By DAVID MOON, Moon Capital Management, LLC
August 19, 2012
An Open Letter to the Members of the U.S. Congress
Please stop it.
Stop meeting. Stop legislating. Stop fighting. Most of all, stop speaking in public. Stay away from the television cameras.
I hear that there is a not-so-secret bunker under the Greenbriar Resort in West Virginia. Go there. Go down into the cave and get taxpayer-funded massages and pedicures. Stay as long as the food lasts – or longer.
Please; just leave us alone.
You are scaring the hell out of people.
In almost thirty years of managing money, I have never witnessed the type of fear exhibited by clients today. And the source of almost all of that fear is you.
For years, I have tried to explain to clients why their fears of politicians are irrational. You guys are dysfunctional, but in many ways, your bark is much worse than your bite. Many of you are, in fact, all bark and no bite. Your bite has been dysfunctional for almost a hundred years. It is your bark that has created this recent environment of economic paralysis.
There is currently $2.6 trillion invested in US money market funds that pay an average of 0.03 percent. These money market fund investors would rather earn zero than, in their minds, subject their investments to the uncertainties of your childishness.
When I meet with investors, they do not ask questions about corporate earnings or business strategies. They ignore market shares and capital structures. They don’t care about P/E ratios. They no longer talk about interest rates, having long ago conceded that we are now Japan. All they want to talk about is you.
You have them frightened to death.
Most of their fear comes from what you say, not necessarily from what you do or don’t do. You are not good at many things, but you excel at criticizing each other. Do you even believe the terrible things you say about each other, or are those merely scripts simply designed to score points with certain needed political constituencies and donors?
For years, I have explained to our clients that their fascination with politics is, from an economic standpoint, mostly unwarranted. Just because the evening news is dominated by this topic doesn’t mean that the value of their portfolio will be five years from now.
People tend to focus on things they understand, not necessarily things that are important. Since most people have been in at least one argument in their life, politics seems understandable.
We tend to ascribe to politics, however, much more economic importance than it actually deserves.
Our growing national debt is a real long-term threat to our economy. The greater risk is the exponentially ballooning, off-balance-sheet Medicare obligation.
In the short-term, however, the biggest economic problem is investor and consumer psychology. Solving the long-term problem requires difficult decisions and sacrifice. Solving the short-term problem, however, simply requires you to shut up – and I am afraid you may consider that an impossible sacrifice.
David, a guy who pays you
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).