The Big Picture: Politics

The Big Picture: Politics

Like Barry, part of my bullishness late last year was partly based on guarded optimism that Social Security reform would pass; the big difference is that I have said it will take until October to pass. My close friend who knows politics better than most said the Dems would never pass a bill that diverts money from contributions. He said they will only accept an "add-on" account. So far, he appears to be correct.

However, the latest versions offered give participants ownership of the existing surplus. There is no cost to this proposal and yet participants will have a guarantee of at least some return from social security. This plan may get traction. It may become difficult for Dems to oppose any reform. The fact that will be used against them is the 11 trillion dollar deficit. Voters know the "train wreck" is years away but some will be very upset if Dems block all reform proposals.

Barry, Kudlow uses the correct analogy of getting the Camel's nose under the tent. The idea of "lock-boxing" the surplus is an Al Gore idea. Lock boxing into individual accounts is the best way to protect the owners. It is also the way to get the Camel's nose under the tent.

BUY THE BULL! THE CATALYST TO THE NEXT MOVE IS NOT KNOWABLE. IT COULD BE STALLING SHORT RATES, DECLINING OIL PRICES, PASSAGE OF AN ENERGY BILL OR PASSAGE OF SOCIAL SECURITY REFORM. WITH STOCKS CHEAP RELATIVE TO BONDS AND REAL ESTATE, ONE CAN CONFIDENTLY FORECAST A GOOD MARKET AHEAD. KNOWING WHAT WILL KICK OFF THE MOVE IS NOT POSSIBLE. THE S&P SITS VERY CLOSE TO BREAK OUT TERRITORY. MY BET IS THE MARKET WILL DO LITTLE DURING JULY AND AUGUST. NEVER-THE-LESS, WE ARE AND PLAN TO REMAIN FULLY INVESTED.