Time to Take Profits: Too Much Government Involvement Will Ruin the Economy

James | Nov 23, 2009 | Comments 6

2009 has been an epic year to date for the average trader. It’s been a rally since March, but the key question is when will we see a major reversal. With the S&P already up 66%, can we expect this kind of trend to continue? My firm opinion is that the markets have become oversold and its time to invest in strong sectors or hard assets rather than the paper assets such as the market itself. I feel the gains we have been seeing throughout the past year have been overexagerated and almost created an optical illusion that the economy is at full strength. It’s through the mass amount of stimulus, bailouts, and rescue plans that the world has somehow saved us from mass chaos and kept markets going higher. The thing I question is what is going to make me want to be a long-term investor if we can’t see any form of sustainable growth. Frankly this past year has been all superficial, temporary growth supported by the bailouts. The key questions that need to be answered are what will happen to these companies when the stimulus checks stop coming through? Will they all fall off the map? I have questions with the way things will be run in the future. When will we see the side effects of the bailouts? If its anything like projected this could mean decades of debt, inflation, and higher taxes. I have my skeptics with the way the government is handling this whole ordeal. Why can’t we let banks fail? To read more about my opinions on this read last weeks article, Too Big to Fail Too Big to Survive. I just feel with the way the government is controlling everything they are taking away the personal risks companies take on. I would cut out any form of government intervention with the economy and allow free market principles to take place. We are already seeing the start of this with the government passing an amendment to where they can control the size of investment banks. How’s this make sense? So we tell Goldman Sachs not to make top dollar and become the biggest bank in the world because it imposes risk. Since when should the government decide what type of return a company should pursue? When you penalize growth and signal to companies that their success is getting out of hand then less growth is expected. Ultimately if this plan were to pass we would just see less growth, which would hurt the overall strength of the markets. Plus with the huge debts coming from health care reform, etc what confidence can we have in the American economy? What we have to look for is investment possibilities overseas. Aka China who is taking the opposite direction of the U.S. promoting growth. Though how much can China grow if the U.S. has decided not to?