Spend First, Ask Questions Never

How government works...

INVESTORS always talk about bulls and bears...but no one ever talks about Chihuahuas, writes Eric Fry at The Daily Reckoning.

Maybe they should. The Chihuahua in my household, "Tango", spends most of his time finding the warmest spot on the floor...and sitting there...until someone offers him food or some other enticing attraction.

Tango doesn't worry about much of anything. When he's out and about, he trots along the sidewalk, darts in and out of the shrubs, chases after birds and generally enjoys himself. And when he's not out and about, he's lying on some sun-drenched floor tile.

Tango doesn't fear much – not even much bigger dogs – but he's terrified of the rain. So when you add it all up, you get a happy-go- lucky little pooch who loves sunshine and hates rain.

Investors could do worse than to "be a Chihuahua". Find the sunshine and repose...until the rain clouds begin gathering.

Throughout most of the global financial atmosphere, the barometric pressure is dropping. Scattered clouds are encroaching upon what has been a delightful two-year run of warm, sunny weather. Japan is radioactive; the Middle East is hyperactive; and most of the Western world is insolvent.

Thankfully, a few select companies are providing selective investment opportunities. But even selective investors must pay close attention to the clouds overhead. There aren't a lot of breezy cirrus clouds these days; it's all nimbus. The US economy is visibly slowing down, while the growth rates of places like China, India and Brazil are contracting.

At the same time, the desperate financial conditions of countries like Ireland and Portugal – as well as states like California and Illinois – are retuning to the front pages. These are real crises, dear reader. Feels like time to avoid the rain...and to try finding the sun wherever you can.

Here in the US, the economic recovery is providing very little legitimate sunshine. This so-called recovery is a tanning booth, powered by outrageously large and expensive "stimulus measures." Unfortunately, now that the stimulus Dollars are spent, and vast portions of the real American economy have failed to revive as hoped, we Americans are left standing out in the rain with our fake tans...and no sign of sunshine anywhere.

A quick foray through today's headlines tells the story...

"Uncertainty Fuels Portugal's Financial Tailspin"

"More Radioactive Water Spills at Japan Nuke Plan"

"Disposable Incomes Drop For First Time Since September"

...and lastly, "Harry and David File for Bankruptcy." Yes, it's true; the gift-box retailer that began selling fruit by mail in the 1930s has filed for bankruptcy protection. Gift-box buyers – as well as "re- gifters" of gift boxes – will no longer be able to rely on Harry and David as their "go-to" present of last resort.

Lost, temporarily, amidst these disturbing headlines is the even more disturbing fact that nations cannot spend their way to prosperity, no matter what clever name they slap on the escapade. From FDR's "New Deal" to Lyndon Johnsons' "Great Society" to Obama's "Build America Bonds" the programs follow a familiar path: spend first, ask questions never.

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