary policy. Watch out for that history thing; nothing hits you quite as hard as that. Let's be careful out there.
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