SYSTEMATIC PORTFOLIO MANAGEMENT
REGISTERED INVESTMENT ADVISOR
FAMILY OFFICE SERVICES


Table
of Contents

Overview
Investment Process
  • Equity Portfolios
  • Balanced Portfolios
  • Mutual Funds
Fee schedule
Vitae
Current
  Commentary
  by Dennis M.
  O'Connor
 •Brae Head Total
  Return
  Performance
Contact Us
Employment
  Opportunities
Tel: (413) 746-3700
     (888) 932-3300
Fax: (413) 746-3419

Copyright © 1998 - 2016
Brae Head, Inc.

Past Commentaries

Current Commentary, Review and Outlook
November 6th, 2002

To My Clients, Friends & Observers:

What Voters Want

The Federal Reserve Board met today and cut the Fed Funds rate another half-point to 1.25%. It will do little other than further stimulate a housing market that needs little stimulation. In fact, to the extent it encourages a speculative bubble in housing prices, it could do more harm than good. The Fed is not solely responsible for “getting the economy going again” as the pundits like to put it. The Fed is responsible for monetary policy and for maintaining a stable banking system. Barring the wanton production of currency, the Fed has exhausted its options for economic stimulus. It is the legislative branch of the federal government that is liable for fiscal policy and the legislative branch has shirked this responsibility for the last two years.

Much has been written about similarities of the Japanese economic malaise of the last dozen years and the U.S. economy and stock market. If the symptoms in the U.S. appear familiar the disease is quite different. The Japanese continue to do little to put real spending power in the hands of their consumers. Their banking system is wholesale rather than retail oriented. This is one of the fundamental distinctions between our economic policies.

Yesterday the voters in America spoke convincingly to the two major parties. The Democrats enjoy the biggest enrollment in the nation. It would seem the majority were speaking to their own party. That appearance is deceiving because the fastest growing “party,” if you will, is the “unenrolled” party, to which I belong, by the way. Looking at Massachusetts, where registered Democrats (1,460,881) outnumber registered Republicans (546,333) by 2.7 to 1, unenrolleds are the most significant block at 1,977,773 voters (all year 2000 figures). In the Massachusetts legislature Democrats outnumber Republicans 7 to 1. How and why, then, did Republican Romney (who was soundly defeated in a Senate effort here four years ago) defeat Democrat O’Brien, who appeared to have all the perfect characteristics to win – female, bright, personable, young, well spoken, experienced and with all the “right” constituencies. The answer is fear. Fear not generated by threats or suspicions, but an actualized fear of present, personal conditions. It is evident in the low Consumer Confidence statistics. People may not be able to do much about job layoffs or shrinking paychecks, but they can vote, and they are fed up. They incurred an average $300 annual state tax hike recently and they are afraid of more of the same.

Among Massachusetts ballot initiatives was the “Clean Elections Law” which was enacted by the voters in 1998 by a two to one margin. The question on the ballot yesterday was: “Do you approve the use of public funds to support and enact the Clean Elections Law?” The answer was a resounding “No,” 74% to 26%. . Do the voters want “dirty elections?” I think not. The operative words were “public funds” i.e. taxpayer dollars. The voters don’t want to have to pay more for clean elections. Shouldn’t they be entitled to clean elections in any case?

Another Massachusetts initiative would have banned the state income tax entirely. It failed, but by a much narrower margin than was expected. Over 45% voted to end state income taxes entirely.

An unusual ballot question was overwhelmingly approved in two suburban Springfield area districts. These were initiatives to instruct the districts’ representatives not to vote for Thomas Finneran as Speaker of the House. Mr. Finneran runs the statehouse with an iron fist and is perceived to be the leader of the Boston Democratic political machine.

A little over a week ago I dined at a restaurant while watching the last of the O’Brien-Romney debates. As it ended our waiter commented, “Not one of them mentioned the Big Dig. Nobody talks about the Big Dig.” Massachusetts’ state auditor, Joseph DeNucci, in addressing this $15 billion project, has reported that hundreds of millions of dollars are missing or unaccounted for. These funds could have kept the state’s budget in balance. The Springfield Union News headlined today that “Voter support in suburbs gives win to Republican.” Is there voter resentment towards the Boston concentration of political and financial power at the expense of the rest of the Commonwealth? Without a doubt.

On the federal level Republicans have regained control of the Senate, increased their margin in the House, and picked up additional governerships as well. Both parties can learn from this and particularly from the Massachusetts experience that the future lies in the suburbs, not in the big cities, that the taxpayer funded costs of infrastructure for big city development is unnecessary and unacceptable. They can learn that average voters have become aware that almost 50% of their earnings are spent on aggregate taxes. They can learn that, compared to money and economic freedom, “a woman’s right to choose” or “clean elections” pale in significance to the average voter. Additionally the Republicans should learn that there is little else the Federal Reserve can do to stimulate economic growth and realize that they have a two year window in which to exercise their responsibility for sound fiscal policies. They can start by letting voters keep more of what they earn. They can finish by completely overhauling the oppressive, arcane enigma that is the current Tax Code. Then government should return to performing the first orders given it by “We the People” in our Constitution: “…establish Justice, insure domestic Tranquility, (and) provide for the common defence…”

Best regards,