If Barack Obama were a stock, would you be buying or selling? On
the Rasmussen Approval Index History exchange, Obama Inc. (stock
symbol “BHO”) is already down from its January 21 price of 27 pct
to 11 pct.
The usual disclaimer on investment vehicles, “past performance is
no guarantee of future performance,” doesn’t apply in this case:
there is no past performance, other than management’s campaign to
get you to invest.
Obama, Inc. has just taken over a long-established firm with two
lines of products: foreign policy and domestic policy. Foreign
policy has little upside; domestic policy, tremendous risk.
Foreign policy, in the age of Islamic terrorism, is primarily
about the hard product line: safety and military success. While
there is growth potential in the soft product line — what the
Europeans think of us — that won’t support the stock price in
difficult times. And the two product lines cannibalize each
other. Promoting military strength will make the Europeans
unhappy, as, in the domestic line, will the Buy American
provision in the “stimulus” bill.
The lead hard product is Iraq. Unfortunately for Obama, Inc.
there is little room for growth in that line. The war in Iraq has
been won — won by the discredited former CEO, and won despite
the specific advice of the current CEO. Iraq is now, or seems to
stockholders, secure and democratic.
What can go wrong? Just about everything. It’s the Middle East,
after all. The problem for Obama, Inc. is that it has widely
advertised that it intends to change the business strategy, so
any failure will be attributed to the new CEO. And if the new CEO
reverts to an approach more like his predecessor’s, he will risk
alienating his preferred stockholders, as well as the Europeans.
Obama, Inc. has a similar problem with Iran. The CEO has stated
that it must not be allowed to develop nuclear weapons. But how
is he going to stop it? By bombing Iran? Please. Through
negotiations? Perhaps, and only perhaps, with a different
president, but Iran’s current president, Mahmoud Ahmadinejad, is
eligible to run again when his term ends in August 2009, and who
can say he won’t be reelected? Successful negotiations have to be
regarded as iffy at best — not a promising growth story.
Obama, Inc. also has a problem in Afghanistan, which presents all
the difficulties of Iraq in an even less tractable country.
Honoring his sales campaign pitch, the CEO has announced he will
send more troops to Afghanistan, but one of his most prominent
stockholders has advised him not to “try to put Afghanistan
aright using the U.S. military.” What are the chances BHO can
sanitize Afghanistan (the Soviets couldn’t, and the Secretary of
Defense has said the effort will be a “long slog”) while keeping
his stockholders happy? Slim to none.
The domestic policy line faces a different problem. The product
is doing terribly. Business, and confidence, are down.
Unemployment, and fear, are up. Fortunately for Obama, Inc., the
problems originated on the previous CEO’s watch. But now the
pressure is on to produce change — and not change the
stockholders have to believe in, but change they can actually
see.
Will Obama, Inc. be successful? Contrarians doubt it. The
business strategy is to spend massive sums of money, but there
are historical precedents suggesting that course will almost
certainly fail. Any money pumped into the economy has to come
from somewhere. There are only two sources, taxes and bonds, but
they are really the same: the productive sector. The government
can take money from today’s productive sector, or it can borrow
from tomorrow’s productive sector.
An earlier CEO of this enterprise — his name if I recall
correctly was Ronald Reagan — reminded us that when you tax
something you get less of it, and when you subsidize something
you get more of it. Taxing the productive sector in order to
subsidize the unproductive sector, like a split-strike conversion
strategy, may be good politics, but it’s not likely to fix the
economy. The economy may fix itself, but then again it may not,
or may not for a number of years. Stockholders may not be
patient.
Could Obama, Inc., long on rhetorical smooth talk and media hype,
get lucky? Of course. But savvy investors don’t bet on luck and
hype.
That’s why the smart money is selling Obama short.
