Friday Rant

2/21/2014

Today I am going to move away from market commentary and options education and venture again into the world of *gasp* econ-politics. There are a few readers out there who give me grief for this and say I should stick to options. And if any of those who syndicate my column choose to skip this one, I understand.

But, hey, it's my website, I pour a great deal of energy (and dare I say love) into this and, y'know, there's fair warning on the right hand side "Market Commentary (sometimes social/political stuff thrown in for good measure)".

What prompted this Friday Rant is two outstanding editorials in today's New York Times. From David Brooks on the right and Paul Krugman on the left. (Oh, and before anyone thinks that they can pigeonhole me politically, be advised that I voted for Reagan twice and Obama twice).

David Brooks discusses Capitalism for the Masses and makes some very good points. Economic equality and the possibilities for making a successful enterprise of one's life. On the one hand, there is a fight over raising the minimum wage and on the other there is this, "When Facebook entered a deal to buy WhatsApp this week, it agreed to pay a price equal to $345 million per WhatsApp employee".

For Capitalism to continue to succeed it must be democratized and available for everyone. Actually, in this regard options democratize the stock market. Google is a $1205 stock, well beyond the reach of the average investor. Yet, due to the leverage of options an investor can profit from Google at a fraction of that cost.

Paul Krugman has an important must read piece, The Stimulus Tragedy. The American Recovery and Reinvestment Act was a stunning success. If anything, it did not go far enough. There was so much misconception, mostly ideologically based. Such as that it would spark inflation and drive interest rates through the roof. The opposite happened, in fact. Interest rates have stayed low and the real threat out there is deflation and not inflation.

In Europe it's been even worse. The crushing "austerity" forced on weak economies has led to terrible unemployment and declines in economic ouput.

Where I am worried is that the US is making the same mistake it did in 1936-7. FDR's stimulus plan, the NRA and the WPA pulled America out of a Depression and when the stimulus was turned back in the mid-1930's the economy plunged again and it took World War II to get America back into prosperity.

Agree with me, disagree with me, these two articles are worth reading and thought provoking.

Don't worry, next week it's back to options!

By: Randall Liss, The Liss Report