CNN iReport

Obama is suggesting that stocks are potentially a good deal because of a very low P/E ratio. It was clear to me that Obama has no experience in business, in banking, in investing, or in economics but I thought that he will gather the experts around him that will tell him how things work and that he could cut through the fog. It dawns on me that the economy might be "managed" by an amateur that might not be able to learn fast enough or go beyond Democrat agendas.

For starters, only the "P" in the "P/E equation is current, while the "E" is backwards looking. This fact turns Obama's recommendation to look at buying stocks into a "rear-view-mirror" judgement. Instead, investors look forward and they will start discounting the certainty of an economic Depression. Businesses are debt laden, if not catastrophically leveraged to the point where only growth could be the saviour. The current downturn will trigger extreme financial stresses for most businesses. American families, businesses, and governments might have to come to terms that the era of "the entitlement generation" has come to an end and that living within means might now be the norm. 

America might already have missed the window of opportunity to "fix" the economy and downsizing might be the prudent approach. I have to raise the prospect that growth might just not be possible after the American "sub-prime" families have been eliminated from the housing market and from expanding credit. "Getting credit" flowing again (to them) sounds quite odd to me. 

I am afraid that I have increasing issues with Obama's judgement. He might have guessed the American sentiments against the Iraq war correctly, and I have expressed my reservations during the campaign, but since inauguration, it feels downhill only. He can no longer blame his predecessor. It is now in his hands and his judgment makes or breaks it. 

A.I.G. is an example of bad judgement and lack of competence. I hear the banker wolves' cry that the whole financial system might be in danger if A.I.G. fails. However, nobody seems to be asking the questions as to how much exactly that interdependency is and how to possibly isolate those risks. Instead, after maybe a thorough audit is conducted throughout the financial system, a NON government bad asset bank in receivership could collect the global derivative casino. A lot of the problems would simply be nullified by such a move and the damage might turn out to be minor. A.I.G. has made the smart judgement call on its own and is now breaking itself apart in order to safe the healthy parts of the business. It might turn out as a role model for banks and other broken companies.

The banking bailouts and "plans" are more examples of amateurism and bad judgement. Where are the facts about how big the problems are and, again, how could they be isolated? Instead, it feels like Obama is simply tricked by bankers, some of them his nearest advisors, with plans that can only make sense to bankers, into shuffling taxpayer money over to banks at no avail. 

The car industry bailouts are more of such bad judgement calls. There again, the sick has to be isolated from the healthy and an orderly downsizing process should be supported. 

Then there is a budget based an amateurish economic outlook that is so far off reality that the budget will be busted before it is even in effect. If an economic decline of 1.2 % is the outlook, what was all the fuzz about an unfolding catastrophe and that bailouts and a Recovery Plan had to be enacted fast? That outlook sounds more like a mild Recession followed by solid growth. Or was it maybe the idea to push through a Democratic agenda based on a wave of economic anxiety turned unexpected reality? If so, shame on whoever had said idea. The President is supposed to have the best teams available and he is supposed to know much more than we ordinary peoples that rely on newspapers, government releases from after the fact, and our own research. You tell me how the government can seriously predict solid growth after massive declines in housing, car sales, retail, and manufacturing across the board. It is simply bad judgement and the lack of competence and instincts to ask the right questions. I don't really care whether most economists at the time did think alike. He's President of the United States for a reason, which is, among others, to protect the people from mambo-jambo that makes no sense at all, in particular if it comes from the very same lips that missed the downturn altogether - even after it already unfolded - and have absolutely no clue as to what is going on with the economy. 

Lastly, there is a Recovery Plan that has no vision, other than patching America's broken infrastructure (with some minor exceptions). Instead of a bold, visionary approach, the plan supports pet energy projects and extends dysfunctional educational systems, just to name a few. To top it off, the Recovery Plan is nullified with the budget 2010. That is lack of experience, amateurism and bad judgement. 

I support President Obama and I want him to succeed. The entire world depends on his judgements and decisions. Many will say that it will take time for the plans to work. This is one of the faulty judgements that will turn out to be economically fatal. There is no time. The economy is approaching a point-of-no-return where it will simply slip into a chasm and the only explosive growth that we'll see is in the size of the tent cities all across the world. I can only help Obama if I tell it as bluntly as I can. 

This is an unprecedented economic crisis and it needs to be managed with full focus on the crisis. Obama can make his agenda come through. However, the people expect real change. They expect an end to politics as usual and so far, it's just more of the same with a different name. Real visions for an economy WITHOUT fossil fuels, education systems that support the American Dream, infrastructure that prepares America for the 22nd century, etc. Without real, radical change, people will inevitably start asking the question: What exactly was government there for? Has it failed an entire generation?  The White House might end up to be beyond repair.   

For an example for a visionary approach, please read "Recovery Plan: more of the same is not change" at http://www.ireport.com/docs/DOC-199883 as featured on CNN. 

Please comment. I will address questions, if I can.

H.R. Tschudi, economist and entrepreneur, Vancouver

March 4, 2009