419. The Right Move

Something you don't think about is how the Defense budget cuts will impact the world, like this withdrawal of troops from Germany. But, it's about time we think about "me" [America] to use this money for Americans. I'd probably back leaving troops there for military reasons, but we seem to be able to deport troops from anywhere now in a reasonable time frame. Bring them home.

418. OBlunder lies some more

Hot off the press this article was send to me for comment. I'm glad others are seeing that the facts don't support OBlunder's rhetoric. Once again he has lied to us. Instead of creating jobs in the energy sector as he retorted in his State of the Union, he is killing them with his EPA Regulations. The coal regions are the target. The good paying coal miners are the victims. But, never fear, OBlunder will give you free unemployment money! Isn't this sick?

417. OBlunder and his Second Guessing

OBlunder admits he second guesses his decisions constantly. Even as frequently as 1 per hour. Is this a leader you want? Maybe he should second guess his PLANS and he won't have to second guess his ACTIONS so much. I was appalled by his statements in this interview. I second- and third- or even more my planning. But once I decide on the best path I very seldom have to readdress PLANNING issues, or in OBlunder's case, CORRECTION issues. I knew we were in for trouble when I learned of the idiots he was using for economy decisions while he was still campaigning. Give a clown a title and he thinks its a license to preach to the world, like Robert Reich, instead of facing the issues. Preach the plan regardless of its flaws (wouldn't want anybody to know). Continue preaching the gospel even when the majority of people and economist on this earth indicate differently. Thus is the life of a Professor! Can't look bad. Spin, spin, spin instead. OBlunder has been spinning like a top. It's about time the top loses its velocity and topples. Let's find a leader. One WITH experience. One who learns from somebody else's mistake IN the PAST and now can apply correct leadership for our future.

416. Do I Hear FLAT TAX! Do consider.

Along comes the AP again to get eveybody's panties in a ruffle. This time re taxing investment gains and why the rich get a break. Their article raises issues which might be true, like double and triple taxing of income before it goes into an investment AND more double taxes once its there and/or sold. The author went out of his way to find somebody to quote the fact that everybody pays double taxes, like it is right! Well, it isn't! I too have SAVED a bit by being frugal for over 40 years. I could have spent it and gone in debt like many people who now cry for help. I didn't. Instead, I invested it. That is, money I earned through salary which was already taxed. Taxing savings, like bank accounts, or bond interest, or stock dividends is an additional on-going tax each year. What gripes me is that capital gains are taxed to the fullest amount. Say I had $10K in gains -- I am taxed on all $10K. However, if my loss is $10K, I can only claim up to $3K per year and the rest gets carried over from year-to-year. In other words, the government wants to benefit fully on my gains in a year, but won't let ME benefit from losses.

So, the rich obviously have a lot of investment tied up. They are probably well diversified. Yet, they do occur losses for the risk they take in investing. Plus, it IS WORK to manage a good portfolio. I cannot back the clowns in this article who think investments should be taxed more. Its water-over-the-dam by the time it gets invested. Taxing MUST be at making time. High paid executives and some privileged employees get perks like stock options or discounts on purchased company stock. Companies DEFER paying on taxes in these forms, as do the recipients! You want to tax salaries? Tax these too in the year they are handed out! All options should be taxed as a gain (stock price - strike price of option) immediately!

Regardless, a way to get past all this double taxation and controversy over what is taxed and who is paying what IS THE FLAT TAX. Once again, go to the BOOKS category and look far back for the reference on the Flat Tax.

415. Stay tuned for more of Oblunder

The groundhog speaksTONIGHT [not post 411]. Get ready to rumble. OBlunder gets to repeat is fairness thing again. I find it difficult to see how Romney paying $3M in taxes and 45% of all Americans paying NOTHING is fair. Yet, OBlunder says a higher ratio, maybe his $6M to the 45% NOTHING would be more fair. I say, forget the inequality thing. It just divides this nation. Santorum said it best in a debate that he wouldn't have "classes!" Right on. Why can't OBlunder just say what should be said: that he wants the wealthy to help him out of the hole he dug and wouldn't they please, please ante up more tax money? I just finished a book [post 412] that clearly explained why taxing the wealthy would hardly impact the debt and deficit. It will take EVERYBODY to get aboard the tax wagon to see even a scratch of improvement. But, if you need to hear the word "fair", do tune in to hear the groundhog. I won't be wasting my time on the Big Show -- I've been living the show! Not his rhetoric!

414. How sweet it is?

I used the phrase "How sweet it is" referring to Apple's increase after hours today. Little did I know about the debate re subsidizing sugar since 1789 and its impact on keeping the price of sugar We the People see HIGH. Where sugar in the rest of the world is lower, ours is high because we have import taxes on foreign sugar too. Thus, ANY product that uses sugar -- think about everything -- is also inflated higher than it could be. Instead of letting the market set the price, we subsidize the U.S.sugar industry and tax the world industry. I suppose we could debate what a lower price of sugar would mean to the thousands of other businesses in the U.S. and to We the Consumer of their products. OR, we can just say we are accustomed to it and let select groups get our tax payer subsidies instead of maybe another industry, OR NONE as Romney suggested. Let the market determine prices!

413. I LOVE APPLE

How sweet it is. Nicely done Apple. Guess you can't complain too much when your stock closes down 1.64% only to shoot up 8% after hours. This should be a great catalyst for tomorrow's market.

412. "The Ten Trillion Dollar Gamble" by Russ Koesterich

A worthwhile reading. Good statistics, good examples, good advice in an inevitable rise in inflation somewhere in 2013. Mr. Koesterich explains the causes of inflation and how to invest when inflation strikes. Here are some notes I took:
                                                                              1985                                       Now
Deficit (amount of spending over revenue)    $.25T, 6% GDP                      $1.3T, 10% GDP
Debt                                                                       45% GDP                    $14T+, 90%+ GDP

CBO (clowns in government who forecast future budget, deficits, debt) did NOT factor in a possible recession in next 10 years, but did assume 4%/yr. GDP average for 2011-2014. A bit optimistic. These are the clowns who also gave the erroneous forecasts for Obamacare.

Can you believe: 5/6 of budget = Entitlement programs, defense, and interest we have to pay on debt. It is HIGHLY improbable that Entitlement programs won't get slashed to reduce debt and deficits. A MUST if we want to live.

Slashing debt and deficits hard to do when 45% of population pay NO TAXES. The wealthy can't come close to helping us climb out of debt by increased taxes alone. Middle class MUST be taxed too. Even then, Entitlements must be reduced.

Government tends to mitigate pain to those in trouble and the middle class INSTEAD of doing what must be done to reduce debt. Mitigating pain is a coverup that leads to much worse effects down the road. Handouts are killing us. Hard to take away and more and more want them. Just why do we continue to extend unemployment benefits? To mitigate pain. Result, we go further in debt to pay the extensions.

Large deficits lead to higher interest rates sometime in future: Need to sell more Treasury bonds to spend=>higher supply of bonds=>lower price of bonds (supply & demand)=>higher interest rates (interest moves opposite bond prices)=>higher mortgage, student loans, car loans, all loan rates=>affect stabilization of housing market=>less people can qualify for a loan. Also higher rates=>slow economy (both commercial and government will spend more on interest leaving less to put toward growth objectives)=>weaker job market.

To mitigate pain during these tough times, the FED will intervene and buy government debt (Treasury Bonds), called monetizing debt, =>increases money supply (inflation)=>devalues dollar=>longer-term inflation. [Note: if banks do not lend money out, then the money supply never makes it to the people and inflation is not yet seen -- as it is now]

Each 1% of GDP rise is about 30-60 basis pts rise on loan rates. The higher of the range happens when debt is high.

To detect when inflation kicks in:
1. Watch for increase in Commercial Loans (i.e., when private businesses begin to borrow). This is the C&I stat at the federalreserve.gov site.
2. Also watch for increase of consumer debt. Their appetite will not increase until unemployment falls. Thus, watch unemployment.
3. When the supply of debt (bonds, notes, etc. by government selling) shrink an demand for bank loans picks up, inflation has started.
4. Track Demand at Treasurydirect.gov/ri/ofgateway which lists the number of buyers by type. The type is important to understand whether domestic use is picking up or foreigner are still the predominant buyer. Foreign buyers have been keeping our inflation in check.
5. Watch Bid-to-Cover ration to understand how many request for bonds there are compared to how many can be satisfied. Higher ratio means higher demand. A ration around 2.4 has been norm. When it starts to trend down, this indicates that banks are loaning more to consumers than to the government. We haven't seen this trend yet because: of conviction of Fed to keep short-term rates low [yesterday, they reiterated that short-term rates will be same until to 2014], lingering risk aversion, concern over Euro.
6. We RELY on foreign investors to satisfy our 90% and growing GDP debt! Watch Indirect Bidder % after the bond auctions at the Treasury site. Higher = more foreign interest. Norm is around 30%. If 15-20% for consecutive auctions it is a sign that domestics are taking over and inflation becomes reality soon.

Fed Short-term rates affect Long-term rates. Yields spread is difference between short and long rates. Norm is about 2%, and 3% for overnight rates to long-term.

Inflation signals:
1. Unemployment decreasing [note: inflation LAGS job growth by at least a year. Normally when inflation is 3% job growth will be <1.5%; If > 1% then there are more jobs than people. watch non-farm job reports 1st Friday of month at bls.gov/ces] which casues
2. Increase in Wages
3.Manufacturing Capacity Utilization >>80% means manufacturing can't keep up with demand and prices rise. [federalreserve.gov/releases/g17]
4.Money Supply grows too fast [federalreserve.gov/releases/h6/current/h6.html]. NOTE: there are long lags between money supply increase and inflation. In '60s it took 4 years. Watch M2 > 6% .
5. Fed Actions, like monetizing debt will increase money supply if banks loan out the money [federalreserve.gov/releases/h41/current/h41.htm balance sheet should now be shrinking from 2.3T. If not, look for inflation.

NOTE; Despite lags in inflation, the market react sooner anticipating the future.

How to play the market:

• Some sectors are more resilient to inflation: ENERGY, HEALTHCARE, TECHS
• Avoid UTILITIES, CONSUMER DISCRETIONARY, FINANCIAL
• Some are disasters in inflation: retailers, particularly specialties (consumer discretionary)
• Search Internationally where other areas do not have high deficits and debt, like Australia, Canada, Hong Cong, Germany and Emerging Markets which are even better than U.S. at this time. Australia has good banking system AND natural resources. U.S. stocks that are predominantly foreign markets are good too, like INTEL (90% foreign sales)
• Avoid U.S. Bonds. Some International Bonds okay which may be played via fund or ETF
• Understand demographics play. Consider emerging markets because they have a higher under 15 year old vs over 65 year old ratio. The U.S. actually does have a higher 15 vs. 65 too, but not as high. Japan is bad.
• Commodities rise in inflation AND when $ is weak AND when demand is high (driven by emerging markets). GOLD is good play , as is OIL which always rises with rates and weak $
• Avoid stocks with P/E >>normal (15) for previous 12 months. BUY when <<15. Note, 15 is normal today and will change with inflation. e.g., in high inflation, 9 may be normal.

Koesterich states inflation not a threat for 1-2 years.

Thus, getting to his suggested 10% in commodities can be done over time. Buy on dips when other factors affect the price [weak dollar, demand]. COPPER may be good for long time. Note: inflation does not mean interest rate rise. This can happen independently.

Some historical numbers of returns:

                                                         Stocks                  Commodities

High Growth, High Inflation                 12%                        20%   

High Growth, Low Inflation                 16%                        10%

Low Growth, High Inflation                   5%                        24%

Low Growth, Low Inflation                   3%                       - 6%

China will continue to have high demand of commodities and 5/6 of overall word demand increase has been emerging markets.   

Commodities also increase when supply is short or costs increase. Mining is getting more costly [new and deeper], as is oil drilling [deeper]. Note, natural gas is abundant [avoid]. Precious metals tend to increase when doaal decreases. Copper increase with demand for building. Agriculture increases with bad weather. 

411: Special Day 2-2-2012 - Oops

Aa sent me this one (oops -- it's 1-24-2012!):

A Special Day is Coming 2-2-2012…

In this New Year of 2012, both Groundhog Day and the State of the Union address will occur on the same day; February 2nd. This is an ironic juxtaposition of events. One involves a meaningless ritual in which we look to an insignificant creature of little intelligence for future prognostication. The other involves a ground hog.

410. Response to Comment on Post #408

I just keep trying to remember how it was when I was your age. Was I as vigilant as I am today, or did the media cover the right stuff correctly? I can't be sure. But, we'd be talking around 1981 : 2nd year in Amarillo the first time, Sesame Street, Electric Co, Land of the Lost, etc. I can not remember ever watching a CNN or FOX News, even a news report on major network. Did get a paper, but even today Amarillo paper is nothing more than cat litter box floor. Internet? NONE -- Al Gore didn't 'invent" it yet. . So, I am leaning towards NEVER even informed of events of importance. Thus, your are on you own as to what to do with this info and react I guess, as am I. However, my future has a closer termination point and anything happening today may never mature to be really, really catastrophic. How would I deal with all this if I were you? Can't get my mind in your shoes -- can't seriously imagine that I will live 30 years longer than now and drum up scenarios. Guess we all learn to adapt. What really bothers me about politics is thqt ONLY the SUPER rich can afford to play it at the upper levels. We HAVE to elect a SUPER rich person who probably has an ego to carry -- an ego with not DESIRE but WANTING to take control of the world. SCARY! We can only hope we get a Ronald Reagan who I feel believed he was actually out to help we peons even tho9ugh he was SUPER rich. A YOUNG schmuck like OBlunder can't possibly have the real WISDOM of an older Reagan and LEAD the world. I hate to stereotype, but Wisdom of the world AND life (relationships, real feelings about people and events, hands-on experience with actions and results, wins AND losses, etc.) do not come with a person OBlunder's age. All he's qualified to do is HIRE more unqualified, incompetent people who think like him. 

But, how about the media? I wonder what percent of the news media (overall must have increased 1000% since 1980) are my "sterotyped" age range? Do you watch whaqt I did when I did? A Walter Cronkite type: mature, seasoned, calm, focused on facts and not opinions? Hardly. Now every reporter chases only his on tail -- remember the quote I posted a few weeks back by Stephen King:    "Each thing I do I rush through so I can do something else".  Seems to be the reporter's motto, instead of my Boy Scout religion -- Trustworthy, Loyal, Helpful, Friendly, Courteous, King, Cheerful, Thrifty, Obedient, Clean, Reverent. You live by the Boy Scout religion and you won't be asking Christian vs. Muslin, right vs. wrong, love vs. hate, etc. -- you be living the best life you can.

So, I need a conclusion. A answer to your comment. I can only suggest SPEAK OUT to others, but not just the rant or complaint, but some background re life as it is now and why it is going down hill fast. We all need to pull back to the 80's in the people relationship category -- certainly not technology. Maybe in another 30 years, people will have learned HOW to deal with these, probably technology-driven accelerated, deficiencies causing such a rift in our lives. But for now. I see no short-term fix to the blabber, to the lies, to the sensualism of reports, to the BAD rich always attempting to take over the power of We the People. Screen your next president carefully. Oh, speaking of which, DO realize that ALL SUPER Rich are probably in the 15% tax bracket BECAUSE the clowns wrote tax code for the MIDDLE class; specifically, they didn't want them to have to pay greater than 15% on their INVESTMENTS (capped rate at 15%). Almost ALL Super rich live off their long-term investments ONLY. Thus, they will pay no more than 15%. ONLY the rich still working will see a small percentage of their total income (salary) be taxed higher. Also note that their WORK INCOME = salary + OPTIONS, where options are taxed differently too. But, do I THINK the RICH should be taxed any more on their INVESTMENTS than everybody else. NO. They earned the money they invested initially and already {AND taxes on it. The only correct answer is the FLAT TAX as discussed in a book I posted -- See Book category and go read it to see how we all can be EQUALLY taxed that will benefit our government's appetite even more AND please We the People too.

Sorry for the rant. Your comment ignited another flame.

408: OJerko OIdiot !!!

Okay. My panties are ruffled and I wear none. Look what OBlunder did now re Canadian pipeline proposal. Sorry, but have you ever met a dumber president than OBlunder? I envision him as Alfred E. Newman -- lookslike him. But even MAD was more sane than this clown. A chance for America to break away from OPEC. Jobs, jobs, jobs to lower unemployment, increase average salaries, and grow America. Poof. Down the drain with just a few words from the anointed's mouth. The Canadian's will reapply for the pipeline to Houston, but just read the reason why he told them no. .....Now go iron your panties too. This is sabotage people. Impeachment is WAY OVER DUE.

407. Your basket full? Market Update

12578.95 DJIA close. Getting closer to the 12700 ceiling I predicted before banging the old noggin again. Keep alert. This looks like a very short breather from climbing the ladder up to today's rung. Same-o, same-o in the news. SSDD. It would be nice to forge through DJIA 12700 and continue upward. This will happen this year. But, not until we take our lumps and kicks to the shin a few times. I feel okay through February, but March may be a different story. And then we have the summer to look forward to (NOT, except for the weather). I might put my shields up early March until September. The worse of Europe NEWS has yet arrived. Nor are the actions going to resolve much short-term. So far, the future curve looks like a repeat of last year.

406: Keep an Eye on Spain tomorrow

Tomorrow's Spanish long-term (10 year) debt sale will be either catapult the market forward or give it another reason to back off. Obviously, people favor short-term German debt at the moment. Are they ready for the high risk Spainish debt sales? We'll have to wait and see if they bid the bonds down (raising the interest yields higher) or will pity Spain and buy the bonds where interst yields manageable for Spain in the long run. Touchy. I shall guess investors are still scared and won't want the debt at par if its yield is equal to others rated the same. The bond players will mark the price based on their risk assessment and lower their price if the coupon rate is above their expectations. I don't know at what coupon rate the bonds are being issued at, so, I will wait too, but on the side line. I'm not into Spain and its banks at the moment.

405. Oui Oui all the way home

Re the Armenian Law France was proposing (post #367): the AP had us running around with our pants on fire. However, today the AP finanlly reported some facts. The Senate voted (unbinding though) against imposing a law on its people to arrest anybody who exercises his right to Freedom of Speech stating his beliefs are different from Turkey Genocide. Is the law unconsitutional in France? Oui Oui.

404. Going Down? So is Europe.

S&P lowered ratings of 9 Euopean countries: "S&P cut the ratings of Italy, Spain, Portugal and Cyprus by two notches and the standings of France, Austria, Malta, Slovakia and Slovenia by one notch each."

As promised..no surprise. Lowering France from AAA to AA is like what S&P did to the U.S. Germany maintained their AAA. hese lower rating should shake up the bond, credit , and stock markets, particularly for Europe. In other articles, Merkel came out and stresses a more important need to proceed quicker with their plans to grow the overall economy, regulate the individual country budgets, etc. There won't be any happy campers for a while until the dirt settles again. When will the first country go back to its own currency? I really don't see any renegades from this bunch -- no cajones. I really see only sheep that are in line to have their wool clipped.

Over here? Earnings may pull us through the depressing European news. If Asia can follow us instead of Europe, the world economy has a chance. China needs to report some better numbers to push the overall markets forward faster.

403. The Pennstater

I received my alumni magazine today. It's cover was BLACK to the point you could barely see the text. It's theme for this issue's magazine was re the Dark days at Penn State. Would you believe they thought the ENTIRE issue should be dedicated to the Sandusky scandal? Even had his pictures (many) on inside covers smiling at us. This was totally distasteful and unnecessary. I had already dismissed Penn State from the mess when they started to investigate and removed individuals potentially involved in some way, not necessary guilty of anything. So, they started with watering-down the way things got reported or not reported based on some psychologist. Then, not in order, they focused on the positive things Paterno did for Penn State, articles about abuse victims, etc. Well, after months of seeing this on TV, there was NOTHING new. It just REOPENED wounds that had a band aid on and were trying to heal. I had already focused on Penn State as a positive university. It was Sandusky and the individuals that didn't pursue the alleged crimes that were wrong. Let's separate the university which had the policies in place from the culprits who chose not to follow them. A few bad eggs should take down the egg business.

I look forward to reading about the successes throughout Penn State, as well as, their involvement outside the university to help mankind. I enjoy the articles about alumni who became successful and students who excel. Well, this issue was a joke! I did not need a university thinking it needed to teach me something. Maybe they should have had a course once per year for those who ignored the abuse! Not me. No glory in this issue -- only doom and gloom and a feeling that they know something that I don't and were responsible to educate me!                      *** Stop State ***

402. Sanction on Chinese Oil Companies

Now we're stirring a hornets nest. Apparently, as part of the Iran sanctions which indicated that we will sanction specific companies dealing with Iran, the U.S. targeted a Chinese major oil company. How we selected just this one I do not know. But, I can see several possible scenarios as a result of this. For example, this could be construed as OBlunder picking which company he wants to help or destroy. Zhuhai Zhenrong is supposed to be the largest supplier of refined products to Iran as well as receive oil from Iran. It did not target China's major state-run companies [as of yet].  Could this make Zhenrong a smaller fish and now part of the other state-run company's food chain? Could this start even more static between China and the U.S. Isn't the trade wars enough? Do we need to push China to start cooperating? Do we need to be firmer (yes)? Is this the start of a cold war between our countries? However you look at it, we have also included an Indonesian oil firm too, making it look like we're trying to be consistent when applying Iran sanctions. Time will tell. I finally feel like it was past due. We should have been firmer on sanctions at least 3 years ago and pussy-footed until we're on the verge of Nuclear dominance by unfriendly nations. Well, it had to start sometime while there are at least a few moments of cooperative chit chat left. We let the hornets build a gigantic nest. I hope just smoke creates enough docility to open talks. The cards are getting too dirty to read any more.

401. Did Michelle Obama go Whoopi?

I can understand Ms. Obama's frustrations with the White House staff IF it is even true. But the question becomes why did she raise the race issue by saying  some people view her as "an angry black woman?" Where did that come from. I don't read trash talk either and agree with her views there, but not once in the article did it say the author of the article she was referring to mentioned an angry black woman. Makes me wonder who is leaning more toward racism? Poor choice of words Michelle. The words actually help the author's point.

400. Perry when young?

A real cowboy has no fear ... thank you Aa for the pic:

399. Tax time is JUST coming?

Remember when you could submit your taxes by January 15? All bank, salary, brokerage statements were mailed out by January 31? Some other investments required you to wait for a corrected 1099 til out in late March? Meanwhile, the tax-processing IRS employees (answer questions, receive and process paper and electronic forms, etc.) sat at their desks collecting salaries from December through May. Here's a money saver: Make tax day June 15, rather than April 15. Let's examine how this would work. Keep all dates for businesses, banks, and brokers (plus partnerships) as they are. Thus, everybody will have what they need in COMPLETE and FINAL  1099s with no corrections necessary. Ah, the dollars saved by the senders. Now consider NOT staffing the IRS with the processors until March, instead of December. Save 3 months of additinal IRS employee costs. Would it be too much to ask for a more effective and efficient process?