Government spending has me re-thinking all of my investment horizons. There is an unprecedented amount of new “Govt” money in the pipeline, and I think this might offset the serious downtrends of unemployment in the short term.
With the end of collaterization, M3 money took a dive, but now the M1 money supply is beginning to take up the slack. The creation of dollars from thin air is replacing the “crap credit from thin air” that fueled the boom into 2006. It is every bit as unsustainable as CMO’s, but in the short run it could re-inflate the economic balloon for a few more years – or at least slow down the “pop”.
Having just gotten hammered on taxes, it is taking some discipline not to run out and buy a tax deductible home. And even more tempting is long term capital gains income on stocks replacing the higher short term “trader” rates. With the new government dollars, and the now unparalleled tax benefits, the market may continue to grow inspire of rising unemployment.
The new government debt may just kick the problem down the road until 2012 – or it could blow up tomorrow. Either way I am staying clear of short positions until . . .