Hey Obama, Buy Stocks -- Not Toxic Assets

It appears the White House finally noticed that the stock market has been in a calamitous freefall, not just bobbing up and down. So like a stock analyst  issuing  a "buy"  rating on a company his investment bank just took public, Team Obama has been firing up the hype machine. First, we had the president telling 401(k) America that stocks are now "potentially a good deal" since they've been beaten down so badly. Then last Friday, economic adviser Larry Summers declared stocks to be "the sale of the century" since the Dow Jones industrial average, when adjusted for inflation, has fallen back to 1966 levels (not including dividends).

So here's an idea: Maybe Uncle Sam should be letting Americans use their payroll tax contributions to buy stocks since they're suddenly such a great bargain. That would probably be a far better use of our dough than having Team Obama take our tax money to buy toxic debt from bank balance sheets.  Heck, an adjustment to mark-to-market accounting rules and a favorably sloping yield curve (good for bank earnings) may well mean the best financial rescue plan right now is no plan at all.  And if there is one thing we know Treasury Secretary Geithner can do well it's is a give speech where tells people the government doesn't have a plan.

But be warned: Washington doesn't have a good track record with market calls. Recall that Alan Greenspan was three years and 5000 Dow points too early with his "irrational exuberance" speech. And being early is the same as being wrong when it comes to investing. Just ask yourself this: Does the direction of taxes, spending and inflation make you more or less positive about the direction of the economy? Are stocks the sale of the century or merely in the middle of a longer liquidation phase?