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My 2009 Stock Market Christmas Wish List

Tuesday, 23 Dec 2008 02:15 PM

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This season, as you sip eggnog, gather around the warm fireplace with all of the kids and grandkids, listening to the Christmas carols of yore, remember that every year Santa looks at Wall Street and sees who has been naughty and who has been nice.

During the course of the year we've found out that more folks have been naughty in the stock market than nice, and the effects have been devastating.

There have been mortgage brokers a-churning, and profits a-burning, wondering where did it go.

There have been spoiled executives a-toasting, and portfolios a-roasting, bringing back the Dow of long ago.

It's most wonderful time of the year, and I'll tell you why.

At the beginning of every year everyone is flush with optimism. People think: Things will be different this year, this year is my year, now is the time.

That optimism, while in many cases unfounded, is not without good cause this year.

Many believe that the worst of the stock market woes is behind us. As I called earlier this year, I believe that we will have a clear stock market direction by the end of the first half of 2009.

There are too many factors that are in play for us not to start to bottom out, or at least know where we are going.

For instance, adjustable-rate mortgages have not been written since the middle of 2007. With a 36-month period before they start resetting, by the middle of 2009 we will have identified most of the problem mortgages and can make more accurate assessments as to how much the losses really are.

In addition, with a new administration, the first 100 days are always the most critical. Barack Obama will pass most of his policy initiatives in this time period while he still has the political capital of a clear mandate.

These factors working in conjunction with a host of others will help provide stability to the markets and opportunities for investors.

So, as we draw this year to a close here's my stock market Christmas wish list for 2009:

  • The end of TARP — The Troubled Asset Relief Program (TARP) has been a monumental disaster. It has amounted to nothing but a government slush fund to give the banks billions of dollars.

  • Increased tax breaks for new home purchases — If the government is really serious about stabilizing this economy, then it needs to be serious about stabilizing the housing markets. The way to do that is to provide incentives for new investment into the sector. The best way to stabilize the housing markets is not to allocate billions and trillions of taxpayer money to banks. The best way to do that is to provide tax credits to creditworthy families and investors who can actually afford to buy the homes.

  • See you later Hank "The Bank" Paulson— This man may go down as the worst Secretary of the Treasury ever. He has grossly mismanaged funds at the Treasury, has implemented zero measures of accountability for the billions that he has handed out, and has had the audacity to ask for more. He should hope that some of the money he gave away might be potentially put to good use.

  • Revamped Big 3 — It was amazing to see Americans protest more for $19 billion of loans given to the Big 3 automakers than they did for the $8 trillion given out as part of the Wall Street bailout. That is because something bigger is at stake: American Capitalism. When we think of the great capitalists, one name that comes to mind is Henry Ford. Ford, along with the heads of the other automakers, drove American industry in the 20th century and were a large part of what made America the dominant super power it is today. Even when Chrysler was on the brink, a great capitalist like Lee Iacocca came to the rescue to show that American ingenuity can always triumph no matter what the odds. That's what I want to see. I want to see a little American ingenuity from the Big 3 and see them make cars that are quality and that people actually want to buy.

  • Low capital gains tax — There was an idea that circulated during the election that investors needed to pay more capital gains tax. Apparently, that would help the economy grow because investors would be very eager to pay higher taxes, while still investing at the same rate. I hope that this was more campaign rhetoric than actual policy directive. Higher taxes are a deterrent to investing. Keep capital gains taxes at 15 percent. With low tax rates there will be incentives to invest.

  • Open global markets — For decades, the balance of trade has gone against the United States. As we've opened up our markets to foreign goods, foreign countries have not opened up their markets to our products. We need to have an administration that pushes an aggressive free trade policy where new foreign markets will be opened up to American goods. If the new administration is serious about providing more jobs, then it needs to open up new markets to sell American goods.

  • Encourage entrepreneurship — Every time that America has had unrivaled success and growth, it has had a great surge in entrepreneurship. As we have more entrepreneurship and innovation, we will eventually have new companies enter the public markets. That's when the boom starts. We need aggressive tax cuts and exemptions for new businesses. Also we should provide for incentives for businesses that employ American workers. But the way to do that is by encouraging entrepreneurship.

    So Santa, as you remember all of the good boys and girls this Christmas, remember the good investors who have worked hard for their money and need to provide for their retirements and their families.

    And, as I finish my 2009 stock market Christmas wish list, I leave you with these words: If 2008 wasn't so great, just remember that we'll be fine in 2009.

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