Fly on WallStreet

While "The Forgotten Man" is certainly an interesting book, I'm not sure that a review of it has any place on this blog. As it happens, it isn't really about trading or investing; it's about the history and politics of the Great Depression. (And as you know, the discussion of such subjects is strictly forbidden on this "vulgar" blog.)

In an effort to give you a good idea of what Shlaes' book is about, I suggest that you take a look at this. After spending a week reading the actual text, I can tell you that this short article does an excellent job of summarizing the 700-page book.

Delimiting our focus to trading and investing, I find it difficult to offer many conclusions. (As I said, those subjects were not the focus of her book.) However I believe that it provides us with a good reminder of the tremendous (and often bearish) influence that equivocal political leadership and interventionist policies can affect upon on our holdings. As the book illustrates, it was in fact the presence of such qualities in Roosevelt's leadership (and too an extent, also Hoover's) that inflicted so much damage on the Dow.

That being said (and without getting too political), I think that its recent release coincides nicely with the soon-to-be-changing political leadership we'll come to witness in the near future. Should we currently be in throws of a recession that extends into the next few years, the valuation of the private sector could be further diminished by the possibility of new, interventionist legislation (from either side of the aisle) and the potential for increased competition from the public sector. As such, it is my belief that these factors necessitate an understanding of our current political climate in order to navigate the financial markets.

But that isn't surprising. For better or worse, I've come to believe that you can't really profit in the market unless you know something that others don't or you can appreciate something that other market participants do not yet appreciate (but will soon come to realize). As this relates to the reminder that Shlaes' book gives us, I would suggest that sectors such as health care, utilities, and the like are at this point perhaps more speculative than investors realize. (Note: That is not to say that I'm necessarily bearish about the future of these industries.)

With the majority of media attention focused on the recession (that we may or may not be in) and all of its causes, I suspect that there is currently a lack of appreciation for the politically-related risk faced by these sectors. But as elections draw increasing closer, media attention--along with investor sentiment--is likely to shift. It is in this change of focus (and as a consequence, share price) that there may exist an opportunity for profit. (Perhaps one of you can even think of a specific stock that may be particularly vulnerable to such a shift.)

Of course, the assertion that the valuation of such sectors doesn't reflect an adequate appreciation is a difficult one to justify. The fact that I've formed that assertion based on the notion that "the focus of the media largely dictates the focus of investors" is certainly objectionable. (Perhaps one of you has experience or input on the profitability of gaming the media.)

Okay; I'm already wandering way the hell off course. To wrap this up: "The Forgotten Man" (despite not being about trading or investing) offers an interesting and fresh perspective on the political and economic decisions of the White House during the Great Depression. It is my belief that an accurate understanding of that era (which Schlaes does an excellent job of providing) is central to the correct interpretation of present economic conditions, and in turn the financial markets.

# posted by Jeremy @ 6:26 PM