FRAMESHOP:OBAMA'S 'GOOD DEAL'

Amidst the hubbub of a diplomatic visit from Gordon Brown, President Obama focused the debate in an unexpected direction:  buying stocks.

Speaking to reporters, Obama dropped a resonant phrase into his comment about the state of the markets (emphasis added):

profit and earning ratios are -- are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it. (link)

FDR talked about a 'new' deal, and Obama talks about a 'good' deal?  Could be. What seems more likely, however, is that President Obama is being advised by his economic team that the stock market is reaching a bottom--that all the hot air and helium hype pumped into stock prices over the past five years has finally been released, such that the prices we see in the Dow Jones and the NASDAQ might actually reflect some vague image of U.S. business reality. 

Does this mean President Obama wants us to take the money we would spend on burgers and fries at Applebees® and use it to buy 25 shares of Ford instead?  Instead of buying a new Macintosh computer, should we buy 100 shares of Intel?

I suspect the President would consider that wise if we planned to hold Ford and Intel for three years or more.  But more than retail stock purchases, Obama's words seem to be aimed at large investment firms and fund managers sitting on the sidelines watching their mountains of cash collect dust.

The problem, in other words, is not the shortage of cash in the financial system, but a shortage of nerve. Investment bankers are all sitting on the side, shivering like kids with wet hair on a cold morning at summer camp. And so the President--for the first time--turned to them and shouted,"Jump in, ya' bunch of wimps!  It's much warmer in the pool than it is outside!"

There probably are not very many investment fund managers out there who make decisions based solely on the prodding of the President.  Which means we should not expect a sudden 500 point rise in the Dow by noon, today.  Still, even the most skittish of traders cannot help but wonder if Obama is speaking the truth.  The rest of this week will likely result in a fury of financial market analysis by investment firms across the country.  Millions of graphs and charts will be produced. By this time Monday, I suspect we will begin to see an uptick--not in the entire market, but in certain sectors where analysts have decided that valuations and market conditions are right for buying.

As for the political impact of Obama's 'good deal,' they could be devastating for the already tattered and capsized Republican Party.  If Obama's 'good deal' comment results in a 200 point rise in the market, we will likely see bitter infighting increase in the GOP ranks.  If the markets shoot up 500 points, primary challengers will suddenly come out of the woodwork.  If the markets rise 1000 points in a month, be prepared for talk of a new party that embodies the true principles of the Conservative movement.

Whatever happens, it should be interesting to watch and good overall for Americans struggling in the difficult economy.  It might even mean that retail investment opportunities are right around the corner for those with an eye towards the future and an interest in putting their money to work to help revive the economy.