Welcome Back, Carter

The bearish stock market, the return of unapologetically expansive government, recession and fears of future inflation impart painful memories of an era thirty years ago when America’s head was bowed, its people beleaguered and “the misery index” first entered the political lexicon. Pardon us for being partisan, but President Obama’s start is conjuring up memories of another Democrat President—Jimmy Carter.

Like President Obama, President Carter also inherited a difficult situation. The American economy was suffering the effects of a huge ramp-up in government spending, both because of President Johnson’s Great Society programs and the Vietnam War. However, Carter’s solution to these problems seemed to worsen them. Inflation and economic stagnation had a choke-hold on our economy, the stock market was in a multi-year funk, foreign adversaries seemed to thumb their nose at us with impunity, American Embassy staffers were being held hostage in Tehran, Iran and all of this disquiet and despair eventually was quantified in an index that combined unemployment with inflation. The resultant number was called the misery index and President Carter’s average misery rating of 16.26 was the highest in history.

Misery IndexWhile the Obama Administration is new to the Oval Office, there are certain events occurring that have a Carteresque feel to them. The stock market’s massive plunge since the election, which intensified after Treasury Secretary Geithner’s mishandled bank rescue plan announcement and release of the President’s budget, has taken the market back to levels last seen under President Clinton. However, the not-ready-for-prime-time handling of a number of important matters, such as the bank rescue plan announcement, the British Prime Minister’s visit to Washington, the Administration’s efforts to obtain Russian assistance in preventing a nuclear Iran, etc. is quite worrisome. Furthermore, since the Treasury will have to print money well into the future in order to fund this massive increase in government spending, expect to see a major bout of inflation at some point down the road which will require strenuous government action to reign in.

Here’s a Youtube link to the theme song of a familiar seventies sitcom. Try playing it while you read the news headlines, look at stock charts or ponder federal spending trends. The catchy tune might just make you forget the ballooning misery index.

Welcome Back, Carter

About Ockham Research 645 Articles

Ockham Research is an independent equity research provider based in Atlanta, Georgia. Security analysis at Ockham Research is based upon the principle known as Ockham's Razor, named for the 14th- century Franciscan friar, William of Ockham. The principle states that a useful theory should utilize as few elements as possible, because efficiency is valuable. In this spirit, our goal is to make the investing environment as simple and understandable as possible, yet no simpler than is necessary.

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