Friday, October 5, 2012

The Replacements

We kind of liked the "replacement refs" the NFL hired.  They called the game completely different than the regular refs did.  There was more contact on the receivers as they went out, making it harder to complete all those short Brady-to-Welker type passes.  It was tougher to get open.  That caused the offense to run more often, which was becoming a lost art under the "Fantasy League" rules the regular refs applied.  (We like the running game.)  The replacements also called more pass interference.  They made it easier for the defensive backs to cover the receivers.  But once the ball was in the air they had to play it straight.  The regular refs did it the other way, making it easier to get open but they gave the defensive backs more latitude if they could get to the ball.  All that is a generalization, of course.  The replacements missed a lot of calls.  They had a hard time keeping the game under control.  And they didn't coordinate with each other very well.  It was fun while it lasted.  But once they began to determine the outcome of games, everyone knew it was time for them to go.

The lasting image of the "replacement refs" was in the Green Bay game.  On the final play the defender and the receiver came down with the ball in the endzone.  Either it was a winning touchdown.  Or it was an interception that saved the day.  One ref called it a touchdown.  The other signaled interception.  It's kind of the way Barack Obama and Benjamin Bernanke interpreted the latest economic numbers.

Two weeks ago the Fed Chairman termed the unemployment situation "criminal" and launched another round of monetary stimulus.  He already had leaked his intentions over the summer, provoking a massive stock market rally.  The Federal Reserve Board's intervention probably lifted the Dow Jones Industrials by 1,000 points or more.  Left to its own devices the market might have stayed put, perhaps even declined.  It's impossible to say.  But corporate earnings were peaking and turning lower.  GDP and employment were trudging along, but at unspectacular rates.  And Washington was perfectly happy to continue the "New Abnormal" economic environment.  The politicians were figuring out ways to postpone the "fiscal cliff."  But nothing practical was on the table.

This week President Obama trumpeted the economic data as verification of his team's outstanding performance.  The unemployment rate declined.  The stock market remained at elevated levels.  Interest rates were low.  Everything was looking good.  The country was on the right path.  Re-elect the president.

Touchdown.  Interception.  Whatever.  Our view right along has been that Barack Obama and Benjamin Bernanke have been delivering mediocre results.  It could have been worse.  But in light of the phenomenal resources at their disposal, let's face it, mediocre is terrible.  Up 'till now the two have worked together, perhaps unwittingly, to create an unprecedented fiscal and monetary stimulus that should have resulted in a Super Boom.  In reality, the economy is barely keeping its head above water.  And when the bill comes due for all the stimulus, it's hard to figure what might happen -- but it probably won't be good.

If the Free Market is allowed to operate the United States could zoom ahead to the next exponential level.  There's tremendous technology waiting to be exploited.  There's ample wealth available to finance the required investment.  Despite all the bellyaching it's obvious America's youth is more talented than any generation that's come before.  They'll do it. Just get out of the way and give them the chance.

The stock market is artificially high at this point.  Earnings are pointed down.  The political scene could swing towards a European model for the next four years.  Despite the obvious negatives, our advice is to not worry about it too much.  The regulations and the rules and the intervention into the market and all the rest of it is a pain.  Of course, it would be better to get the real refs back in the game.  But as the Mighty Belichick would say, "It is what it is.  We will deal with it."

It's a problem.  But it's not an insurmountable one.  Stay invested in a diversified portfolio of Special Situation growth stocks.  The future is bright.  It might take longer if the "replacement refs" who run Washington keep interfering.  The long term outlook remains a good one, nonetheless.

Walter Ramsley
Executive Editor