Manifesto Part 1
(a response to recent requests for thoughts on the political scene and its potential impact on stock prices)
Pretty much everyone I know, who has worked steadily for a number of years, owns their home. For some it’s a townhouse on a “postage stamp” size lot in Boston and for others a single-wide mobile home in Bremen, Alabama. I travel across the Country and my observation, stated at the outset, holds true regardless of things like occupation or level of education.
Now, please, let the following “soak in”: On the global stage, even amongst developed countries, this degree of wealth alone makes these people KINGS. Hold on a second and let me restate that. Makes YOU PEOPLE kings.
Here’s the point. In the history of mankind, the only economic form that has ever produced liberty and prosperity – like that described above - for the masses is that form which most closely resembles capitalism – that is an undisputed, historical, economic fact. Historically, it is this system that made this Country special. I’d even say exceptional.
It has been written by various classical economists that we have never known true capitalism (pure competition) here in this Country. Possibly, the closest we ever came to it was during the late 1800’s in the era known as the second industrial revolution. Really, since the beginning of the New Deal and the end of the second World War we have steadily grown government (controls and regulation) in every facet of our society which, of course, has had the effect of limiting individual freedoms. I would suggest that anyone who is interested, pick up a copy of F. A. Hayek’s “The Road to Serfdom” or watch any number of interviews with the late Milton Friedman or Thomas Sowell – you can find them on YouTube.
So, a lot has been written over the years regarding elections and the stock market. It has been my observation that people take this information and, quite candidly, distort it to fit their own personal view of how things should be. Government spending can be good for the economy and stock prices. Lower taxes and regulation almost always are. Innovation and the increases in productivity that come with it are good for both as well.
In certain debates I have often stated: if tax rates don’t matter then make them 100%. This is a silly way to make a serious point – one that I think should be obvious. Things like tax rates and regulations DO matter and they matter a lot especially to the more productive members of society.
Historically, there have been different reasons why different political policies might be good or bad for the economy and the stock market. Periods of prolonged innovation can and do come about, regardless of party politics, as long as individual incentives and freedoms are not stifled.
I’m not interested in discussing politics in these forums but economics is certainly fair game. The essence of these recent requests has, in fact, been based in economics even though that is not the way they were worded. It seems to me that there is less understanding than ever about economic issues and the causes of both real and perceived economic angst. Cognitive dissonance is the disorder du jour and confirmation bias has joined “death and taxes”.
If this all seems discombobulated, go to our inventory of written blogs and video podcasts to catch up.