It’s Not About Hope

Like most, I watched yesterday’s Inaugural festivities with interest, less in the pomp and pageantry and more in the messaging from our new President. While I don’t think it will go down as among the most memorable and quotable of addresses, it was blunt, honest and grounded. But let’s be clear; notwithstanding the positive sentiment around Obama’s taking the reins, and the hope associated with his plans, his achievements will be based on policy decisions and not on hope. And while sentiment will play a role in our recovery, it will not be the driver of a rebound. Changes in sentiment that impact people’s financial behaviors will come from real changes in our Federal Government, the economy, and the health of our financial institutions and local governments. And these changes will only happen if Obama is willing and able to make the hard decisions necessary, such as:

  1. Aggressively taking over failing banks, recapitalizing the healthy parts with public and private capital and working out the rest over time;
  2. Providing a mix of tax incentives and public funds for upgrading our technology infrastructure;
  3. Using tax policy and access to our National labs and Universities to unlock trapped intellectual property that can be used for innovation;
  4. Developing a durable solution to the morass that is Social Security;
  5. Constructing a plan for re-invigorating public education, using market-based methods and vouchers to create a culture of high achievement that is accessible to all; and
  6. Investing in re-training displaced workers from dying industries to make them productive, fulfilled and able to secure a healthy future for themselves and their families.

None of these things are easy and require broad-based, bipartisan support for passage. But for the Obama Administration to be truly successful, he will have to take on these massive, mutli-generational problems. While it is easy to say that the hand he’s been dealt is not fair, and that bar for what constitutes success has been set too high, he has been handed an historic opportunity to restructure key elements of a badly broken system.

As is my wont to use derivative metaphors, the Obama Administration is not unlike a very valuable at-the-money option. The question is, will he reward the call buyers or the put buyers? Because my hunch is that option sellers will be the losers here; something explosive will happen. The question is in which direction.

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About Roger Ehrenberg 94 Articles

Roger is an active early-stage investor, having seeded or invested in over 20 companies in asset management, financial technology and digital media since 2004. Prior to his venture days Roger spent 18 years on Wall Street in M&A, Derivatives and proprietary trading.

Throughout his career he has held numerous executive positions, including:

President and CEO of DB Advisors LLC, a wholly-owned subsidiary of Deutsche Bank AG. His 130-person team managed over $6 billion in capital through a twenty-strategy hedge fund platform with offices in New York, London and Hong Kong.

Managing Director and Co-head of Deutsche Bank’s Global Strategic Equity Transactions Group. In 2000, his team won Institutional Investor magazine’s “Derivatives Deal of the Year” award.

As an Investment Banker and Managing Director at Citibank, he held a variety of roles and responsibilities in the Global Derivatives, Capital Markets, Mergers & Acquisitions and Capital Structuring groups.

Roger sits on the Boards of BlogTalkRadio; Buddy Media; Clear Asset Management; Global Bay Mobile Technologies and Monitor110. He is currently Managing Partner of IA Capital Partners, LLC.

He holds an MBA in Finance, Accounting and Management from Columbia Business School and a BBA in Finance, Economics and Organizational Psychology from the University of Michigan.

Visit: Information Arbitrage

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