Well I read something that was quite interesting the other day. It dealt with the questions of what we can expect from an Obama Administration. The article by Jim VandeHei and John F. Harris titled What we don't know about Obama points to some interesting thoughts.

So far we know that President Obama has ordered the detainee prison in Guantanamo Bay closed. He expects this to take one year, though the Bush Administration has spent at least 2 years seeking to move some 60 of the worst prisoners to any nation that will not just release them to Al Quida. This is part of his promised acts as a peace maker. That is in conflict with his plans for Afghanistan.

President Obama believes we can win in Afghanistan. He has stated that is the center of the war on terror. And that is where he wants to focus, then end our fight. But to do so is anything but being a peacemaker.

“Most military experts think a decisive win in Afghanistan — as opposed to a muddle-through strategy leading to a gradual withdrawal —will involve a major surge in troops and a willingness to tolerate high costs and high casualties.“

And speaking of war, there is Iraq. Which President Obama continues to move towards running from. The country is finally in some semblance of stability after our prolonged presence and several gaffs of the Bush Administration.

“But this remains an extremely volatile region that could erupt in new bloodshed. Will Obama still cling to a speedy pull-out if it means the country could implode?”

With anti-war hawks like Hillary Clinton in his Cabinet, and a majority of the Democratic Party looking for nothing less than absolute withdrawl what would President Obama do in that situation? Especially as he focuses our troops in Afghanistan thus escalating that conflict? Especially as military history states that a war involving multiple fronts usually end up with loss.

Also along these lines is the question of torture and interrogation. The first part of which is what to do with the detainees in Gitmo as I stated above. But moving forward is what to do about any future suspects we might encounter. They will not be able to be detained. Thus we must presume they will be interrogated in the field. But under what rules?

No matter what some may feel about the use of questionable techniques or outright torture there is one absolute truth. America gained needed information that has led to no more attacks on American soil. With many of the prior interrogation techniques now banned will we still be able to gain that information? Since we will not have detention areas to hold these suspects will we have an opportunity to learn the information that would prevent another major attack?

Then there is the question of the economy. An issue I have long has major problems with. The proposals made by the Obama Administration demand and create multi-trillion dollar deficits, which President Obama has said cannot be maintained long-term. But there is nothing in the proposals that would indicate that the deficits would be paid off in the next 4 years, or even 10.

The public is now becoming used to, and insistent on stimulus checks. If you ask the average American right now they believe that another stimulus check will be in the mail – which has been directly refuted by President Obama. And the poorer the person the more they are anxious for that check.

But that is a mere $850 billion dollars. If President Obama also goes forward with his healthcare plans, his expanded Government, and the declared spending (bailouts) for the economy the imbalance will be at least $1.6 – $2.1 trillion dollars when it’s all said and done (this year alone).

If President Obama plans to keep his budget in massive record deficit only for the short term then he must raise taxes sharply - for ALL Americans, cut entitlements drastically – including the new healthcare and social security, and reduce the military’s budget even as we have soldiers fighting in Afghanistan. And a major deficit will still exist, with no guarantee that the economy will have improved.

And then there is a hot-button issue for me. Darfur. A subject that most politicians have avoided on all levels. America has yet to pass the laws sitting in Congress for 4 years that would prevent corporate or individual investment in the Sudan (Darfur Accountability and Divestment Act). This is similar to the laws passed that prevented funding Apartheid in the 1980’s. Yet even in the Democrat-led 110th Congress nothing has been done.

Will President Obama step up and use his extreme approval ratings to draw national attention to this genocide that has been ongoing for some 7 yeas now? Will he place financial bans, or even use military force to help save millions of non-American lives? Does his role as peacemaker end at the shores of America or does it include other parts of the world that have dire need and no strategic benefit to our nation?

What will President Obama do? No matter what he chooses he will piss off some part of America. But is he strong enough to piss off his main support – far-left liberals? They gave him the money to win. They rallied him over Clinton. They want some of the most extreme (I believe socialistic) changes to the Government. And if President Obama is to be an effective President for all of America, the far-left must be pissed off often and on major issues at times.

But that would bode poorly for his approval rating and chances at re-election. And virtually all the plans of the Obama Administration seem to require 2 terms to come to the proposed fruition. Is President Obama willing to risk that second term for a more balanced Government?

All serious issues, all serious repercussions. And all without any assurance of what will happen. Many wanted change, and in some form or another they are about to get it whether they like the outcome or not.

Labels: Afghanistan War, American economy, Darfur Accountability and Divestment Act, Guantanamo Bay, Iraq, Jim VandeHei, John F. Harris, President Barack Obama, stimulus package, torture techniques

I have been talking about the economy and what would happen if a Democrat would win since late 2007. When it became clear that President Obama was the Democratic nominee I discussed how the stock market would react to his win. And after the election I forecasted what would likely happen to the Dow Jones Index on inauguration day.

I hit the nail on the head. Well close enough to that anyway. I called for a 7600 Dow on or shortly after the inauguration. I called for a 500 point drop on inauguration day. And I detailed how the economy would continue to tailspin to levels last seen in the Carter Administration.

The Dow Jones Index closed down 332 points. The Dow currently sits at 7949. That’s down 4% from Friday and 12% since the start of the year.

Some will want to blame this all on President Bush, but the reality from Wall Street is that a Liberal Democratic President is a negative for the economy. If only ½ the economic promises made on the campaign trail come true the national debt will tower over any level seen before, and none of the plans are good for private business. And that is bad for investing.

Still crude oil is at lows, and the inflation hitting food has not increased in a while. So maybe Joe Public doesn’t realize how bad things will get, yet. But Wall Street is preparing. And they are looking at the long haul.

I still target the low of the first half at about 7600. I still believe that the money wasted on the mortgage/ credit bailouts will increase drastically. I say again that the 2nd stimulus plan will be a worse waste of money than the first under President Bush. And I insist that the Democrat-led Congress under Pelosi and Reid are the worst Congress in at least my lifetime.

I really hope to be wrong. But so far I am 4% or 349 points from being exactly on target. Any spike in oil prices, a run on gold, a blip in the value of the dollar, continued fighting in Israel, or any of a number of anti-American nations - and terrorist groups - beating their chests (as Vice President Biden promised will happen) and my targets will be exceeded. And all the feel-good talk prior to the inauguration will evaporate.

Yes the stimulus plan will be a great political boost for our new President. And public opinion will soar, until everyone realizes that the extra $60 a week (or less) will not prevent them from losing jobs. Or that at some point soon you will be paying taxes for a house you don’t own. Or paying for a healthcare system that is substandard and as convoluted as any department of the Government. Stock will lead the way down.

But there is time to avoid all this. Congress can reel back all the new additional spending. President Obama can give up on the 2nd stimulus plan. Taxes could be cut, at both the corporate and personal levels. And departments of the Government could be trimmed of wasteful spending.

In a pig’s eye.

Congress is going to spend more than what has been used to bailout the financial industry as the first shot in the bow. Additional money will soon be needed to balance the financials already continuing to flounder, not counting those that will follow like dominoes. And the auto industry that stated flatly that a penny less than $50 billion in a bailout would mean Chapter 11, will become bankrupt as they did not get their money.

Increased regulation will increase cost, and fail to increase good business decisions. And companies will fail. The stock market will lead it all down. Lines will form for Government corporate handouts. The national debt will soar.

Sounds bleak doesn’t it. It should. It is happening before your eyes. By the end of the 1st quarter Joe Public will feel it, badly. Just in time for taxes.

And if I am only as correct as I was about my prediction for the inauguration, well you can see what that will mean. I hope, honestly hope, that I will be wrong.

I really want to be wrong. But what I see in the marketplace tells me that I am right. That double digit inflation and unemployment are mere months away. And that it will last at least as long as the Obama Administration, if not longer.

So since putting your money in a bank will gain you nothing, the taxes on investments make that plan dumb for anything with a return in the next 2 years, and gold is already moving just wait. Wait and take small bites all the way down. Because America will rebound at some point. Because I hope to be wrong soon. The reward from that will be better than me eating crow, it will be a stronger economy.

I can’t wait.

Labels: American economy, Congress, Dow Jones Index, Harry Reid, mortgage bailout, Nancy Pelosi, Obama Administration, stimulus package, Wall Street

Let me see if I understand this correctly.

"A jump in unemployment sent stocks sharply lower Friday as investors feared that Americans won't soon deviate from their tightened budgets."

That means that someone thought consumers would go back to spending money, or realistically increasing debt, because the new year started? Or they thought that the $120 a month less in taxes (for only 4 months) President Obama has proposed was going to spur new home purchases? At the same time that nearly every industry in the nation is slashing jobs?

It must be great in the world that some of these economists live in.

We have lost the most jobs in this nation since 1945. That's at the end of WWII, when we scaled back from the massive military supply we needed for the war. And I believe more people had more savings and less debt than today - even adjusting for inflation. And the Government had none of the debt we have today, or will soon have even more of if Congress and President Obama get to spend as they plan on doing.

How could anyone look at the 2nd half of 2008 and not expect consumer spending to continue downwards. To expect the stock market to continue in the bear market that it's been in for months now. I mean what did they expect, President Obama would smile and the world would just step up and buy stocks?

President Obama is a Liberal Democrat. He has said from day one that he will increase the deficit, spending more money than ever before. He has made it explicitly clear that he intends to get even more money from fewer sources, business and the higher incomes. What exactly counts as higher income keeps changing, and getting smaller. And business really loves to have to pay more money as sales shrink.

Let's not forget that with the mismanagement of the Fed and the Treasury (neither of which is President Obama's fault - given) we have wasted billions of bailout dollars, have a line of industries waiting for their turn at the free money ATM called Government, and inflation is the one word no one wants to talk about. And inflation will be the one thing that really kicks everyone's ass.

Of course President Obama will say that the sky is falling tomorrow if he doesn't get to give away all our money. That's polispeak, meaning that he wants to look good at trying something that can't work so he has some political clout before it all falls apart. Then he can point backwards in time and blame everything that fails in his plan on President Bush. Politics as usual.

Of course these "old politics", that President Obama promised to banish, are very good at keeping political clout but horrendous for low wage earners and small business. The stock market knows this. That's why its a bear market. And as we approach the inauguration, I expect even more selling. I mean why have an investment when the taxes on it will cost more than you expect to make in the next 2 or 5 years.

As a stockbroker I learned to look for capitulation in the market. That emotional point when people just give up. That's when smart money jumps in and buys. Except that the emotional selling all happened in September and October. Since the election smart money is selling. And that means things are really going to get worse.

Until there is a reason to buy stocks, the market will continue to slowly slide down. Never in just a straight line, but trend down it will. The Democrat-led Congress will authorize spending in new programs that will not help any one get a job or start a business. The President will come up with plans on how the Government can take care of everyone, while being in every pocket deeper than before. And $1.2 trillion dollars in debt will look like a target to strive for in coming years.

I've said it before and I will again, a Nancy Pelosi and Harry Reid Congress with the most Liberal Democratic President in decades equates to double digit inflation, double digit unemployment, rock bottom consumer confidence, and business bankruptcies all not seen since the Carter Adminsitration - if we are lucky to have it that good.

So who is surprised? Not me.

Labels: American economy, bear market, Congress, credit crisis, Harry Reid, inflation, Nancy Pelosi, Polispeak, President Barack Obama, stockbroker

Last year I was looking at the gold markets and speculated that gold would surge along with several of the gold stocks. On December 6, 2007 I rebuffed the claims of Goldman Sachs when they stated to sell gold. At the time the spot price was $855.

In January of 2008 I pointed out a few gold stocks:

• Streettrack Gold Trust
  
• Barrick Gold Corp.
  
• Agnico Eagle Mines Ltd.
  
• Goldcorp Inc
  
• Western Goldfields Inc
  
• Agnico-Eagle Mines Ltd
  
• Alamos Gold Inc
  
• Anatolia Minerals Development Ltd
  
• European Goldfields Ltd
  

- each of which was soaring. At the same time I was pointing out my belief of what would happen to gold spot prices, oil, and the Dow Jones Index.

"All stock markets, all financial markets, move on emotion first. That’s given. And few things are more emotional that 1.25 basis point moves by the Fed in a week. But fundamental facts of the markets always come to fore and correct the emotion. To me, $1000 gold, and higher gold stocks across the world, is as fundamentally sound today as when I discussed it earlier this month and in December of 2007."

Which lead me to state

"Now I will go one step better. If supply remains constrained, as we can see is likely, and the U.S. economy has the mild recession now being stated by the Federal Reserve. If oil production is cut, in combination with the recent U.S. refinery accident that has placed pressure on capacity, and Senator Barack Obama becomes the Democratic nominee for the President of the United States. If all those actions occur, which seem 80% probable to me at this time, then I believe that gold spot prices in excess of $1125 are possible by the end of this year. Commensurate with this move should be gains among the gold mining stocks across the world."

How close did I get? $1035. Close enough for me and many others. And then gold drifted down. The power outages in South Africa were resolved, oil prices peaked and then dropped. The world was consumed with the problems of the mortgage bailout and then the credit crisis. Major financial institutions failed and/or were on the brink of collapse as politicians (like Barney Frank), The Fed, and the Secretary of Treasury all scurried around like rats on a sinking ship.

Now we have entered 2009 with several important facts known. Interest rates are at all-time lows, the mortgage crisis has yet to be abated, oil is on the rise again - albeit from lower levels than seen in recent years. The American economy is leading the world into a depression, and at our helm is a new inexperienced highly liberal Democrat. None of these things are positives.

The American Government is about to spend even more money than all of 2008 combined, with a Democrat-led Congress that has no desire to reign in the Democrat President. Both his policies as stated and his indicated primary goals are wastes of money on a grand scale few countries could ever command as their GDP.

Thus we are seeing gold sit at $879, the Dow at 9034. That's just about 2000 points lower than my initial expectations for 2008, but above the lows of the year - barely. What will happen next?

In a move much like what was seen in 2008 we will see gold and gold stocks rise. I again call for gold spot prices to hit $1125, with gold stocks reaching new 52 week highs. This will likely be coupled with a reduction in oil production, increases in crude oil prices (to a high of around $105 a barrel again), an ethanol glut, higher energy costs, increase home losses, the failure of more financial institutions, the bankruptcy of at least 1 major auto company, and higher unemployment.

The new stimulus plan envisioned by President Obama, some $850 billion dollars (about 5x the Bush stimulus), will stabilize investor fears and consumer confidence for 1 quarter. Then the resulting fact that most of the money was spent on mortgages, credit cards, bills, or placed into bank accounts and mattresses will be seen. And the economy will drop again. The stock market will drop to about 7600 - as I stated in 2008. The bear will roar.

Gold and gold stocks will be one of a few places investors and those that fear financial institutions will run to. Crude oil will be another. Demand will outweigh supply, and emotion will propel prices ahead of that. For 9 months of the year the economy will be abysmal.

If I am as correct as I was in 2008, then my expectation for gold will be in excess of 90% correct. In terms of the Dow I am being overly generous, if my past predictions are accurate. And Crude oil will likely exceed and then under-perform my belief.

While many will feel my thoughts are overstated, as they did and were partially correct in 2008, I believe that the overall outlook is less stable than in 2008. Politics internationally are as bad with Israel and Palestine trading rockets and Iran moving forward on creating nuclear weapons. Fewer banks are making loans, and fewer people and businesses are qualified to get them. Democratic spending is looking to increase the national debt to levels unseen, without any real expectation of improvement. Government interference with private business is greater than ever before - with the Government consistently proving it has no clue on how to run anything.

It is quite early in the new year. Our new President has yet to be sworn in. Much in the world is in flux. So I hope to be wrong, I hope very wrong, in what I am predicting. But I believe that at the end of this new year I will be no less than 60% correct. How you act on that is up to you.

Labels: American economy, bear market, Congress, crude oil, Dow Jones Index, gold spot prices, mortgage crisis, President Barack Obama, stimulus package

I have been talking about the economy and the repercussions of the failures in the financial markets for some time now. Back in 2007 I was discussing the effect that oil would have on the economy, and I hinted at how the sub-prime loans would affect banks from New York to China.

But in all that is the fact that while I was an experienced stockbroker, I am not an expert in mortgages nor real estate. With the bailout plan being debated and now finalized I wanted to get a more accurate view of what to expect. So I went out and found a more credible source of information to ask questions of.

The result is my interview with Mr. Gregg Cordero, owner and primary broker of Remax in the Binghamton and Broome County of New York State. The interview has been transferred to video for you to view. The interview took place on Thursday, and the delay was resulting from the limitations on getting the video edited and made into a video clip.

I expect that the conversation will provide some insight and answers for the questions homeowners, real estate owners, and those interested in any aspect of real estate markets might have. And I expect that particularly shrewd minds will be able to see their own opportunities and forecasts on the economy.

Labels: American economy, Binghamton, Gregg Cordero, Michael Vass, mortgage crisis, New York, real estate, Remax, sub prime loans

The bailout deal that was rejected on Monday by the House of Representatives was a bad deal. And the result was a Congress divided, a media blitz, polispeak galore, finger pointing, and a 777 point drop in the Dow Jones Index.

Most focus on the drop in the Dow Jones. The media love to play that up. I even heard the number increasing as the night went on. Some newscasters call the drop “a nearly 800 point drop”, or “nearly a 1000 point fall”. Talk about exploiting the facts to gain viewership.

The fact is that nothing that happens will stop the drop in the market. The second that short-sales are allowed back into the market, bigger drops will occur. All that stopping these trades has done is increase the power of the drop. Because while the numbers look big right now, the actual affect is not nearly as big. That’s because of the current value of the Dow Jones Index. But as the Dow drops, these big sell-offs become more meaningful and powerful. And they feed a bear market like honey.

But the bailout, now trying to be spun into a “loan” by pundits and politicians, is horrible. Because it fails to answer 2 simple questions. How much is being assumed in bad debt, and how do taxpayers get repaid?

The first problem goes like this. Under the deal laid out on Sunday, at least 3 separate payments would be given to Treasury Secretary Paulson to buy bad loans. The value of what he pays for the loan is unknown. Would he pay the original price of the loan, the current value, the real absolute value? No idea, nor was one required by the legislation. Thus he could buy all the bad debt at the top price, ensuring taxpayers could never break even or be repaid.

The second problem is that there has been nothing said on how taxpayers get the money back. The money is coming out of our pockets. We know that. To the tune of about $10,000 per person. And it will likely be collected from higher taxes for EVERYBODY. But how are we to be repaid. Will we get tax credits in the future? Or a check? Or guaranteed lower taxes (though how much lower and lower than what level is yet another question)? If you can’t say how we will get repaid how can we believe we ever will.

To deal with these 2 major issues the politicians that were trying to rush this version of the bailout proposed this bit of eyecandy. Executives would no longer get ‘golden parachutes’. Yea! It’s nice that the Government is in effect starting on the path to regulate how much money anyone should be paid. It’s very socialist of them. Still I can agree that paying someone that bankrupts or severely damages a company millions is folly. Though I see no problem paying them is they create a bigger stronger more profitable company than they took charge of. But the legislation is unclear if a great executive doing a great job is free of the same stipulations and restrictions.

And all of this says nothing to the power suddenly endowed to the offices of Secretary of the Treasury and Fed Chairman. They get control of more money than 1/3 the countries of the world make combined. And if you think that Congress can watch over those positions and keep them in check remember that it was the brilliant and attentive eyes of Banking Committee leader Barney Frank that said in July of 2008 that Fannie Mae and Freddie Mac could not fail, and that he saw no problems in the financial markets.

And another unseen problem of the bailout deal that was thrown out is its effect on the nation. This deal would have effectively kicked out the last leg holding New York as the financial center of the world. And it still might happen. And with that loss of status means tens of millions of dollars lost to the nation and New York State.

This is not a game with obvious consequences. Some things have to be thought about. And because some of those most responsible for this mess don’t want the blame, they are insisting on the most speed in passing the buck and a deal.

The bailout will cost over $1 trillion by the time it’s all said and done. The stock market will fall as the dust settles and every industry with debtors lines up to be next to be paid. And eventually things will improve. Such is the nature of markets and trade.

But if the main questions I have asked are not answered in future bailout proposals, because of the rewording of what the deal is called, or political favor to a Presidential candidate, or rushing to soften the ultimate downturn of the bear market, or just because no one was smart enough to ask, then the real cost will be far worse than just the money thrown away.

Labels: American economy, Barney Frank, Congress, Dow Jones Index, Federal Reserve, small business, stock market, Treasury Secretary Paulson

Warren Buffett has made a significant symbolic action in our economy. He has invested $5 billion into Goldman Sachs, the bank. Not the investment bank but the commercial bank that it has now become. The difference may sound small but it’s huge.

In doing this he has signaled his long-term belief that the American economy will weather this storm. Which few doubted. But this one act is hardly enough to resolve all the issues between now and his normal 5 – 7 year investment window.

Now I realize confidence needed to enter the markets. And the doubt of the bailout plan did not help anything. This is a great stabilizing factor. But the bailout plan is not a smart bet, and will not benefit the nation near-term.

The reality is that the Government wants to give Ben Bernanke $700 billion dollars to accept the bad debt of the financial markets. This is the same individual that failed to identify or resolve the problems in the financial markets that I saw back in January at least. And he is planning to accept every problem every size bank can shovel into this deal.

Have no doubt that every bank is working out how they can get their debt passed onto the taxpayers. These are individuals that were smart enough to create the derivatives that regulators are not smart enough to see as a problem for over 5 years. And suddenly we think that more regulation will prevent bad decisions and prevent being unable to understand what is happening in the markets.

The Government should not be in the business of owning banks. The Government is not smart enough, efficient enough, nor reactive enough. The Government is not able to take on debt at a realistic valuation since it does not understand the value, and thus every dollar spent on the bailout will be a waste. And the Government has never been able to intervene in the financial markets to the benefit the nation or investors.

I would bet that Warren Buffett was asked by the Government to step into the market. He is too strong a figurehead to be ignored, and thus symbolically stabilizes the markets. And the fact that Goldman had to become a less powerful commercial bank, and thus seek out deposits to shore up its bad books and loan reserves, to get the investment by Buffett is telling indeed.

The fact is that nothing will prevent the markets from going lower in the short-term. They need to. And if there is to be any real confidence we need to see other investors step up and make similar styled investments. I want to see the Blackstone Group, and Apollo Investments to make similar steps. Bill Gates too. But that is not happening yet.

The Government has been given time, to sort out what it will do. My advice would be to let the markets sort out the problem created in the markets and bad decisions. Because all a bailout does is tell the markets that the Government will step in every time they make an overly greedy decision. And if you think I am wrong, go back and look at what the auto industry is asking Congress right now.

But perhaps one of the worst things a bailout will signal is opening the floodgates on mortgages. If we bailout bad bets by financials, why not bailout the home owners that made bad decisions? And if we can help those home owners, how the hell can we not say that people like myself that made a smart decision on their loans deserve help too. Why should my taxes go to help pay a mortgage that is not my own? Especially since all those home owners had to do is read their documents and do the math.

The Government is not responsible for correcting the bad decisions those it governs makes. But in making the bailout a fact that is exactly what it is doing. And that is more than a small step towards a socialist government and away from a Democracy.

In the Star Wars movies there is a scene where it is said that

“This is how Democracy dies. With thunderous applause.”

But I believe that that is not the only way we can lose it. It can die with a funnel of money draining from the people. Not as dramatic or poetic, but perhaps far more effective and deceptive.

Labels: American economy, Ben Bernanke, financial news, Goldman Sachs, mortgage crisis, Warren Buffett

If you were watching cable news at about 1:25pm today you would have heard Senator Obama speaking about the economy. He mentioned how we need change, though he failed to mention what he might change.

He mentioned he wanted to reform regulations on Wall Street. That he wants to follow a different economic plan. He blames Wall Street executives for their intention to make money out of the bailout. And he tried to draw a line from Reganomics, to President Bush, to Senator McCain.

But I have to wonder where is Senator Obama’s admonishion of his fellow Democrats are. He failed to mention that House Speaker Nancy Pelosi is trying to slip in $50 billion to the bailout plan. He fails to mention that many in Congress are trying to add earmarks to the bailout. He fails to mention that 2 years ago Senator McCain tried to reform policies on Wall Street and was shot down.

He fails to mention, when he speaks about the Clinton surplus, that President Clinton created the internet bubble. That the jobs created by the bubble were lost when it burst. That the Administration redid the way the government counts the deficit – such that they came up with the following.

They figured that since stocks were up, and would continue to be up for 5 yrs, taxes on the investments would be enough to balance and exceed the deficit. And based on that surplus, from the stock market, the government could spend that surplus and still be even in 5 yrs. In other wods there was never a surplus, and if you tried to use that same math in your life or business you would be in jail for fraud.

But he also fails to mention that Reganomics saved the nation from failed Democratic economic policies of President Carter (which most of the economic proposals Senator Obama has mentioned mimics). He fails to mention that Reganomics created the environment that created the surge in the economy and stock market. He fails to mention that in the face of warnings about the internet bubble, Democrats allowed the crash to happen which costs billions and put tens of thousands out of work.

Senator Obama fails to mention that it was not the regulations, that were weakened during the Clinton Administration, that caused the current fiasco but bad decisions. Everything was done within regulations, but the bad decisions caused the bad loans. And you can’t legislate choices, in a Free nation.

Senator Obama is a great speaker. He can polispeak with the greatest orators I can recall. He can obfuscate the facts, and avoid obvious truths with ease. And he can fail to actually detail a plan yet make people believe he has one.

When you listen to Senator Obama talk about changing the economy, have you heard him give a plan on what he will do? That he will refoprm exactly which regulations? That this change will help investors how? That will benefit the economy in what manner?

Like most politicians, in DC especially, he has no plan, just polispeak. He doesn’t even have a bill in Congress with his name on anything with this. And where is the blame on say Democrat Chris Dodd, in charge of the banking committee, that failed to do anything about this mortgage crisis over the past 1 ½ years?

You know, I love to hear a great politician. But when it comes time to vote, you just have to sit back and remember that all those little questions you never got an answer for. For me, there are just too many questions without answers, to many calls for change without a detail of what kind of change.

Call me crazy, but I like to see a President that has a plan. I don’t have to love the plan, but at least then I have something to go by. But some don’t need that. Like in 2006 during the mid-term elctions when Democrats were elected to Congress on change. And since then we have gotten no change, but lots of excuses. Now we have a Presidential candidate that also rallies around change, without a single detail. And some expect things to get better. I just have to wonder why?

Labels: American economy, cable news, Nancy Pelosi, Polispeak, Presidential election race 2008, Senator Barack Obama, Wall Street

Don’t you love when the Government spends your money? And they do it on a scale so grand that you just have to stop and go wow.

Currently the Government has proposed the best deal Wall Street has ever seen. After having spent over a quarter of a billion dollars on Bear Sterns and mortgage loans and other financials (like AIG), it is now going to by every bad loan of every financial company. Oh joy!

Of course the stock market is flying. Every financial company will now have the chance to load up the Government with every single bad debt they can engineer to be connected to terms of the bailout. And the people working at these banks are far smarter than the Government agencies that will take over these debts. Instantly the books of each bank and brokerage and insurance company will look astounding. All relevant economic guidelines will look solidly in the black: book value, loan reserves, earnings per anything, and so on. All it took is what will be over a trillion dollars of taxpayer money.

Add to this the face that 799 companies in the stock market are no longer allowed to be sold short and you have a market that has no choice but to go up. Like I’ve always said the financials always lead the market higher. Sadly this is bollocks.

The market is artificially propped up right now. Without this bailout, which will hurt the economy for the next President (no matter who it is), we would have found a bottom. But that means once all the crap is done the market will eventually find that bottom, and then exceed it. Just like what happened after the internet bubble burst. Trying to cushion that lead to the real estate bubble and it’s bursting, and now this will lead to another bubble that will burst as well.

Perhaps my time as a stockbroker gives me better insight on this but this is bad. We are talking about over a trillion dollars that will grow and become a bigger problem the next time.

And the Presidential candidates are showing us how they will deal with that next problem now. Senator Obama is waiting for information, instilling no confidence in the market or for investors. Senator McCain is looking for people to blame, which has about the same effect. The only difference is perhaps the fact that since the President must look strong to give the markets any feeling of safety Senator John McCain is looking more Presidential.

But taxes look that they will get raised. It’s the only way to pay off $1 trillion dollars. That means Senator Obama will definitely increase taxes on everyone, massively. And Senator McCain will have to raise them to some extent.

Obama already wants to raise corporate taxes, and increase taxes of everyone from $31,850 and up at least 3%, and raise taxes on energy consumption, capital gains taxes, and payroll taxes. Add this bill and those numbers increase almost exponentially. He will undoubtedly equal or exceed the economic environment of President Carter.

For McCain we will see the likely removal of the President Bush tax cuts. Possibly increases on capital gains as well due to political pressure. This means slower growth in the economy and tough times – not like some want people to believe exist now but will actually exist by 2010.

Here is one thing that I would love to see. I believe that any owner or CEO of a company deserves whatever pay they can justify. There is no limit on what they can be paid, if they have created a profit for their company. But that does not mean they cannot receive a tax, similar to a luxury tax, for a bonus in excess of say $25 million.

If a CEO can grow a company 15% or more and thus ensure everyone connected with the company is safe that deserves a reward. If they retire and the company had netted a profit over their time at the lead, again they deserve a bonus. Because after becoming a CEO of some of the largest companies in the world is likely to be the last job they will ever have. But again the extreme bonus tax should exist. They will still receive millions, so they aren’t going to a poorhouse or changing their lifestyle.

But if a CEO fails to create a profit, they should be restricted in their pay as well. IF a company must be sold to save it, or is cutting workers to stay a float, then management has failed the company. If the company must be bailed out by the Government, the CEO has failed it. Again I can agree that the CEO deserves to be paid their salary, but not a bonus. And if they are leaving the company and created net losses their retirement package should reflect that. So instead of $100 million as an example they would receive say $1 million for each year they were on the job, and still have to pay the extreme bonus tax.

And when I say an extreme bonus tax I mean that say 50% of any bonus over $25 million dollars is split between the company and the Government. The split is 33% to employees, 33% to the corporation, and 33% to the Government. That scenario benefits the company and its employees, hopefully increasing profitability and shareholder confidence. It also benefits the nation. And I can’t see how any CEO that would have gotten say $34 million as a bonus would be upset because they got a $17 million dollar bonus.

But that won’t happen. Just like taxes won’t go up because of this bailout, or that there will not be another crash in the markets because the Government has intervened.

I predicted a 10,200 Dow Jones Index by December. I stand by that. I stated that 9,300 on the Dow in 2009 was possible, I still believe that. And I said that I think $160 per barrel of crude oil would happen over the winter, which may be overly aggressive but still possible. This bailout does not remove these possibilities, it enhances them. Greater regulation does not prevent future problems; it increases the cost of identifying them. Preventing short sales does not help the market, it hides the weakness. And none of these things prevents bad decisions which are honestly the key reason why we had the internet and real estate bubbles.

The only questions that are left are when will the next problem become evident, and how much will the Government spend to bail that out as well.

Labels: American economy, real estate, stock market, tax policy, Wall Street

Back when I was a stockbroker (I know, it’s a bad word today) I had a buddy that love to quote this old brokerage saying.

“Bears make money, Bulls make money. But pigs just get slaughtered.”

Obviously the Board members of AIG, Lehman, Bear Sterns, Washington Mutual, and more than a few other financial companies didn’t know that saying.

But the blood is in the water and panic is in the streets. Ok, enough of the sayings. The fact is that the financial markets are screwed right now. We have hit my target of 10,800 on the Dow Jones Index – though not in my timeframe. My target of foreclosures has been exceeded, currently targeted at 9%. And my list of probable factors are being checked off 1 by 1.

So far:

1. Confidence in all financial will go lower forcing the need for more liquidity
2. Several institutions will fail - focused mostly on those dealing with housing markets first
6. Home foreclosure will hit 5.5%
11. Republicans will be blamed

Now that is only 4 out of 15 on my checklist, but they are the big ones. Gold is rising as a hedge to the dollar and to protect assets. As is crude oil. The Dow has nearly hit my December target of 10,200.

So what do we do?

I say buy. There is no greater time for profit than when everything is in a freefall down. Of course picking your time and which stock is essential. I like the financials, because the winners will rally strongly once things settle.

I would avoid Citigroup. They insure their own product and had massive exsposure to bad mortgages. I would avoid Insurance companies since I expect that regulation restricting their abilities to own other assets will be restricted shortly.

But what else is there to buy. In every down market something always goes higher. And there are always leaders on the way back up.

Coal is a great area. Energy is one of the top 5 issues on the minds of voters. Politically it’s a go to industry. Increasing coal use is positive because it means less foreign oil, increased business domestically, increased international trade, and cheaper energy prices to consumers.

Also if coal is liquified then we see the potential for a fuel that is carbon-nuetral as compared to oil. The cost of this process is about $35 per barrel equivalent to oil. That means a savings of some $55 or more dollars per barrel at current prices. Yet at this moment production is minimal.

And coal is plentiful. At current energy consumption rates there is enough coal to power the entire world for 57 years, or just the U.S. for 164 years. And did I mention that the U.S. has the largest reserves in the world. This says nothing of the coal-bed methane that is a potential energy source as well.

A couple of interesting names in the sector include:

Arch Coal
International Coal
Walter Industries
Peabody Energy
Patriot Coal
Massey Energy
Alpha Natural Resources

Now if we are seriously looking for options in this difficult market, taking into consideration political advantages, energy needs, stability, domestic economic benefits, and isolation from the turmoil of the financial markets we have to look at coal. It just seems like smart money to me.

The financial industry will be merging and bouncing around. There will be regulation and political fights about who is doing the right thing. The dollar and crude oil and gold will get stronger or weaker and then back. Smart money looks at panic and sees the road to profit in the future.

Eventually, perhaps even now, financial stocks are attractive but you will get lumps in the near-term. Gold is too emotional. Crude oil is where everyone is trying to get away from. But you like to get on the internet right? Like lights at night? Want to watch TV and stay warm? Energy is the answer, and Solar, wind, biomass and other alternative energy sources don’t exist – nor will they for at least a decade.

It makes sense to me. So like I used to say as a stockbroker

I love life!

Labels: American economy, clean energy, coal, Crude oil prices, Dow Jones Index, financial news, stock market

It was interesting to listen to Senator Obama just now. He was speaking at 2:57pm, and it was televised live on cable news. Of course he was speaking in reference to the falling stock market with the Dow Jones trading down 220 points. He made absolutely no reference to AIG or the bailout made by the government.

But Senator Obama did state

‘John Mcain says he will root out the old boy network. The old boy network? In the McCain Campaign it’s called a staff meeting.’ [paraphrased due to lack of transcript]

Now that was said because Senator McCain has been in Congress for the last 22 years.

Of course Obama failed to remind the crowd that his Vice Presidential pick (Senator Joe Biden) has been in Congress for the last 26 years. He is in fact the 4th longest serving Democrat. He is as responsible for any failed economic reforms, energy policies, or whatever else Obama would like to claim along with McCain – if not more. If the old boy network is in McCain’s campaign, what the hell does Obama call the CEO of the network that is his second in command [who does not agree with Obama, nor thinks he should be President]. It would seem that if nothing else the men and women in the McCain campaign are unified – Democrats can’t say that.

Senator Obama went on to say

‘We don’t need a commission to get us out of this mess.’

Actually yes we do. The fact is that while Obama thinks he understands how this all started, he obviously doesn’t. If he did he would acknowledge that this started from the Clinton Administration. The fault started with the failure of President Bill Clinton to prevent or burst the internet bubble. Because he allowed it to happen, it led to this current crisis. In fact this is just a continuation of that original problem.

But since we can’t go back in time we have to focus on the resolution of the problem in the future. Senator Obama believes that raising taxes will resolve the problem, with the addition of creating new sources of energy without additional drilling.

Obviously he need some advice here. He is stating that he wants to take more money from companies (of all sizes) while they are scrambling to raise cash or meet loans. This is while they are receiving reduced income from sales. There is a good plan.

And he intends to make sure that companies receive less funding. All companies. But he expects that these companies will find money, obviously not from financial companies that need to lower their credit risk nor from investors that will have to pay more money on their investments and taxes, to invest into research to create alternative energy sources.

They will have to make money from thin air, to pay his higher tax rates, and increased worker costs, to lose money in developing biomass converters, wind tower generators, and advanced solar cells – none of which exist in any productive manner today. And don’t forget they need to create factories and distribution lines besides the engineering. And that is while energy costs fluctuate higher over time, further reducing every shrinking revenues.

And all this will help improve America. Obama doesn’t need a commission, or advisors to help him? I think I can give him a bit of help and it will be free. Get a calculator because the math you are doing in your head wouldn’t keep a lemonade stand running.

I wonder if he did not mention anything about AIG directly because he doesn't understand why the Government was forced to bail them out? heis comments would lead me to believe so.

Labels: AIG, American economy, cable news, news media, Senator Barack Obama, tax policy

Today the economy is the big issue in the Presidential race. That’s not to say that the Presidential candidates weren’t paying attention to that before, it’s just that they are panicking to look strong now.

"The Fed has been providing banks extra money to ensure their solvency, but not requiring that loan reserves be increased. It's kind of like stopping a leak in your tub by adding more water. The problem is not getting fixed and may get far worse. And all the panic about the mortgage industry seems to have done nothing but whip up polispeak from political candidates and political parties, each looking to sway voters." - July 2008

Recently Senator Obama has been attacking Senator McCain about his positions on the economy, specifically that McCain stated the economy was ok. Senator Obama now states that he will reform regulation. He still maintains his desire to increase taxes for an undeclared amount of those Americans NOT receiving a paycheck but making them.

Well isn’t that nice. It’s very emotional polispeak, but it’s not worth much.

First consider that the real problem in the economy was created during a Democratic Presidency. The Clinton Presidency. The problems today are just the continuation of the internet bubble, which President Clinton allowed to happen. President Bush failed to resolve the issues, true, but the Twin Tower attacks altered the viewpoint.

In trying to cushion the pain of the internet bubble bursting, both Administrations, created the real estate bubble. Like all bubbles it too burst, but because most companies had not fully recovered from the first crash they took further damage now – especially in the financial markets.

"Just remember this, no matter what plan is announced oil is still nearly at all-time high levels, many mortgages are still failing and/or at risk of failing - and not all of them are sub-prime. Food prices are increasing as ethanol production is diverting corn and wheat to this less efficient alternative fuel source and with recent laws mandating increased usage on a national level we can expect even higher prices. The financial sector is not done writing-off their losses for making the bad loans, and more money will be coming from overseas to prop them up." - January 2008

Every time the Government steps in to bailout the stock markets, the worse they make the situation. Bailing out homeowners that made stupid purchases, without consideration of the potential consequences, hurts the economy. Regulation does not prevent dumb decisions, but politicians would like you to think so.

Banks fail every year, as to hundreds if not thousands of businesses and home loans. That in a good economy as well as bad. But this looks worse so people are more scared now than then.

But Senator Obama is essentially promising to go to the companies that are hurt and increase their taxes. He wants to add to the burden they have now. And that is supposed to employ more Americans, and provide more money to them. Add to that the fact he wants to put more people into the process.

Adding regulation means more people involved. These people work for an employer that cannot balance its books, and cannot efficiently manage any aspect of what it does. And has done so for decades. Were the Government a business it would have been bankrupt before I made it out of elementary school. And Obama wants to add to that.

"I would also remind people that the markets may soon be hit. If the minimum wage is increased, lay-offs and slower hiring will ensue. Unemployment will go up. Why? It's economics that should be apparent from high school classes; small businesses can't afford the increase. Yes those living on minimum wages will have more money, there will just be fewer of them for a while. Net result in my opinion is that unemployment will increase, as will welfare, and the economy will slow as fewer people will be spending the extra cash. That is no gain for many, at least for 3 years after the increase. Oh, did I leave out that there will be fewer small businesses, some closed due to the increase and others unable to start because the increase creates a ceiling of minimum cost that they can't cross." - November 2006

That is not to say that some don’t laws need to be changed. But America is not falling apart, like some would want you to believe. 90% of mortgages are being paid. Most businesses are running normally. 95% of workers are getting paid just like they did last week, or a year ago.

Right now the Dow Jones is down (2:30pm). That’s because the Fed failed to lower interest rates. Because the Government failed to interfere with the markets, as it consistently has, as expected investors are upset. Such is life in an industry that ebbs and flows on a minute by minute basis everyday.

But if the Government bailed out the banks, and lowered interest rates, and bailed out homeowners, would that be better?

If Senator Obama had his way, all the above would happen. And taxes for corporations, investors, and the AVERAGE American would all go higher. So how would that help anything? More people would be mucking up the markets, the debt would go higher, and you would have less money to pay your bills with.

"Add all that up and you have a stagnating market, with reduced sales, higher costs, shrinking profit margins, higher taxes, horrible bond rates, and depressed real estate values. I call that a real problem. Especially if the tight credit, higher fuel costs, and higher taxes cause more home mortgages to fail than just the 15% low-end estimate I posed earlier." - November 2007

Seriously people, listen to more than the well-time polispeak. View everything in the context it is presented in. Remember everything that the candidates have said in the past. The economy is not great, but it’s not the Depression either.

Labels: American economy, Polispeak, stock market

The following is the full interview between Bill O’Reilly and Senator Obama as first seen on the O’Reilly Factor. For commentary on each part of the interview please check out Black Entertainment USA

Part 1 Iraq



Part 2 The Economy



Part 3 Bill Ayers, Rev. Wright



Part 4 Alternative Energy and Domestic Drilling

Labels: alternative energy, American economy, Bill Ayers, Bill O'Reilly, domestic drilling, Iraq, O'Reilly Factor, Presidential election race 2008, Rev. Wright, Senator Obama

As I recall, back in December I spoke about the chance of the Dow Jones hitting 11,000. It was roughly the same time that I mentioned my targets for the price of oil (initially 110 and then upped to 125). So far one has exceeded my expectations the other is probably forthcoming to a similar degree. So what else can investors expect?

Well I think the mining sector has issues that are both positive and negative. So far there is still a huge run-up in commodity prices that is keeping many companies in the black that otherwise wouldn’t. Anglo Platinum out of South Africa is one such example though there are others. But this run up won’t last too much longer.

One of the main factors helping many mining companies has been the fact that supply has been cut. Energy shortages, most notably in South Africa but also in North America and Chile, forced supply down artificially helping to boost prices. But that is a problem that has been in the works of being fixed since the 1st quarter. Once it is done supply will rise to meet the growing demand and be a signal for profit taking.

Another factor to consider it the American economy. Mining companies eked out a mere .2 percent profit so far this year, though only one other group in the S&P 500 also held a profit. As costs for fuel continue to rise that profit margin is evaporating. Add in a decrease in demand due to cut-backs, and then an increase in supply and you have strong sell signals.

Of course there are still companies in the group that have room for these problems like Marathon Oil and Newmont Mining Corp. Marathon is only trading around 7.5x earnings and Newmont was the 9th best stock on the Philadelphia Stock Exchange Gold & Silver Index. Some analysts like Brian Barish of Cambiar feel they have not caught up to the surging resource prices and thus are worth owning.

So what is the net result? It’s no easy answer but since I expect a run up in heating oil and crude oil prices as the 3rd and 4th quarters hit, plus a continued bear market in the U.S. driving Gold and precious metals, my belief is that mining stocks will outperform most markets into the 2nd quarter of 2009.

Now that doesn’t mean profit, nor does it mean that other factors like who wins the U.S. Presidential race won’t affect the final results. But I think the odds are likely to favor all the mining stocks even if their books aren’t perfect. Its food for thought, take it as you will.

Labels: American economy, Anglo Platinum, Brian Barish, Dow Jones, election coverage, Marathon Oil, mining stocks, Newmont Mining Corp, Philadelphia Stock Exchange, S and P 500, South Africa

Well the first part of 4 videos on Bill O’Reilly and Senator Hillary Clinton is now done. It’s taking forever to get all the videos downloaded to YouTube.

Here is the first part of their conversation



Now here are my thoughts:

One of my biggest problems with what bill O’Reilly didn’t ask, in any point of the interview, is why Senator Clinton lied to the American public. I am directly referring to her lies about being under sniper fire in Bosnia, and her lie about being a key figure in the Ireland Peace talks. In both cases her every utterance was a fabrication intended to puff up her abilities, create an impression of experience, and gain voters that do not follow the political news as much as someone like myself. And in each case her lies were refuted by first-hand witnesses of high regard.

Another point that I thought should have been brought up was the fact that Senator Clinton has been more than happy to take advantage of the Rev. Wright media barrage leveled against Senator Obama. Yet she was given a pass on a far more serious issue. That being her association with a known criminal, Norman Hsu, and her campaign’s acceptance of $1 million that was stolen – which her campaign tried very hard to not give back. If an association with a pastor that has no political power, and is not up for election, is significant how is it not important that she received stolen monies and harbored a fugitive?

I know that these 2 items are constants in my conversations about Senator Clinton’s nomination run. But I find them critical indicators of what kind of President we can expect her to be. And in both cases we do not see an equivalent, relevant action or situation among any of the other Presidential candidates.

But directly pertaining to the video are the following:

First is the “sudden” decision to appear on The O’Reilly Factor. There has been an open invitation to all the Democratic candidates to appear on the program since November 2007 as I recall. They all denied to appear, with the exception of Dennis Kucinich (which might have been on Hannity & Colmes I’m not sure).

But with Senator Obama currently reeling from the major news media motivated (led by Fox News) Rev. Wright debacle, and Clinton emphasizing the racial aspects of the Democratic nomination since November, she decides to make the move. Remember that she contacted O’Reilly. If this is not an example of counting polls and being calculating I don’t know what is. And it’s completely in line with her past actions (ie the Hot Coffee bruhha) of jumping into headlines for the sake of self-promotion.

But since Rev. Wright is a personally important issue for Bill O’Reilly, which I continue to feel has minimal importance to the actual issues a President should be voted for, this was the first question. And Senator Clinton was allowed to not be asked why some of her prior pastors made similar comments to some of those that Rev. Wright has made. Or why she has not had a pastor or church since Bill Clinton left the Presidency. That kind of makes her opinion on being in a church (the same one for 20 years) moot.

She also mentions that she does not believe the US could be behind AIDS. While I do agree, I am not 100% on this. And no reasoning American should be. Why? Because America has done a similar thing in the past. Tuskegee Experiments. 2 words that no White pundit or politician wants to utter.

The fact is that America harmed African American men, and the Black community, for 4 decades. That’s the equivalent of my lifetime. The end of this human experimentation, something that is universally denounced among nations across the globe, was a mere 30ish years ago. And if America could do this in my lifetime once, potentially affecting the fathers and grandfathers, uncles and/or brothers of you my readers, why would they not do it again? Some of those involved in running this ‘experiment’ are still alive and could influence policy. Were it not for the whistle-blowing on this, America would never have known. What prevents the Government form doing this secretly again, and this time keeping quiet because of the devastation? America dropped the 2nd H-bomb on Nagasaki after seeing the horror of Hiroshima, partly because the Japanese were ‘nips’. Thus how can anyone say that AIDS was 100% not possible in a nation that has shown what it can do to those not exactly like the majority?

For Senator Clinton, this is 100% impossible. And you know it must be true because she loves to make speeches in front of African Americans on Dr. Martin Luther King’s birthday. Though she does nothing to denounce the racially motivated and incendiary comments of her husband. I wonder what influence he has on her views of Black Americans and why she hasn’t distanced herself from him?

[By the way, the latest Rasmussen poll shows that ‘surprise’ Senator Obama is seen as sharing the views of Rev. Wright – at least in part. But pundits are amazed as everyone, regardless of political party, agrees that there is no evidence in his voting record, actions, or conversations. Yet it is the major news media that has plastered nothing but Rev. Wright for 3 weeks now. That wouldn’t influence voters, could it?]

Moving on we come to oil and energy. In particular the fact that Senator Clinton has jumped on the bandwagon created by Senator McCain. Shocking that she would approve of a plan someone else made that has polled well. Suspending the 18 cents federal gas tax is popular, and hypocritical.

Senator Clinton has shot down drilling in ANWAR, which would have at least lessened the current problem had we done this years ago. In addition Senator Clinton is anti-nuclear power (voting against it 7 times). Considering that she is against these alternatives, and promoting ethanol - which is less effective than gasoline, increases the cost of food globally, and potentially is polluting the Gulf of Mexico not to mention unavailable in about 45 states in the nation – one has to wonder how committed she is to fixing the energy crisis.

Of course this was a wonderful time for her to jump on the “oil companies are bad” stump polispeak. One of the mantras of ultra-liberals all big business is bad. They make too much money and need to be penalized. So much for the American dream.

Senator Clinton does not mention the fact that the profits of oil companies fuels this economy. From jobs, retirement funds, mutual funds, the stock market, and the value of the dollar oil companies are a big part of a stable economy. Take away their money and you hurt America directly. But that’s something anyone who has run a business might understand – Clinton has never run anything.

That say nothing of her thinly-veiled intent to socialize business in America. If she were to take money from, or cap profit of, oil companies what industry is next? And what level is the limit? It’s a slippery slope that ends with businesses essentially being employees of the government – that’s called socialism and in its most extreme communism.

Lastly in this segment we go to healthcare. Universal Healthcare is again her big issue. Senator Clinton failed to get this passed the last time she was around the Oval Office and this is her mulligan try. In her explanation to Bill O’Reilly Senator Clinton has left out a key component of her plan. Everyone pays for Universal Healthcare, it’s free to no one. And if you don’t pay you will be penalized. Thus it is very realistic that those who need the most help will not only still be unable to afford it, but that they will owe money because of the penalty for not having healthcare insurance. Nice plan, huh.

Another question that was not addressed well is her response about running this program. She avoided the fact that already California and New York States are in debt some $20 billion mostly due to healthcare costs (minus a hefty 20% discount for fraud which is more than believed actual). This is inefficiency of the Government as much as increased costs. And Senator Clinton had no answer.

The Government cannot run the Post Office efficiently – and it’s cost goes up routinely without an increase in performance. The Veterans Administration is so bad it would be laughable were it not so sad. Name a DMV that you think is either efficient or inexpensive. And let us not forget that the Government routinely buys hammers and nails for in excess of $500 each (and I do mean each nail) and has not run a profit in decades. [By the way, the profit that was claimed by the Clinton Administration was a lie of fuzzy math the Government employs. What was done was that the Clinton Administration valued the growth in the stock market, averaged it, and projected it forward 5 years. Based on that math the Government was in a surplus by the end of the 5 year figures, and they spent money based on being even at the end of 5 years. Of course the bursting of the bubble led to the “sudden” deficit that happened instantly as Gore lost the election. Try to run your business like that.]

So given these everyday facts, and that Senator Clinton promised Upstate New York the creation of 200,000 jobs yet provided a net loss of 30,000 since being elected Senator, do you think she can manage costs? Do you think a(nother) Government run program will be cost effective?

Yes Senator Clinton spoke well. Yes she kept composed under the pressure that Bill O’Reilly provided. But if you listen to what she said, understand the environment in which she said them, and facts she avoided mentioning you might come up with a loss. American needs a President that is cool under pressure. But we also need a President that has a plan that IMPROVES the nation in more areas than not. This first part of the interview does not encourage me to believe Senator Clinton has that plan.

Do you agree?

Labels: AIDS, American economy, Bill O’Reilly, Dr. Martin Luther King, Polispeak, President Bill Clinton, presidential election, Rev. Wright, Senator Clinton, Senator Obama, Tuskegee Experiment, universal healthcare

How rich do you feel if you are making $31,850 or more?

If you are like most families and individuals in America, I imagine that you don’t. In fact I would say most would feel relatively poor. Not because of a lack of luxury items or failing in a competition with the Jones’ but because of a scarcity of essentials and a knowledge that loss of everything is possible.

Americans in the middle class don’t feel rich because they are the ones losing their homes to the mortgage crisis. They are the ones incapable of affording better colleges (or sometimes any college) for their children. They are the families most often without healthcare coverage and unable to afford medical costs.

And they are the ones that are going to feel even worse if Democrats, and the Presidential candidates Senator Clinton and Senator Obama, get their way. I don’t say this because of some ideal, or dedication to the Republican Party. I say this because that is exactly what they are voting for.

“Senators voted 52-47 to reject a move to extend tax cuts for middle- and higher-income taxpayers, investors and people inheriting businesses and big estates.”

and

“Obama and Clinton both promise to reverse Bush's tax cuts for wealthier taxpayers, but the Democratic budget they'll be voting for would allow income tax rates to go up on individuals making as little as $31,850 and couples earning $63,700 or more.”

So, if you make $31,850 or more you may not feel like Bill Gates and Warren Buffett but you are going to get taxed like them.

This is not a surprise because for all the statements by Democrats that running scared from Iraq will turn the economy around, and their implication that universal healthcare is the same thing as free health care the facts are that more money will come out of our pockets to pay for it all. Your pocket, whether or not any of the things you will be paying for will provide a single benefit for you or those you know.

This is what a Democratic President will provide. Some may believe that this is a small price to pay. Some may believe that all businesses should pay more in taxes. And some may believe that terrorists and those hostile to the existence of America will give up their fights just because we turn our backs.

But I believe that increasing the taxes that the middle-class and businesses pay will not improve the economy. I believe that giving money TO problems rather than spending money to FIX the problems is foolish. I believe that turning your back on a bar fight will get your head cracked open from a chair smashed upon it. I believe that nothing is free, and some things are too expensive to be worthwhile.

The Democratic candidates have marched across America saying they will only tax the rich. They have said that they will only affect big business. They have said that they will make America safer. All are great things. But the facts of their actions indicate they are lying if not confused.

“Under both Democratic plans, tax rates would increase by 3 percentage points for each of the 25 percent, 28 percent and 33 percent brackets. At present, the 25 percent bracket begins at $31,850 for individuals and $63,700 for married couples. The 35 percent bracket on incomes over $349,700 would jump to 39.6 percent.”

So here is the big question for the up-coming election. If you aren’t rich at $31,850 and the Democrats are going to increase your taxes, what other plan proposed by them is equally skewed to your disadvantage?

Labels: American economy, Bill Gates, college tuition, Democratic Party, Iraq War, mortgage crisis, Senator Clinton, Senator Obama, tax increase, tax rates, universal healthcare, Warren Buffett

The Dow Jones Index drops 370 points, financial stocks are being hit hard, and the service sector index hit a low not seen since 9/11. That feels bad, and it bodes is for the economy. We all know that, as does the world markets.

"This was certainly an unexpected piece of bad news. The magnitude of the miss below the estimates really got people’s attention," said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles.

The FTSE 100 Index lost 158.20 points, Hang Seng index plunged 1,339.24 points, or 5.4 percent, to close the half-day session at 23,469.46. Japan's Nikkei 225 index tumbled 4.7 percent to 13,099.24. And that’s just the immediate reaction.

"It's unbridled pessimism," said Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. "Everyone is concentrating on a U.S. recession, but Europe is also looking bad.... We are in for a bear market now."

Now that you’ve had the shock, focus on the positives. For China stocks there are several items that may bode well. Obviously there is the fact that the Olympics will help draw new revenues to hundreds of businesses and industries. It’s a spark to the economy that definitely going to be a cushion regardless of the American economy at the time. But that is a short boost and limited in its scope.

There of course is the news that besides the pressure coming from America in recent weeks, there is a national crisis in the form of winter storms that have hit the lowest temperatures in 100 years.

"In northern China we have quite a good emergency plan to cope with unusual weather conditions. But in southern parts of China, the mechanism and emergency plan to cope with such weather needs to be improved," said head of the Chinese Meteorological Administration, Zheng Guoguang.

In the midst of such gloom and serious causes of concern, and with so few glimmers of upside hope in the near future bears normally rule. But, besides the bears, savvy bull market investors have to be happy. This is a market that in some ways mirrors what I saw as the reaction of some investors after 9/11. While many panicked and sold, a small few searched and picked the sturdiest of industries to get into. Not huge positions all at once, but a piece here and there as the prices went lower and lower.

Now I know I’ve questioned the growth in China for some time. I realize that their may well be limiting factors, and the American Economy ranks high among them. But with world stock market prices getting hit again, European markets being shaky, low interest rates, and the 54 billion Yuan cost of this unforeseen and devastating winter storm, I like the opportunity.

Is this the perfect time? Never, such a thing does not exist. But a smart plan, taking the best companies in fields that are and will be hardest hit shortly, involves taking disaster and world turmoil and turning it into a long-term profit center. While some may look for the quick boost to the service sector, and transportation, I think financials are the key along with mining.

Time will tell if these sectors will end the year up, but considering that by the end of the quarter both should be hit hard it’s attractive to me. But again, that’s only if you think buying in troubled times is a useful part of your overall portfolio plan, and you expect China and world markets to regain some of the strength they have lost.

Labels: American economy, asian markets, Chinese stock market, Francis Lun, Fulbright Securities, Hang Seng index, Olympic games, U.S. recession, Wedbush Morgan Securities, Zheng Guoguang

It’s amazing what can happen in 30 days. In virtually a single month there have been dramatic changes in the world, and in the world markets. Not least of these events has been the change in price of gold. What follows next will be interesting.

Back on December 6th 2007, I stated that oil hitting and exceeding $100 a barrel was imminent. I mentioned that geo-political instability was in the air. I was looking forward to a Fed rate cute, and further trouble in the housing markets. And I mentioned the threat of recession. All of these things I felt were cause for the gold futures hitting $855.

Since that time we have seen oil soar and attain the century mark. Former Prime Minister Bhutto was viciously assassinated in Pakistan, either by Al Quida or the military/government there. The Fed did cut rates and the housing market has slowed down. At the same time, reinsurers for high-risk mortgages have been hit and another round of write-offs seems imminent. Many are starting to talk recession, and gold spot prices have hit in excess of $850 with many calling for a run to $1000.

Sometimes you just hit the bull’s-eye.

So considering all that, and the fact that today is just the 4th day of 2008 what can we expect? How far will those that are rising go? What is holding back gold stocks that have not rallied as gold spot prices have?

Perhaps just time. Even as I write this the Dow Jones is falling some 200 points. The next round of write-offs due to the mortgage crisis has yet to be announced, but I expect that several major banks will exceed expectations by 75% or more. I also expect more banks to announce their own mortgage based problems.

A massive 100-mile and hour winter storm is starting to hit the Northwest coast, potentially dropping as much as 10 feet of snow. As that storm and others travel the nation, heating oil prices are sure to rise, and inflation is probably going to follow suit.

The dollar is getting hit repeatedly, and expectations of good sales numbers from the 4th quarter are unlikely. Expect no help from there.

And Middle East politics is anyone’s guess. Iran may or may not have nuke; Pakistan is still rioting and ready to riot. And we are still fighting Al Quida in Afghanistan, plus the war in Iraq.

Instability has always been good for gold and gold stocks. Demand has always been a solid factor. Right now demand from China and India is surging. Literally everything is in place.

But gold stocks are not gold spot prices. Events across the world and at home don’t cause instantaneous reactions normally. There is always a trickle factor. But it would seem that gold stocks are worthy of a lot of attention. Yet timing is vital. Geo-politics can stabilize quickly. Oil can drop as fast as it has risen. This could be the last of the big winter storms.

I would take a viewpoint similar to Warren Buffett when he recently spoke about China’s stock market. Caution is the key. Timing is everything and being sure often is worth more than rushing in.

Still analyst like John Ing of Maison Placements Canada Inc. are confident,

“It's unquestionably going to be a golden year.”

And 4 well known stocks have already hit 52 week highs. Streettrack Gold Trust, Barrick Gold Corp., Agnico Eagle Mines Ltd., and Goldcorp Inc. all surged.

Maybe JPMorgan analyst Josh Bridges will be right when he stated,

“We feel that we could be beginning to see another period of gold prices outperforming their dollar relationship.”

Just remember that the last time, some 30ish years ago, when gold last broke out it then entered a 20 year bear. And 30 days can make a huge difference.

Labels: American economy, February gold futures contracts, gold spot preices, Warren Buffett

I was speaking with a young former military man today, and the subject of the 2008 election came up. This man is 22, a former Navy Seal, and interested in what will happen to America in the near term. He also has no idea who to vote for.

Sometimes I forget that many people, of all ages, have not been following the Presidential race since 2006 like I and other bloggers have. That’s not because of a lack of interest, or intelligence. It’s because there is so little information out, and so little to get behind. There are plenty of YouTube video clips, charts on the net to chart where each candidate stands, and 30 second soundbites galore. But there is little substance and platforms for the average American to sink their teeth into.

To an extent I hope that my lists of Pros and Cons of Republican and Democratic candidates are helpful. I hope that my letters to several of the candidates (of both political parties) helps to give further insight to what each offers the nation. But even if all that I have written over the past year and almost a half on this has been read by every undecided voter in America I don’t think it is enough. That is because all the candidates are failing America.

They are failing us because they are playing partisan games, one-upmanship and preening like celebrities (with issues) more than attempting to be political leaders. And that benefits none of us.

One example of this failure is in the question given to me by this young man. The question was

“This war has gone too far. Especially since it was started over oil. I’m concerned about that.” – paraphrased but the essential elements of the question.

My answer is simple, and not one politician has ever said this that I am aware of.

Let’s say that the war was done only for oil, which is easily debated and proven incorrect. Why is that bad? Right now, estimates state that there may only be another 40 years or so of oil left in the Middle East. At this time there is not another alternative energy source that works. Not one. Lot’s of theoreticals but they are all only effective on paper.

Given that fact, and there is no debate it is fact, then oil is the only reliable energy source in the near future. America has reserves and access to several major oilfields that have never been tapped. The reason is that we are using all the oil in the Middle East while developing alternatives for the future. If OPEC were to run out of oil, most every nation would be unable to continue to provide for the safety and quality of life of their people virtually overnight. Except for America and a few other nations. That’s because of our use of foreign oil.

Taking a long term view, it is strategically important that we use oil from everyone else as much as possible, to guarantee that when the reserves start to dry up we will still be able to defend our nation, and continue to seek and create improved energy sources.
So, having an ally in the Middle East that provides America cheap oil in large quantities is vital to our long-term survival. It makes sense for us to want to have control over a major oil producer.

In addition, there is the question of money. Many want to point at President Bush and say it’s about him making money. The theory is that only oil companies will make money from Iraq. Those claiming this fail to recall that those same oil companies help fuel the American economy. They are part of the stock market, where tens of millions have invested their retirement funds, based on the thought they will bring in a profit. These companies employ thousands of people. They are paid to find, refine, and transport this fuel. This oil is used by hundreds of businesses that create cars, plastic, tires, perfumes and other products.

Oil companies making more money, means that America makes more money. And for those that might want to “take the profits away from the oil companies and give it to the people,” they are both liars and ill-advised. If the profits are taken from the oil companies, you will not receive a check for your share of that money. In addition, your mutual funds, and the stock market will drop. Jobs will be lost, in dozens of industries. America will be hurt.

It’s true, and all you need to do to see it is to look at the big picture and the long term view.

But politicians won’t say that.

How about tax reform that so many want to have. Several presidential candidates claim they will “remove the IRS” and completely convert the tax code. I feel they are misguided in the worst manner.

Not that I think the IRS is a good thing, or that the tax code is working. But if it were to be removed it would impede the entire nation. Of the roughly 40% of the nation that is employed by the Government let’s say that the IRS, or any department, makes up 5% of all the people employed. Without the IRS they are all out of work.

In addition you lose all the people that do oversight on the IRS, all those that do research on the effects of the tax codes, those investigating the loopholes of taxes, and those that prepare taxes for the average American.

Say good bye to H&R Block and other similar corporations. And with their loss goes the benefit and impact they provide to the stock market. Unemployment skyrockets, and the stocks, mutual funds and retirements of millions plummet.

The big picture, long-term view really takes all the wind out of the sails of a cute popular soundbite. But it’s far more honest. Because the fact is that any department of the Government is incapable of being removed or revised substantially. There are just too many lives, and economic implications tied to it to happen.

What does that mean when evaluating Presidential candidates? That when you look at all the information and comments made you have to take a moment to review what they are really saying. You have to look at the long term effects. And you have to throw out all the feel good fluff soundbites they all make. Because there isn’t a human being alive, ever, that can discuss all the implications of say nuclear weapons in Iran or illegal aliens in 30 seconds.

Labels: American economy, Democratic Party, election 2008, H and R Block, Iraq War, IRS, Middle East, President Bush, Presidential candidates, Republican Party, tax code