What on Earth do automakers, airlines, & alternative energy have to do with "Foreclosure Prevention"?!?!?!
I've seen some complaints from people lately about blog posts on politics. I find this interesting because few things have more impact upon the economy and in turn the stock market as the government can. To bury your head in the sand while the government makes all sorts of absurd policy decisions is like giving away money. Use them to your advantage in investing. One can benefit from the government's mismanagement if they invest properly. As long as the federal government keeps wasting our tax dollars and ringing up an ENORMOUS national debt, it is very likely that the U.S. dollar will continue to fall. As you can see in the chart below, there have been lots of bear market rallies in the dollar over the past several years. I suspect that we are due for another one at some point in the near future, but the trend is undeniable...DOWN.
Here's the latest example of government ineptitude. In their infinite wisdom, a couple of weeks ago the Senate decided to sit down ant put together a bill to help homeowners who are in danger of foreclosure (see article: Big Tax Breaks for Business in Housing Bill). One can certainly debate about whether the government should just let the market correct itself naturally rather than spending money that they don't have to prolong the pain and possibly make things worse (the current housing bubble was essentially created when the government tried to "fix" the bursting tech bubble). Regardless of whether you think they should intervene, in an election year the government probably will.
Here's the best part though, the "Foreclosure Prevention Act" that the Senate came up with includes BILLIONS of dollars worth of tax breaks for airlines, automakers, alternative energy companies, home builders, and a whole host of other industries! WHAT ON EARTH DO THESE THINGS HAVE TO DO WITH "FORECLOSURE PREVENTION"? The lobbyists must be working overtime on this one. The government is going to spend, spend, spend until the dollar is absolutely worthless. Yuck. Doing so will cause the prices of commodities to continue to rise in dollar terms and provide a nice boost to the earnings of foreign companies and U.S. companies that export. For the most part, that's where I have been putting my money.
One thing that I have learned over the past several years is that it is essential to focus on the big picture when investing. Once I started learning about economics and looking for large global trends my investing results improved dramatically. Paying attention to what is happening in the real world rather than just looking myopically for any company in any industry that has good "value" metrics is the way to go. Don't get me wrong, "value" is still very important to me, but it has to be at the right place at the right time. That is why I have refused to purchase restaurant stocks lately, even though they are such a better "value" than they were six months to a year ago (see my blog on this topic: Sell Your Restaurant Stocks Now!!!!). I don't think that the coming pain of higher input costs and lower consumer spending has been adequately priced into many of these companies yet.