08/18/10 Baltimore, Maryland – The stimulus debate du jour is how the government will save Fannie Mae and Freddie Mac. More government support is vital, said Treasury Secretary Timothy Geithner, the maestro of yesterday’s White House housing summit, “to make sure that Americans can borrow at reasonable interest rates to buy a house even in a downturn.” It is, after all, your God-given right.
To be clear, the Treasury “will make sure the GSEs have the resources to meet their financial commitments,” Geithner added. Whatever the fate of Fannie and Freddie, it will be financed with tax dollars and controlled by government. Both companies, despite being at the very heart of the financial crisis, were left out of the recent Financial Reform Bill.
“Government is part of our future,” Bill Gross responded. “We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.”
Scary stuff, eh?
But as menacing as this all ought to sound, here’s an interesting twist: Some of the best-performing stock markets in the world this year are in socialist-leaning nations. Denmark’s OMX 20 (like our Dow) is up 22% so far this year, the best-performing index in the developed world. Incredibly, Hugo Chavez’s IBVC index of Venezuelan’s stocks is close behind.
Compared to the S&P 500, it’s no contest… 2010 is the year of the socialist investor.
There’s more going on here than just form of government. Denmark, for example, is in the catbird seat of the euro crisis — part of the EU but not a euro nation, very low debt and a conservative banking system.
But still, it’s worth noting… in a world that’s terrified of excess government involvement, two countries with massive state presences are giving investors top-rate returns.
Ian Mathias
for The Daily Reckoning
Ian Mathias
Ian Mathias is the managing editor of Agora Financial’s Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report – Agora Financial’s flagship income investing advisory.
Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He’s also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he’s not at work, you’ll probably find Ian on a bicycle, racing up and down the “mountains” of Baltimore County. Ian has a BA from Loyola University in Maryland.
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Doesn’t the high inflation in Venezuela factor into their stock market performance?
Similarly during hyperinflation, Zimbabwe’s index had the best “numeric” performance in the world. It tracked the reduction in value of the Zim Dollars…inversely.
With a 30% inflation rate, that return on the IBVC index actually looks pretty bad to me.
Andy actually used his brain before publishing his comment unlike the author.
REAL returns is what matters.
Lame blog post.
Ian, it seems that you are just posting the facts and not making a value statement (I hope). Your post is an interesting observation of the way it is.
Keep in mind, however, that a return of 20% in exchange for your freedom will not last. With the overwhelming force of government, I can force you to work for free until you drop, forbid you from raising your prices (like Chavez did this year), and promise you the world.
The thing is – it won’t last. The ownership of private property is a basic human need. Socialism is great for the short term, but it rots in the long term. Capitalism is like gravity. You might not like it, but it’s a natural law that can’t be repealed.
Apart from being socialist, aren’t Denmark and Venezuela both net energy producers?