Optimized key words for Page Title

As an investor, you have to wonder if anyone is steering the ship of state in terms of economic policy. During a White House news conference on February 28, President Bush adamantly stated once again that the country was not headed into a recession. When asked about the prospect of gasoline costing $4 a gallon, the President responded: "That's interesting. I hadn't heard that."

Subsequently, the Energy Information Administration reported that gasoline will reach $3.60 per gallon in June, and could rise to $4.00. Maybe the EIA should give the White House a call.

As to whether the country is facing a recession, the minutes of the latest Fed meeting state that, "The staff’s projection showed a contraction of real GDP in the first half of 2008..." The minutes also state that recent inflation reports are "disappointing," noting with concern that inflation is edging higher.

Meanwhile, both the Administration and Congress are unabashedly touting the premise that a revival in economic growth will begin in earnest when 130 million households begin spending their rebate checks. With food and energy prices skyrocketing upward, home values plummeting, tens of thousands being laid off their jobs, just what are these 130 million households supposedly going to buy with that grandiose $300 to $600 per person windfall?

Needless to say, with the subprime explosion and the economy spiraling downward it should be of little surprise that the finger of culpability is pointing towards former Fed Chairman Alan Greenspan...and he is not taking it well. In fact, he is lashing out, stating that he is being unfairly blamed for the current crisis and that he has no regrets with regard to the decisions he made while at the helm of monetary policy.

Instead of decrying his innocence, Greenspan would do well to help ensure that the same errors are not repeated. Unfortunately, any admission of an error in judgment, however slight, might reduce the number of proffered million dollar speaking engagements and with a recession looming one cannot be too careful.

So how bad is the investment environment? The International Monetary Fund stated recently that despite "unprecedented intervention, the financial markets remain under considerable strain." The IMF is estimating credit-related losses for the financial industry in the neighborhood of $945 billion as of March. That projection certainly conflicts with Standard & Poor's estimate of $250 million, while Goldman Sachs' $460 billion estimate. Somebody’s calculator needs a new battery.

Speaking of financial strain, after seeing a 54 percent drop in Alcoa’s first quarter earnings, a 15 percent drop in first-quarter sales over at Advanced Micro Devices and lowered earnings outlooks from Novellus Systems and UPS, a few of the Street’s denizens are now starting to believe that first-quarter earnings might come in weaker than expected. Just what, pray tell, are the others expecting to see?

Wall Street will eventually right itself. That is not a worry. What is worrisome is that we as a nation are not tackling the root cause of the problem. A recent report by the Fed indicated that high school seniors answered only 48 percent of the questions posed regarding personal finance and economics correctly. Only 16.8 percent knew that stocks offered the highest level of return long-term, while 37 percent thought a savings bond would outperform stocks.