Posts Tagged ‘Radio Address’
Saturday, August 21st, 2010
By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors.
With markets as jittery as they are, why would President Obama want to further undermine investor confidence?
In his latest weekly radio address, the president set up a straw man – privatization of Social Security – and then used it to once again scare Americans by saying their retirement savings were at “the whims of Wall Street traders.”
I have two big problems with his comments.
First, he starts with a flawed premise – there is no effort now underway in Washington to “privatize” Social Security in any way. At least two non-partisan watchdog groups analyzed the president’s statement and said it didn’t pass a truth test.
Second, the president is fanning fear for no good reason. He’s using his bully pulpit to tell Americans to be afraid to invest because the capital markets are a crooked cabal of “Wall Street traders” that spends its time scheming up ways to steal their life savings.
The president is renowned for his use of words and imagery, so it’s likely that his phrasing was intentionally and carefully crafted for effect. Which brings me back to the beginning of this commentary – why?
And why now? This chart from State Street Global Markets shows that investor confidence in June and July was rising off May’s 12-month low (and one of the lowest lows going back to January 2001) despite stubborn unemployment, mixed economic signals and the prospects of a double-dip recession. Surely the president’s characterization will not help build this confidence further.
A Bloomberg story today may be onto something: “President Barack Obama and fellow Democrats have run out of time and tools to generate growth as a historic government intervention to rescue the economy runs up against the limits of the November election calendar.”
The president has been bashing the financial sector since he was Candidate Obama, throwing around terms like “fat-cat bankers” and deriding markets as “casinos.” With midterm voting only a few months away and the Democrats increasingly vulnerable to big losses, it’s no big stretch to think the president may be returning to an old reliable to whip up support at the polls.
But this should not be seen as an “us against them” issue. The fact is that some 50 million U.S. households have individual retirement accounts, and millions more have 401(k) accounts, 529 accounts for their children’s education, pension accounts and the like to build wealth for their future. When the president undercuts confidence in the markets, these “Main Street” investors trying to plan for retirement and future college tuitions feel the impact, too.
The ultimate drivers of stock price performance are the underlying economic and financial conditions, not “the whims of Wall Street traders.” When investors and business leaders feel confident about the future, the overall economy benefits. This is when jobs are created and productivity rises, and we certainly need more of both right now.
Good government policy is key to instilling confidence and creating an environment conducive to long-term business investment, and this will be reflected in the financial markets. Financial reforms have been approved by Congress and the president — let’s give them some time to see how they work.
In the meantime, the president’s job is to lead us forward to better times, not to keep the country scared and living in the past.
Director of Research John Derrick contributed to this commentary.
Tags: Barack Obama, Bully Pulpit, Chief Investment Officer, Double Dip Recession, Economic Signals, Election Calendar, Fat Cat, Fellow Democrats, Financial Sector, Frank Holmes, Government Intervention, Investor Confidence, Privatization Of Social Security, Radio Address, Retirement Savings, Straw Man, Truth Test, U S Global Investors, Wall Street Traders, Watchdog Groups
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