Obama's approval slipping, oh my!

The news headlines shout out that President Obama's approval numbers are at an all-time low, that he hasn't really done anything, and that he's dithering on Afghanistan. So he's not doing a good job as president, right?

I disagree.

Although the Republicans are whining about record deficits, Obama (and Bush before him) did what was needed to avoid a worldwide meltdown that would have lasted much much longer than the current recession. Greater than 10% unemployment doesn't win any president popularity, but with the economy limping back to life, this will change pretty soon.

In short, as this article states, he is in the process of preventing a depression, remaking America's global image, and championing universal health care. Not bad for a first year!

Investing in an inflating market

In a previous post I predicted that we would not be headed into another Great Depression, that there would be hopes for a recovery, and that the government would sacrifice the dollar to get out of this mess. It's looking like that prediction is coming true.

In another post I predicted that the market was at a bottom. I was a week early, but it was still a pretty decent prediction if I do say so myself.

I also put together a portfolio for this recovery that ended up returning 26.5% from Jan. 9 to today, while the S&P returned 20.3%. Again, not bad.

Will I quit my day job yet and become a Wall Street trader? Not quite yet. But I will make some new predictions.

I predict that with unemployment over 10%, Americans still struggling, and the shock of the financial crisis still on everyone's mind, the Fed will choose inflation over any threat of a recovery. All of the financial rags are predicting a resurgence of the dollar soon, but I predict over the next year a continuing decrease, and at some point the Fed will actually have to raise rates to keep inflation from getting crazy.

What does this mean for investing? Assets like commodities, gold, and energy should do well. Government bond prices should fall. All bonds will be under pressure from rising interest rates. Although Congress is looking at changing the health care industry, I still see this as a good long-term investment, as people are willing to spend more and more for their well-being. I also see a continued rebound in tech stocks and the NASDAQ.

At any rate, this is a good time to rebalance your portfolio. Here is my new BeeDub Index:

High-Yield Bonds (VWEHX): 5%

Intermediate-term Investment Grade Bonds (VFICX): 5%

2X Short Government Bonds (TBT): 5%

Emerging Markets (VEIEX): 5%

Health Care (VGHAX): 10%

S&P 500 Index (VFINX): 10%

NASDAQ 100 (QQQQ): 10%

International Stocks (VGTSX): 20%

US Small-Cap (NAESX): 10%

Gold (GLD): 5%

Energy (VGENX): 5%

Commodities (DBC): 5%

Real Estate (VGSIX): 5%

I'll keep these for the next 9-15 months before rebalancing. Let's see how this plays out!

Repudiation of Ayn Rand

This Slate article is the best counter to her philosophies (and what's becoming the philosophy of the far right) that I've seen.

CitiZombieBank

A little post-Haloween followup. I now get why Citi has jacked up rates to 29.99% on their customers (including me). This New York Times article describes the company as "desparate for capital", and paints the picture clearly:

While Citigroup has written down tens of billions of dollars’ worth of mortgages on its books, there are looming problems in its huge credit card portfolio. Of the company’s $1.2 trillion in credit commitments outstanding in the second quarter, $873 billion were credit card lines. A measure of the bank’s efforts to wrestle that problem to the ground is the interest it charges customers: in October, Citigroup raised interest rates on some credit card holders to 29.99 percent.

Chris Whalen, editor of the Institutional Risk Analyst, calls Citigroup “the queen of the zombie dance,” referring to the group of financial institutions that the government has on life support.

They are hoping that a combination of bank assistance and maximizing revenue and buying time will let them survive,” he said. “When I look at the whole picture, Citigroup is in the process of resolution. I continue to believe the equity is worth zero and that the company will have to go to bondholders for some kind of money to make the bank stable.”

This shows that the government has stabilized the financial system for now, but it's still very fragile. Is a second bailout around the corner?