Investment Planner Releases 'Obamanomics: How Policy Affects Investment Management'

Share Article posted "Obamanomics: How Policy Affects Investment Management" to new Investment Blog The article details how current proposals and trends affect Investment Management.

The American people voted for change in 2008, not realizing they were going to get more of the same policies of the previous administration. More government spending, more and greater deficits, more government bailouts and ownership of previously private businesses, more regulation, and more government interference are being continued on a much grander scale than many imagined. The scale of which Obama policies are being proposed will have a profound affect on investment planning and portfolio management.

The health care industry accounts for about 1/6 of our economy. It is clear the government will have a significantly increased role in picking the winners and losers of both care givers and care consumers. Rationing of care is a fact of any health care system. With the technology we have today it is physically and economically impossible to provide everyone with every drug, procedure, surgery, etc., available. While health care reforms are needed, rationing decisions are more efficiently handled by patients and the free market than by government bureaucrats. Long waits and poor care in countries with a large government role in health care demonstrates our reform is headed in the direction of shortages and greater market inefficiencies.

Both political parties have played a large role in handing out trillions of dollars in corporate welfare, rewarding those who have failed. Worse yet, the government has taken ownership (i.e. AIG, General Motors) of companies and now compete against companies that have survived on their own. Part of the efficiency of free enterprise is the weak die off during lean times allowing the efficient to innovate and compete in the future. It will be harder for surviving companies (i.e. Ford) to innovate and invest in the future because the government bailed out and now owns GM.

Many of the billions in the "stimulus" plan are being used to retard the natural cleansing of the system that is required to get back on solid ground.

Housing is another important segment of our economy. Homeowners whose homes are worth less than they owe and are unable to meet current mortgage payments are being offered government backed mortgages at 125% of appraised value. Taking money from taxpayers to help those who have made purchases beyond their means does economic harm. These actions keep home prices artificially high and prevent potential homeowners who are capable of purchasing at lower prices from becoming homeowners.

Health care, corporate welfare, and housing are only a sample of the tidal wave of government involvement in our economy. Anytime the government gets overly involved in free markets, moral hazard and inefficiencies are created that cause the economy to operate at less than optimal growth rates. When government picks the winners and losers; there is a pattern of rewarding those who make poor choices and making those who have made good choices pay. The government overreach is at such a grand scale it will affect our daily lives and our investments. The United States will have to become accustomed to much slower economic growth and lower corporate earnings for the foreseeable future.

The increased role of government means Obamanomics is having a profound affect on investment management. With slower economic growth and the government picking winners and losers; asset allocation and individual stock selection will play a greater role in investment returns. While diversification is always crucial, choosing asset allocations that correspond with economic reality is equally important in this investment environment. Investors can no longer afford to park money in equity index funds as they did successfully in the 80's and 90's. Broad index investing versus proper asset allocation and researching individual stocks with strategic advantages will be the difference between poor investment returns and achieving investment goals.

Investors who want to manage their own investments, but lack the knowledge and/or time for proper asset allocation and research of individual investments, need to obtain portfolio management advice from a trusted source. The Arbor Investment Planner provides the Arbor Asset Allocation Model Portfolio (AAAMP), Trade Alerts, Updates, and Special Reports to provide investors everything needed to manage their portfolio. The AAAMP uses Stocks and ETFs to provide a conservative diversified portfolio for long term growth.

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Ken Faulkenberry

Candace Runaas
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