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Fletcher: News items that caught my eye

August 23, 2011
Stephen Fletcher , The Alpena News

Some weeks go by and pretty much nothing interesting comes to my attention. They are just kind of blah time periods during which I mostly read books and periodicals. This last week wasn't like that at all. Two or three interesting items passed my purview and here they are.

First, I'm reading along in The Wall Street Journal, which is a pretty staid periodical by any measure, and a columnist whose output I'm reading refers to President Obama's stimulus and other plans as "economic bimboism." That is quite a change for a major publication, as normally a newspaper or magazine shows more respect to the president of the United States.

Of course, "economic bimboism" isn't a bad description for the hapless bumbling of this administration, it's just sort of unexpected to see it written. Personally, I have been privately referring to the president as "Bam Bam" because of his economic ability. For those of you who are history buffs, you'll know the origin of "Bam Bam" immediately. In "The Flintstones" comic strips and television program, Fred Flintstone's pal, Barney Rubble, has a son named "Bam Bam."

Both "Bam Bam" of Flintstones fame and "Bam Bam" the president seem to have little or no knowledge of economics, thus both can probably be described as "economic bimbos."

I hope our president has had a nice vacation in Martha's Vineyard. I'm certain these days of vacation have been more fun for his family than for our country's unemployed families.

The second thing that startled me out of my lethargy was a guy saying to me: "So where do you put your money under these economic conditions?"

Typically, during a recession with inflation you go to the stock market. However, with the extreme lack of economic tranquility from Washington that might be a foolish move. The market is down a couple of thousand points and is very volatile right now. I'm taking a "wait and see" approach to the stock market.

So if it's not stocks, is it bonds to invest in? Well, the bond market pricing in bonds moves inversely to the interest rates. What this means is that interest rates are low, bond prices are high. The opposite is also true. When bond prices are low, interest rates are high. The present situation is that bond prices are high due to interest rates being at historical lows. If interest rates rise, which is the only way that they can move as they are virtually at zero today, then the value of a bond purchased today will surely drop in the future.

Holy Smokes! If it's not stocks and it's not bonds, what about holding your investment principal as cash? Well, the American dollar is down against almost every other currency in the world. The dollar is off around 7 percent versus the Euro and down over 15 percent against the Swiss Franc. In other words, holding your nest egg as U.S. currency is risky too.

Because of all this lack of certainty in the markets caused by the lack of leadership in Washington, I think that "Bam Bam" and "economic bimboism" are apt terms under the circumstances.

Maybe after President Obama rests up, our country's economics will improve.

Stephen Fletcher was graduated decades ago from Cornell University with an A.B. in Economics and from Michigan State University with an M.B.A. He has lived and worked in the decades from graduation until now in the Alpena area. He thinks economics is fun and interesting.



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