Tuesday, November 04, 2008

A Comparison of Two “Messianic” American Presidents

As Americans head to the polls today in record numbers in order to effectuate the coronation of the new “messiah” Barak Obama, I am reminded of a time as a youth when I was also caught up in the whirlwind bandwagon effect of a presidential political campaign.

The last time there was a candidate for president of the United States with similar messianic like qualities that Barak Obama seems to exude to the masses, I was a young twenty-one year old college junior at the University of Tennessee in Knoxville. Seemingly out of thin air, a little known man with the plan to set America back on course appeared on the scene and had massive appeal to the populace that had not been experienced in years. With 2% name recognition even his mother replied “president of what” when he told her of his plan.

The candidate appealed to liberals and conservatives, people of all races, creeds and colors. Whatever someone wanted to see in a president, he appeared to have it. The bandwagon got rolling early in the year and grew through the primaries. I had never voted for president before and I knew that pulling the lever for this world changer was something that I would never be as excited about again in my voting lifetime.

The opposition candidate was a true old school party hack that had carried the torch for his party for years. He was a loyal public servant, was fairly well versed on the issues and had experience that a national leader would need. Unfortunately, to a young impressionable college student looking for something new, improved, different and not the same old business as usual inside the beltway D.C. approach, the old guy just wasn’t cool.

My man was not the most qualified candidate even in his party. He had minimal experience in foreign policy and in other areas of how to get things done in the Federal government. None of that mattered because we were going to elect a new breed of politician that would change the way things were done in Washington. “Throw them all out” was the mantra – the good, the bad and even the ugly.

The man’s vice presidential running mate was more of an old school party hack that was likable enough but not one that could lead the country should something happen to the president. That really didn’t matter to me because my vessel of change was a young guy and ready to lead for the entire eight years after his coronation as president.

At that time, the country that my man was set to lead had been through a difficult time. There had been a very unpopular military conflict that split the country like no war ever had. The office of President had also been tarnished by a leader who had resigned under threat of impeachment. The national mood was in need of a change and my man was ready to take us back to the nation of a chicken in every pot and unlimited opportunity for all.

The more caught up in the ground swell and enthusiastic I got cheering for my man, the more others tried to make me come to my senses. My parents tried to get me to take a more objective look at who was best able to right the country’s ship. A neighbor from Chicago named Wayne tried reasoning with me on a daily basis that I was being caught up in a gush of enthusiasm and being hoodwinked by the media circus surrounding the rising popularity of my man. I thought he was a kook, and after all he was over 30, so what did he know.

None of this ever mattered. I was ready for change for change sake and on November 2, 1976 I went into the presidential voting booth for the first time in my life and pulled the lever for the man for our country’s future, James Earl “Jimmy” Carter. That night I went to a big celebration sponsored by the local Democrat party and partied throughout the night, toasting each state as the results came in. The next morning, in spite of all my enthusiasm, loyalty to the cause, and feelings of exuberance, all I really had to show for my efforts was a bad hangover.

Unfortunately, my hangover was probably the least damaging thing that happened to the United States as a result of the election of an inexperienced, unqualified, “messianic” president that was swept into office on nothing other than promises of change and a new way of doing things.

The next four years were some of the more dismal years in our country’s two hundred year history. The pride of the tall ships in the harbor during our national Bi-centennial celebration quickly faded.

As could have been expected there was an immediate expansion of the Federal government in spite of such niceties of asking cabinet members to drive their own cars. The federal government deficit rose to the highest levels in the country’s history.

The country was driven to its economic knees early on in the Carter administration by the skyrocketing price of oil driven by the OPEC nations flexing their muscle for the first time sensing a weak president unable to deal with exerting force on the world market. My man Jimmy’s answer was to turn down the heaters and wear cardigan sweaters giving rise to the moniker of Jimmy “Cardigan”.

The economy tumbled into what Jimmy described as a “malaise”. The term “stagflation” was created to describe a situation never experienced before. It was an all encompassing term that was to take in consideration of double digit inflation, high interest rates, a dead housing market, skyrocketing unemployment, and a complete halt to the nation’s productivity growth.

Taxes were increased and the defense budget was cut leaving us vulnerable to the world during a cold war era that showed no sign of disappearing. The SALT II treaty signed by Mr. “Change” in 1979 did a good job of making us even more vulnerable to the worldwide Communist forces.

The Panama Canal, a longtime strategic asset of the United States was given by treaty to the foreign country of Panama. This was done in the spirit of goodwill and not wanting to seem like a bad guy to the world by allegedly “occupying” a foreign country. The US built it and many American lives were sacrificed in the process. This was one of the most unpopular actions with the public ever undertaken by a sitting US president.

I could go on ad nauseum with the failures and bad policy of my former “hero” but the crowning failure that cast the national demeanor lower than ever before was Mr. Peanut’s dealing with the revolutionary forces in our then best friend country in the Middle East, Iran.

After the fall of our country’s friend, the Shah, on November 4, 1979, the revolutionary forces overtook the American Embassy and took 52 American diplomats as hostages. This was no bank robbery gone bad situation. This was a national embarrassment that lasted for 444 days. Our citizens were blindfolded, mocked and paraded for the cameras on a regular basis and we as a nation appeared impotent to respond. They were tortured, abused, and at one point were the victims of a “mock execution”. Jimmy did noting but talk of economic sanctions and looked to the failed body of the United Nations for answers.

In April 1980, while fighting off an unheard of Democrat Party primary challenge to a sitting president by the infamous Ted Kennedy, the agent of change finally did something other than “negotiate”. “Operation Eagle Claw” was devised to attempt a rescue of the hostages. All that resulted was a massive failure and further national embarrassment that cost the lives of eight soldiers and loss of two aircraft and only worked to embolden the spirits of the revolutionary forces.

The country’s national swagger appeared lost forever. We were at the mercy of a minor third world country and could do nothing to effect “change” at all. Carter was soundly defeated by the military hawk, Ronald Reagan, in the November elections. It was no coincidence that on the day Reagan took office the hostages were released ending the national nightmare that a weak kneed, unqualified, poor choice of the electorate had allowed the country to endure for 444 long bitter days.

As we approach the witching hour tonight when the celebrations begin for the “hope” and “change” crowd, I am committed to pray for our country and for our future president, Barak Hussein Obama. The world is a much more dangerous place than it was in the late seventies when we last placed the country’s security and leadership in a man as unqualified as what we are electing today. While many, including myself, will never agree with Obama’s policies, we are called by the Creator of the universe to pray for those who rule our nation. While that is a bitter bill to swallow, we have no choice. Our country will not stand if we don’t repent as a nation and submit to God’s will and learning to be obedient and pray will be a good place to start.

Buddy Oakes for Musings About Life in a Fallen World

Friday, October 24, 2008

Voodoo Economics in the Last Days

I realized during a discussion with my sons last night in the car that at some point in the last twenty to thirty years we, as a society, have lost sight of basic Economics 101 investment strategies. We have gone from making investment decisions based on potential return via interest, dividends and profits to a Las Vegas style buy low, ride it up, and sell high rollercoaster with no real understanding of a company’s underlying performance or financials.

When I was young (I’m now 52) if you had say $1000 to invest, you would take a look at several options for the best vehicle to try to grow your nest egg in a solid, safe and somewhat predictable manner. The safest instrument would be to go to the bank and open a savings account and get approximately 4-5% return a year, or if you were really stepping out you could get a bond that might pay a little more.

If your fancy was more along the lines of stocks you would look for a company that was stable and predictable and that had history of paying regular dividends. One of the primary things to look for was a company with a Price/Earnings ratio of less than twenty. In other words if you bought $1000 worth of stock your return over the next year in a company with a PE of 20 should be $50 or 5%. If the value of the stock went up or down that was considered a bonus or something to keep an eye on. Basically, you investment was driven by the expected dividend rather than the change in stock price. If you bought a stock you were generally in it for the long haul.

A third more risky investment for the more entrepreneurial folks was to start a business. You would take your $1000 sum and expect that after all was said and done that your company would be worth at least the initial $1000 investment but would also give you a return of more than you could do at the bank or in the stock market.

All that being said, the financial world we live in today resembles nothing of the basic structure that our country was built on. Hard work, dedication and doing a good job has been replaced by insider tips, speculation, government bailouts, and a true gambler mentality no different than a drunk with a blond on each side rolling dice at a crap table.

Basic supply and demand economics has been replaced by a supply and speculation mentality. Stocks, options and commodities are purchased based on where the investor thinks the price is headed as opposed to the intrinsic value of the item being gambled on. Oil, recently trading in the $140’s a barrel within a few weeks was trading for half that amount. Neither the before of after price was based on anything other than speculation and what item was in favor with investors (or gamblers as they truly are).

The hocus pocus figure of the Dow (take a look sometime how this monstrosity is actually figured) has 52 week range of close to 14,000 to a recent low of $7800. There is no possible way that that the true bricks and mortar value of the US economy can drop 45% in lest than a years time. The economy was never actually worth the higher figure other than being driven to that point by good feelings and speculation that the price would go higher. The minute that there appeared to be a problem on the horizon investors retreated to the basic principle of supply and demand where there were more sellers than buyers with everyone jumping off the feel good bandwagon and grabbing whatever cash they could on the way down.

Folks that talk about a recession or depression and the great global fears that are swirling are the ones that are driving the market down at a pace far quicker than it should based on true underlying facts of the economy. In the collapse of 1929 banks went under and people with savings in the bank had none left and true poverty was created overnight. I am convinced that now no more folks than would be expected during any economic cycle will experience “poverty” from the recent downturn. Those who are involved in wild market speculation have lost money based on their own greed and need a good reality check as to the “game” they are playing with the world economy. Granted unemployment is rising and the housing industry has slowed to a crawl due to credit concerns but you don’t see thousands in soup lines and millions living in the streets as you did during the 1930’s.

Alan Greenspan testified yesterday that he “made a mistake” never envisioning that banks would not take care of their business and protect their assets. Unfortunately, the same greed that was driving speculation in the market was driving banks and loan companies to make decisions that no logic based business would do. The easy credit for new homeowners driven by new federal government policies in the mid nineties that opened the market to millions who should have never qualified for a gas credit card much less a home loan.

I was thirty years old in 1985 when after years of saving, planning and intense agony of worrying about signing a note for a mortgage I was able to purchase a modest condominium worth $50,000. Even though I had kept my nose clean, was employed, and had a perfect credit record, I had to put $10,000 (or 20%) down in order to qualify for the loan. That was what the American dream was about. I had played the game and did what was right in order to become a home owner.

After the Federal government changes in the mid nineties, none of that blood, sweat and tears stuff was needed in buying a new house no matter how poor you were or how bad a credit record you had. There was a mortgage banker on every corner willing to give you a loan for up to 110% of the value of a property that no one in their right mind would tell you that you could afford. All this was done in the liberal / socialist / feel-good notion that everyone, no matter what, some how or other “deserved” a nice home.

What used to be the American dream where people actually had to work for something before they could have it, has turned into the American nightmare where we have an economic “crisis” where folks who don’t have good credit can’t go spend money they don’t have or never will have. Things are finally returning to reality as to where they actually need to be.

Unfortunately, no matter who wins the presidential election next month, the US government will continue to spend it’s way to a solution to try to return to the situation that got us in this mess to begin with – people spending more than they can afford and others gambling on the fact that they will keep spending more than they have in the future.

Fortunately, each of us has free will, and other than being taxed to death to pay for the errors of our government policies, we can choose as individuals to live within our means, make investment decisions based on hard economic reality, and try not to become a part of the frantic masses who base their life on what the daily whim of an out of control media chooses to have you worry about on a given day.

It’s time for a return to the true American Dream where you work hard for what you have and buy only what you can afford. This will be a true wake up for a couple of generations that have had a “see and buy” mentality and are used to buying everything you want now and pay interest for the rest of their lives, never actually paying on the original principal.

Buddy Oakes for Musings About Life in a Fallen World