Poor Obama. Poor Geithner. They are trying to do a very difficult thing. They are trying to reason with a group of investors who are acting more like a group of drug addicts. Wall Street is obsessed with their next fix. They are never satisfied. Because of this, the markets cannot be trusted in their interpretation of news.
The market baited us into believing that we needed to pass an urgent bank rescue plan, and then it baited us into believing that we needed to pass an urgent stimulus plan; the market baits us into believing that once it gets its fix all will be well. Not true. In the heart of a recession there are no quick fixes, but that doesn’t mean there aren’t any long term solutions.
So here we stand. Investors trying to understand Washington and Washington trying to understand investors. The current group of 40 year old / Generation X traders are a mess and Obama knows it. They are so full of fear from the dot.com
fiasco and now this that they have lost all rational ability to manage money. From my experience, the majority of these guys lack conviction, they don’t know who to trust, their greed resembles that of royalty, and these panic attacks have removed all sense of toughness from their makeup. This Generation X group wants to replace anything fundamentally concrete with abstract technical analysis. They are all surface and no depth. It’s clear that Wall Street is not at the top of our game and thank goodness we have a smart guy like Obama who is taking action to fix this thing.
At this stage of the game it’s time for Wall Street to check into rehab and heal from its addiction. The time honored virtue of patience needs to replace the short term infatuation with getting the next quick fix. If Tim Geithner needs two more weeks or even two more months to come up with the right banking solution then he should be given all the time he needs. Don’t listen to Wall Street Tim. They will ditch you and move on the minute you finish your speech.
Smart investors feel there is a tremendous opportunity to capitalize on the overreactions we currently see. Just because Wall Street has an addiction problem doesn’t mean all of corporate America does. There are segments of corporate America that have never been more fiscally responsible. Compare Apple’s (AAPL
) Steve Jobs who works for $1 a year with a banking executive like John Thain who was running around like a rat trying to secure his $10 million bonus. Look at Apple’s $28 billion in cash. Look at Amazon (AMZN
). Look at Google (GOOG
). Look at IBM
. Just because the financials are out of whack doesn’t mean the entire country is.
Investors would be wise to take a step back and gain some perspective on the new Washington / Wall Street dynamic. Washington is attacking all the right problems, they are working on housing, unemployment, and banking. If they weren’t doing these things, we’d be in serious trouble; but they are. Wall Street just happens to be too sick to notice.
In the meantime the door is wide open for savvy investors to do the unthinkable nowadays, which is to make long term purchases based on Washington’s actions today. It’s the addicts who are laughing at Warren Buffett for buying Goldman Sachs (GS
) and General Electric (GE
) but I assure you that Warren Buffett will get the last laugh. It’s like Jesse Livermore once said, "Throughout all my years of investing, I've found that the big money was never made in the buying or the selling. The big money was made in the waiting."
DISCLOSURE: LONG AAPL