Thank you Ben Bernanke. Thank you lame duck Congress and President Obama. Because of you we have a holiday gift fit for a king in the form of quantitative easing and massive tax cuts.
If this doesn't get the economy going, nothing will. In the end, it's a huge bet that's been placed on jump-starting the American economy. And we as investors want to believe in Santa; we really do. And the Santa rally has proved that we as investors are capable of clinging to hope despite very apparent economic problems.
While one might be tempted to revel in the free money cast our way from every possible source, perhaps it's wise to consider saying "Bah Humbug" to the dramatic economic efforts exploding all around us.
True, there’s nothing better than free money but eventually that money needs to be paid back and it seems to me that we are merely kicking the proverbial deficit can down the road. We are not addressing the real issues for the American economy; too much debt, too much exuberance, and not enough rational thought and self-control.
In a recent CNBC survey of investment strategists, I painted a fairly rosy picture for 2011. I stand by those projections. Still despite my outward optimism, I still harbor great concern about the long-term problems facing the United States' economy. Deficits simply will not go away and must eventually be dealt with. Inflation waits in the wings as the US government's solvency is called into question and the printing press works overtime. Entitlement costs continue to soar despite healthcare reform. And the United States still seeks its next business rebirth to compete and win in the 21st century.
Will it be Apple leading the United States to global leadership? I doubt it. Yes, we will own iPads but that won't remake the whole economy.
Don't get me wrong; I'm a big believer in America. There is no country that has the depth of talent and creativity that the United States enjoys. Resources, technology, a currently strong currency, and a resilient population provide huge competitive advantages for America. But we should not assume that these strengths alone can overcome the structural problems mentioned earlier in this column. Sometime down the road we must exercise self control; spending must be reigned in.
While banks and companies are criticized for not spending freely to expand and hire, perhaps there is a lesson to be learned from these institutions.
There's a reason Citigroup and Wells Fargo are conservative in their lending practices. These institutions see the risks in the economy, want to maintain high capital levels, and are living off huge interest margins as the Fed nurses banks back to health. Throughout corporate America, CFOs remain pessimistic about the trajectory of US GDP growth and it's rooted in a belief that, in the end, America will need to pay the price for excess. "Bah Humbug."