Obama's Speech: What It Means for Investors

Last night, President Obama spoke to a joint session of Congress to lay out his economic plans. His plan has three major points.

The first is to set up a new lending fund designed to get bank lending back on its feet. The crucial issue for the administration is to take the toxic assets off the balance sheets of banks. Once that happens, banks will be in much better shape to resume lending.

The idea is for the government to set up another Resolution Trust Corporation similar to what the government did during the S&L crisis. I’m pleased to see that Paul Volcker is advising President Obama since Volcker had experience with the original RTC in the 1980s.

My biggest concern, however, is whether Treasury Secretary Geithner has the guts to tell us exactly how much this will all cost. The administration has been very light in giving out details. Personally, I’m getting near my “where’s the beef” moment.

The second part of the plan is a housing plan designed to help keep responsible folks out of foreclosure. Frankly, this is a waste of time. My wife and I looked at high-end foreclosures yesterday in Tahoe. It’s very sad, but I think it’s necessary to see the housing market fall back to reasonable levels.

The third part of Obama’s plan is to target banks and hold them accountable. This may be politically popular but I don’t see the point. This is just a “blame game” maneuver since politicians always need a scapegoat.

What does this mean for investors? The ones who will be really hurt are folks invested in U.S. dollars. Uncle Sam will need to borrow a lot more money to finance this initiative and that will put more pressure on the dollar. The plus side is that a weak dollar is great for commodity-oriented stocks like steel, precious metals and agricultural chemicals. I’d avoid almost all retail stocks. Consumers will be under a lot of stress for the remainder of 2009.

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