and our two political parties are basically telling us that they will not make necessary reforms as they would involve too much pain and could imperil their chances of winning the presidency in 2012.

Ever since President Franklin D. Roosevelt’s legendary “First 100 Days” in office, which stabilized the U.S. from being ravaged by the Great Depression, the first 100 days of each president have been used as a measuring stick for success. Well, that time has come and gone for our current leader. When does the first 100 days imply these are the “Only 100 Days” that matter?

It looks as though President Barack Obama had 100 days to push through the basics that were badly needed to stabilize the United States' economy and then lay groundwork for his big initiative called health care reform. Since then, much of his time was spent preparing for midterm elections, then recovering  from his midterm losses, after that  he was announcing his re-election bid and then, judging from all of the Republicans who have already declared their intentions for the presidency, the race got started. That said, it is our opinion the chances of the two parties successfully making difficult decisions to fix the massive, potential problems staring us in the face are small, unless of course the global financial markets or Mother Nature imposes it upon them. Neither of which can be viewed as a long-term positive event.

Therefore, it is with great anticipation and hope (a word we do not use to describe an investment strategy) that nothing tragic happens until President Obama or our new Democratic or Republican president has his or her 100 days in early 2013 to take their quick attempt at fixing our country before getting ready for the 2014 midterm and 2016 elections.

It is not possible for America to remain a great country if the opportunities for meaningful reform are reduced to either financial market or climate-induced crises and 100 working days every four years. We need a full-time government, regardless of which side of the aisle they come from, and not political parties that are full-time fund raisers that occasionally legislate in the first 100 days.

QUANTITATIVE EASING 2 SAILS INTO THE SUNSET

June 30^th 2011, was the last day of the Federal Reserve’s financial asset purchase program known as Quantitative Easing 2 [QE2].

Traditionally, the Federal Reserve stimulates economic activity by lowering short-term interest rates. A decline in these rates reduces borrowing costs with the goal that it will lead to increased investment | consumption, particularly of consumer products purchased on credit.

When short-term interest rates are already near zero and cannot be lowered further, this type of policy is unlikely to have a significant effect. Therefore, economic activity was stimulated in other ways, specifically by raising the prices of stocks and other assets. QE2 definitely increased asset values, leading to an increase in wealth and consumption; it generally reduced volatility | stability in the stock market.

In terms of job creation, unemployment peaked at over 10 percent and had been retreating until recently settling at 9.1 percent. To us, QE2  did not impact these figures, as low interest rates have not created employment, historically speaking.

The main purpose of QE2 was preventing deflation and this program certainly played a role in creating commodity price inflation as investors [and banks] can borrow at extremely low rates and purchase global commodities. In addition, banks borrowed capital at the Fed Fund rates to buy U.S. Treasuries for a wide spread; this helped financial institutions balance sheets; it also curtailed their lending to some extent.

Did QE2 aid the reduction of interest rates? Absolutely. The Fed Funds rate is almost zero and the 30 year Fixed-Rate Mortgage is approximately 4.75 percent. If these rates persist, the housing market will continue to show signs of improvement, albeit slowly.

The real problem facing the economy is that households are reducing their debt levels due to 1) credit contraction following an easing of credit standards in the past decade and 2) households are anxious about increased food and gas prices, elevated unemployment, uncertain economic growth and continued malaise in the housing market.

The final effects of QE2 will not be known for many years to come. However, the immediate wild card is when Chairman Bernanke and the Federal Reserve will begin to reduce the size of its balance sheet. The first sign of this will be when the Fed ceases reinvesting the proceeds from maturing securities and the next step will be actual asset sales [both of which are expected before the Federal Reserve raises interest rates]. When this process begins, the effects of QE2 will be reversed. But until the economy shows signs of continued improvement, the end of the program should not produce any meaningful economic implications.