As Economy Recovers, Obama Turns From Substance to Spin President Barack Obama's State of the Union address Tuesday was packed with soaring rhetoric. The country needed a new "Sputnik moment," Obama said, and his national policies would help us create more world-leading companies like Facebook and Google (GOOG).

The speech sure was a crowd-pleaser. A poll by CBS (CBS), for example, found a staggering 91% of viewers approved of Obama's proposals.

But investors looking for cues about the shape of future policy shouldn't get take any of those plans as done -- or even doable. Despite the lofty sentiments expressed by President Obama, the White House seems to have moved from substance to spin amid growing signs the economic recovery is gaining steam.

"After two years of ambitious proposals and policy achievements, President Obama used Tuesday's State of the Union address to frame a new narrative about the economy and bipartisanship," analysts at political risk consultancy Eurasia Group wrote in a note to clients. "The speech underscored that the president is moving from a policy-making strategy to a public relations strategy."

Standing Back and Letting the Recovery Happen


No news should be good news as far as the markets are concerned. Strong signs indicate that the U.S. is recovering more rapidly than most had predicted, and highly respected analysts like Deutsche Bank's (DB) Peter Hooper are anticipating a GDP growth rate close to 6% under the right circumstances in the year ahead.

Under those conditions, feel-good rhetoric and flowery oration may in fact be a better way to go than heavy-handed policies that have the chance of backfiring. Speeches about getting tough on spending, for example, will be better than the kind of big budget slashing that could deliver a major blow to overall demand.

A light-touch approach is especially promising given how broad-based the signs of a recovery are. As corporate profits soar, job growth is picking up and may be underestimated at the moment.

Housing, VC and IPOs All Surge


Even the battered housing sector showed signs of life as new-home sales soared passed expectations on Tuesday. The 17.5% surge in sales marked the biggest jump since 1992, analysts at Ned Davis Research wrote in a report Tuesday, and sales in the Western region jumped 71.9%. Median sale prices rose to their highest levels since July 2008. "We expect housing activity to stabilize in the coming months and gradually pickup as the year progresses," the analysts wrote.

Venture capital investment grew 19% to $21.8 billion in 2010 to post its first gains since 2007, according to the MoneyTree Report by PricewaterhouseCoopers.

The IPO market also continues to heat up, a sign that investor risk appetite is gaining momentum. Issues by Demand Media (DMD) and Nielsen Holdings (NLSN) soared on their debuts Tuesday -- up 33% and 9%, respectively.

The key now is not to let the politically charged environment interfere with the advancing recovery.

GOP in Spin Mode, Too


Based on its official response to the State of the Union address, the Republican party also seems intent on limiting its ambitions to the cosmetic.

GOP rhetoric about fiscal responsibility aside, the $50 billion that Eurasia Group expects the Republicans cuts from this year's spending to be a drop in the bucket compared to the $1.48 trillion deficit.

"The big takeaway on fiscal policy is that neither the president nor Republican respondent Paul Ryan (R-Wis.) spent much time on entitlements or other large drivers of the deficit," the firm's analysts wrote. Like the White House, "Republicans must convince the public that the limited spending cuts they deliver are meaningful."

Political posturing and grandstanding like the recent visit from China's president elicited will be in abundance. But investors should be thankful that actual measures should be in short supply.


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TomHornbuckleJr

oh my I hope this is not an accurate article. the majority of the people i talk to aren't interested in obama's proposals. we are concerned that he will spend us into a depression. i certainly hope the republicans are able to cut spending more than 50 billion a year. at the least they could repeal the health care bill, that would save more than that in net revenues. these are serious times and call for serious measures. announcing that the recession has ended in the face of a 10% unemployment rate is amazing and if not ignorant and delusional, cruel.

January 28 2011 at 5:52 PM Report abuse rate up rate down Reply
Scottilla

REPUBLICANS say that companies cannot create jobs if they don't make enough money.
On the other hand, REPUBLICANS say that even though companies are making lots of money, the stock market is rising, and the GDP is expanding, ordinary people don't have jobs.

If you can't communicate, the very least you can do is shut up.

January 28 2011 at 12:14 PM Report abuse rate up rate down Reply
1 reply to Scottilla's comment
bggdg

Is it just Republicans that "say that even though companies are making lots of money, the stock market is rising, and the GDP is expanding, ordinary people don't have jobs"? If so, it's only epublicans that speak reality.

January 28 2011 at 7:57 PM Report abuse rate up rate down Reply
bohemianacres

This year we will get the "do nothing" actions from Congress because of the way it is set up from the last election. One party hold the House and the other party holds the Senate. That is a formula for do nothings. So yes, I also expect Congress and government to sit back and do nothing, because that is the inner being of what it is now. This type of thinking of Congress only plays into the hand of the people in office in D.C. They know they can do nothing. Look at all the "symbolic" passages done already since the election. I expect a lot more to come. History will look back at 2011 and 2012 and see it was we the people who took care of ourselves and did something. It will be a case of the doctor curing him- or herself. And it will affect globally. Just look at Egypt, Tunisia, Yemen, and etc. etc. as the days come. Yep, Win The Future will be just as it is being toted today, WTF.

January 28 2011 at 11:34 AM Report abuse rate up rate down Reply
1 reply to bohemianacres's comment
bggdg

Doing nothing is by far the best government can do for the citizens. Let's hope you are correct. Doing something sure hasn't worked very well.

January 28 2011 at 7:58 PM Report abuse rate up rate down Reply
MSmailbox

The "patient" has undergone about all the "treatment" that it can stand, for now. We're in the "recovery room" and must absorb what medicine that we've been able to keep down. Don't get me wrong, we are getting better.

January 28 2011 at 10:40 AM Report abuse rate up rate down Reply
scottee

Investors need The Fed audited and ended. we need the dollar put back on the gold standard to stop the printing and dilution of our dollar. we need The Fed to stop manipulating interest rates, gold prices and stock prices. and we need smaller government, fewer taxes and free markets.

January 28 2011 at 7:48 AM Report abuse +2 rate up rate down Reply
stegerjoyce

Refinancing replaces your current mortgage with a new loan that has a more favorable interest rate and terms that you can afford to manage. The new loan is secured on the same property as your current loan. I refinanced and saving $451 every month! search online for "123 Mortgage Refinance" they got me a 3.11% rate

January 28 2011 at 5:18 AM Report abuse -2 rate up rate down Reply
wayfarer2u

The President is correct, this is a Sputnik Moment. We missed it when Al Gore did not get elected in 2000 and the following IT Bubble burst. Since the proper small business economic model (Bottom-Up) got derailed for the Trickle Down model, the economy got hijacked. The "Too Big To Fail" companies got on the fast track to fleece consumers, not so smart investors and governments for all they could get. Money in, and no investments to the future, efficiency or anything useful to the working class was going out. Fat checks and bonuses to the greedy. Meantime the faithful was looking at the 10lst and ownward congress to deliver family values and "reclaim America" (wink, know what they meant). The Bush years went to corperate values and in return we got the melted economy when small business here in America lost its place (from ineffiency and policy to compete, not tax cuts). The Too Big to Fail companies went off shore before they would get production in America. No money, no honey or house payments whether predatory loans or not. We are on the rocks. How long did the Great Depression of 1929 last? Who is it that think a recovery for the largest, most complex and likely most broken ecomomic system is going to instantly recover from talk about spending and tax cuts? 50 states, GOP governors and mayors included, did not sound the housing bubble was going to happen. Who is it that think the Federal Government is responsible to recover the mess alone. Where is the States' rights in that? Be scared when you hear people that don't understand that the nation must step back to the IT bubble burst and recover that effort. The 9 to 5 job is linked to the Too Big To Fail Companies that are irretrivably failed. The Good Old Boy system in the Big Company is gone as much as the market share, tanked out. Be scared, especially when the nation is hankering for more of the stuff that bought the economy down. The President is correct in calling for innovation, and smaller companies taking up the slack. You don't have a job that you can't create anymore. Since 'Downsizing and Reorganizaton' this clamity has been looming. Again, some want to reclaim America but what they bought on the nation was corperate greed. Standup with dignity to say it was our fault to "stay the course" for rejecting R&D and innovation leading to the sytmied ecomomics coming from 2000 to 2008; a collosal failure to build on the start of the Information Age with the Clinton years. Innovate, starting at this Sputnik Moment or get ready to be a "used to be Super Power".

January 28 2011 at 1:39 AM Report abuse +2 rate up rate down Reply
theprotecter2

I TOLD YOU THAT ASS HOLE WOULD DESTROY THIS COUNTRY BUT PEOPLE WOULD NOT BELEAVE
BEFORE ITS TO LATE STUPID PEOPLE STILL BELEAVE IN HIM THAT OBAMA HE SHOULD GO
BACK TO HIS OWN COUNTRY AND THATS FORSURE

January 28 2011 at 12:08 AM Report abuse -3 rate up rate down Reply
1 reply to theprotecter2's comment
wayfarer2u

You mean destroy it more than Newt and "W"? President Obama is not that good. He is in his country, and doing a better job than Bownie.

January 28 2011 at 1:46 AM Report abuse +1 rate up rate down Reply
elpasoerin1234

How many parents kept telling their kids "don't worry, it'll be alright" while the foreclosure was taking place after dad lost his job? How many times has someone reassured a friend/relative/sweetheart that "it'll be alright"? It sounds all moonbeams and rainbows spewed out to people that will believe whatever they hear. How sad. Everything is NOT going to be alright if we don't change course immediately. This economy is not going to be able to just rock on as it has in the past, but no one wants THEIR special program to be cut back. Even people on welfare carry a cellphone, have more than one television in their home, most have a play station, etc. We are in trouble and we are going to have to make drastic cuts and changes. Obama and his people, the GOP and their people, and WE THE PEOPLE will have to ALL collectively and individually change. Leadership needs to set the example!

January 27 2011 at 10:56 PM Report abuse -1 rate up rate down Reply
2 replies to elpasoerin1234's comment
wayfarer2u

Elpasoerin1234, actually, getting onboard the course the President laid out is best. Where are you going if the nation does not start to innovate; to come up with new ways to do business and make stuff? The Too Big To Fail companies have failed on many counts, including providing jobs to maintain the nation's middle class. See your local goverment about program management for welfare inefficiency. The President is above that. Does your local government have a "Jobs Building" policy or how about "Innovation To Market"? Know the President does not run your state and local economy. Take this concern to City Hall or County Council for action.

January 28 2011 at 1:56 AM Report abuse rate up rate down Reply
bggdg

And the way to spur innovation while simultaneously rejecting the premise of "too big too fail" is to downsize the bloated govenment.

January 28 2011 at 9:21 AM Report abuse +1 rate up rate down Reply
davetonk

I Rest My Case...davetonk

This Is Why There Are No Jobs in America
By Porter Stansberry
November 18, 2010

I'd like to make you a business offer.

Seriously. This is a real offer. In fact, you really can't turn me down, as you'll come to understand in a moment…

Here's the deal. You're going to start a business or expand the one you've got now. It doesn't really matter what you do or what you're going to do. I'll partner with you no matter what business you're in – as long as it's legal.

But I can't give you any capital – you have to come up with that on your own. I won't give you any labor – that's definitely up to you. What I will do, however, is demand you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you're allowed to operate your business. That's my role in the affair: to tell you what to do.

Now in return for my rules, I'm going to take roughly half of whatever you make in the business each year. Half seems fair, doesn't it? I think so. Of course, that's half of your profits.

You're also going to have to pay me about 12% of whatever you decide to pay your employees because you've got to cover my expenses for promulgating all of the rules about who you can employ, when, where, and how. Come on, you're my partner. It's only "fair."

Now… after you've put your hard-earned savings at risk to start this business, and after you've worked hard at it for a few decades (paying me my 50% or a bit more along the way each year), you might decide you'd like to cash out – to finally live the good life.

Whether or not this is "fair" – some people never can afford to retire – is a different argument. As your partner, I'm happy for you to sell whenever you'd like… because our agreement says, if you sell, you have to pay me an additional 20% of whatever the capitalized value of the business is at that time.

I know… I know… you put up all the original capital. You took all the risks. You put in all of the labor. That's all true. But I've done my part, too. I've collected 50% of the profits each year. And I've always come up with more rules for you to follow each year. Therefore, I deserve another, final 20% slice of the business.

Oh… and one more thing…

Even after you've sold the business and paid all of my fees… I'd recommend buying lots of life insurance. You see, even after you've been retired for years, when you die, you'll have to pay me 35% of whatever your estate is worth.

After all, I've got lots of partners and not all of them are as successful as you and your family. We don't think it's "fair" for your kids to have such a big advantage. But if you buy enough life insurance, you can finance this expense for your children.

All in all, if you're a very successful entrepreneur… if you're one of the rare, lucky, and hard-working people who can create a new company, employ lots of people, and satisfy the public… you'll end up paying me more than 75% of your income over your life. Thanks so much.

I'm sure you'll think my offer is reasonable and happily partner with me… but it doesn't really matter how you feel about it because if you ever try to stiff me – or cheat me on any of my fees or rules – I'll break down your door in the middle of the night, threaten you and your family with heavy, automatic weapons, and throw you in jail.

That's how civil society is supposed to work, right? This is Amerca, isn't it?

That's the offer America gives its entrepreneurs. And the idiots in Washington wonder why there are no new jobs…

Regards,

Porter Stansberry

January 27 2011 at 10:47 PM Report abuse -1 rate up rate down Reply