As Donald Trump and his votaries in talk radio like Sean Hannity and Mark Levin continue in their disserving of the public debate in this country by casting the superficial problem of illegal immigration as an assault on constitutional fundamentalism, there remains a silent killer of Liberty not being acknowledged. Not to imply in any way that illegal immigration is not a troubling problem that should not be addressed. However, once one has emerged from the foggy emotionalism of the Trump phalanx, the clear-eyed facts remain that illegal immigration over the southern border of the United States has actually decreased over the last decade.
One of the more troubling issues about which no conservative pundit or candidate appears to be talking is the complete rearrangement of this great nation's financial and economic system. The economic aspect of this great rearrangement has been accomplished via the Federal Reserve. The one two punch to economic growth of historically low interest rates for the last 7 years, combined with the Federal Reserves purchase of treasury bonds, has kept a lid on inflation, but also economic growth as well.
In addition to the balance sheet of the Federal Reserve more than tripling over the last 7 years, is the danger that has been posed by the new banking law passed in 2010 known as Dodd/Frank. Named for the two men more responsible for the financial meltdown in 2008 than anyone else on earth, this legislation was government's way of ensuring that a repeat of 2008 would not occur in the future. Those on the Left in congress who rammed this legislation through to law claimed that what caused the crisis was the idea of having institutions that were "too big to fail."
The "too big to fail" ideology is a throwback to the early 20th century when the founders of American progressivism, Teddy Roosevelt, Louis Brandies, et al, went after large institutions like JP Morgan for the simple fact that they were "big, and anything big is inherently corrupt." Those early progressives, as well as modern progressives, still think anything big is corrupt, with the exception of government of course.
What Dodd/Frank has accomplished is the narrowing of the banking industry so that only the big will eventually survive. Since its inception in 2010 only one new community bank has opened its doors in the entire country, while over 1000 smaller community-based banks have been forced to close. These banks have not closed due to mismanagement or wild speculation, but because they can not afford the millions of dollars required to be compliant with the far reaching Dodd/Frank law. This causes fewer choices for depositors, borrowers, and savers, which is never a good thing for the cause of Liberty. In other words Dodd/Frank has transformed too big to fail into too small to succeed.
This fundamental transformation of our economic system which has its roots in the founding, has somehow been drowned by the rants, howls, and emotional machinations of those pushing the problem of illegal immigration to the head of the line. I think when the history of this time is written, and the sober thoughts of our descendants turn to the loss of Liberty in America, they will rightly see the transformation of our financial system to be more culpable in that loss than the ephemeral problem of illegal immigration.
Showing posts with label Financial Commentary. Show all posts
Showing posts with label Financial Commentary. Show all posts
Wednesday, July 22, 2015
Tuesday, August 5, 2014
Hubris Of The Fed
The stock market has had a little trouble lately on its fairytale expedition to never, never land where shares prices increase simply because the sun rises and the Federal Reserve bunnies dance with magical monetary policy in fields of brightly colored flowers of delusion. You may wonder why, after recent record highs, the stock market seems to have throttled back a little.
Well it certainly is not earnings, economic data, the crisis on our Southern border, the hot war between Israel and Hamas, the cold war between the United States and Russia over the latter's incursion into the sovereign nation of Ukraine, the Argentine debt crisis, the European debt crisis, or arguably the worse U.S. economy since the Great Depression of the 1930s. No, what moves the market now is talk of the Federal Reserve increasing their benchmark interest rate from its historic low of zero to a quarter percent, which it has maintained for six years.
The stock market is like the Roman Emperor Nero, who played his fiddle while Rome burned. As long as the market has its security blanket of Federal Reserve monetary policy, which has pumped almost 4 trillion dollars into what would otherwise have been a flaccid market at best the last 5 years, they are as quiet as a baby suckling at his mother's breast. But as soon as there is talk of raising interest rates in conjunction with the Fed reduction in the amount of bonds they are buying each month to drive money into the market, those in the market scream like that little baby when he is detached from his mother before he has had his fill.
The economic reality is that during the last decade the median wealth amongst American families has decreased from $87,000 down to $56,000. A majority of that decrease has happened in the last 6 years that Barack Obama has been president, and the Federal Reserve has been handing out the candy of higher share prices at the expense of average Americans. Too low of interest rates over an extended period of time has the same effect as too high of interest rates, both stifle economic growth. Low interest rates have conspired with excessive federal regulations and laws like ObamaCare, to constipate real economic growth.
The real irony of the Obama-led Federal Reserve keeping interest rates so low for so long is that Democrats screamed from the rooftops that it was just this kind of monetary policy which lead to the financial crisis of 2008. Recently in a congressional hearing, Federal Reserve Chairman Janet Yellen would not agree to setting any metrics on when certain monetary policy would be implemented by the Fed. This hubris on the part of Ms. Yellen is typical of those in government who have never worked in the private sector economy, but somehow think their economic theories cooked up in the vacuum of the university can change the economic reality of a free market.
Well it certainly is not earnings, economic data, the crisis on our Southern border, the hot war between Israel and Hamas, the cold war between the United States and Russia over the latter's incursion into the sovereign nation of Ukraine, the Argentine debt crisis, the European debt crisis, or arguably the worse U.S. economy since the Great Depression of the 1930s. No, what moves the market now is talk of the Federal Reserve increasing their benchmark interest rate from its historic low of zero to a quarter percent, which it has maintained for six years.
The stock market is like the Roman Emperor Nero, who played his fiddle while Rome burned. As long as the market has its security blanket of Federal Reserve monetary policy, which has pumped almost 4 trillion dollars into what would otherwise have been a flaccid market at best the last 5 years, they are as quiet as a baby suckling at his mother's breast. But as soon as there is talk of raising interest rates in conjunction with the Fed reduction in the amount of bonds they are buying each month to drive money into the market, those in the market scream like that little baby when he is detached from his mother before he has had his fill.
The economic reality is that during the last decade the median wealth amongst American families has decreased from $87,000 down to $56,000. A majority of that decrease has happened in the last 6 years that Barack Obama has been president, and the Federal Reserve has been handing out the candy of higher share prices at the expense of average Americans. Too low of interest rates over an extended period of time has the same effect as too high of interest rates, both stifle economic growth. Low interest rates have conspired with excessive federal regulations and laws like ObamaCare, to constipate real economic growth.
The real irony of the Obama-led Federal Reserve keeping interest rates so low for so long is that Democrats screamed from the rooftops that it was just this kind of monetary policy which lead to the financial crisis of 2008. Recently in a congressional hearing, Federal Reserve Chairman Janet Yellen would not agree to setting any metrics on when certain monetary policy would be implemented by the Fed. This hubris on the part of Ms. Yellen is typical of those in government who have never worked in the private sector economy, but somehow think their economic theories cooked up in the vacuum of the university can change the economic reality of a free market.
Thursday, June 26, 2014
Warren Buffet: The Ultimate Insider Trader
The Obama administration has announced that it is eliminating the former restrictions on foreign exploration and drilling of domestic oil reserves. This means that a higher percentage of United States oil reserves will be extracted from the ground for foreign interests. It also means that the price of oil will increase substantially. Additionally, these foreign interests will not be refining their oil using U.S. refineries, but their own. And this is where billionaire investor Warren Buffett comes in.
In the previous months, Mr. Buffett has been dumping his shares in domestic refinery companies, having been tipped off to this new Obama policy before it became general knowledge. For those paying attention, this is not the first time Mr. Buffett has benefitted from his cozy relationship with Barack Obama.
There were the shares of General Electric he bought in early 2009 just before it was announced by the administration that GE would receive billions of dollars in TARP money. And who could forget Warren's purchase of Bank of America stock, which he was allowed by the Obama White House to receive dividends on while at the same time they forbade BofA from paying dividends to common shareholders. Finally, there is the Omaha environmental group that Mr. Buffet funds which has been instrumental in keeping the Keystone Pipeline Project from coming to fruition so as not to upset the profit that Berkshire Hathaway makes from transporting oil on their rail cars.
In the 1950s, when Warren Buffett first founded his company, Berkshire Hathaway, he used his skill and cunning as an analyst of economics and business financials to make money. In recent years, especially since Barack Obama became president, Mr. Buffett has used less stock picking skill and more political connections with which to make money for his shareholders. He is the ultimate crony capitalist, and the richer and more influential he becomes, the more crony and the less skillful analyst he becomes.
It was not always the perfect marriage between Warren Buffett and Barack Obama. In the beginning of the latters administration, Mr. Buffett was critical of the president's policies, which he saw as destroying the economy. But it seemed with each billion in profits Warren made as a result of being fed valuable information from the administration, the less concern he had for his country, and the more he turned a blind eye to Barack Obama's anti-capitalist agenda. Which is the antithesis of the free market principles that built Berkshire Hathaway.
Mr. Buffett is the poster child for the crony capitalism that has destroyed the sanctity of self government and has given free markets a black eye, even though his behavior has no place in them. For now there seems to be no concern, let alone action to stop, Mr. Buffett's ultimate insider trading. It is the typical thing that happens in corrupt banana republics, which the United States of America is racing down the road to become.
In the previous months, Mr. Buffett has been dumping his shares in domestic refinery companies, having been tipped off to this new Obama policy before it became general knowledge. For those paying attention, this is not the first time Mr. Buffett has benefitted from his cozy relationship with Barack Obama.
There were the shares of General Electric he bought in early 2009 just before it was announced by the administration that GE would receive billions of dollars in TARP money. And who could forget Warren's purchase of Bank of America stock, which he was allowed by the Obama White House to receive dividends on while at the same time they forbade BofA from paying dividends to common shareholders. Finally, there is the Omaha environmental group that Mr. Buffet funds which has been instrumental in keeping the Keystone Pipeline Project from coming to fruition so as not to upset the profit that Berkshire Hathaway makes from transporting oil on their rail cars.
In the 1950s, when Warren Buffett first founded his company, Berkshire Hathaway, he used his skill and cunning as an analyst of economics and business financials to make money. In recent years, especially since Barack Obama became president, Mr. Buffett has used less stock picking skill and more political connections with which to make money for his shareholders. He is the ultimate crony capitalist, and the richer and more influential he becomes, the more crony and the less skillful analyst he becomes.
It was not always the perfect marriage between Warren Buffett and Barack Obama. In the beginning of the latters administration, Mr. Buffett was critical of the president's policies, which he saw as destroying the economy. But it seemed with each billion in profits Warren made as a result of being fed valuable information from the administration, the less concern he had for his country, and the more he turned a blind eye to Barack Obama's anti-capitalist agenda. Which is the antithesis of the free market principles that built Berkshire Hathaway.
Mr. Buffett is the poster child for the crony capitalism that has destroyed the sanctity of self government and has given free markets a black eye, even though his behavior has no place in them. For now there seems to be no concern, let alone action to stop, Mr. Buffett's ultimate insider trading. It is the typical thing that happens in corrupt banana republics, which the United States of America is racing down the road to become.
Thursday, May 1, 2014
The New Phase In The Obama Recovery: No Growth
At any other moment in this country's history, the government's release of a Gross Domestic Product growth rate of one tenth of one percent, would be proof positive that our economy is in recession. Yesterday's release by the Obama government of first quarter GDP that dragged itself across the finish line at 0.1%, was hardly noticed by the main stream media and financial markets. But this reaction is par for the course in the age of Obama, where the "recovery" has only managed to average GDP growth that barely touches the 2.0% level, well below the average for the last 70 years of 3.2% a quarter.
Those in government and the financial industry have blamed Winter weather for the decrease in growth. But even accounting for the "severe" Winter, their expectations for first quarter growth were 1.2%, which is of course 12 times the actual number reported. Talk about a miss. The Winter of 1978-1979 was much worse than this Winter and actually broke more weather related records than this year's Winter season. But listening to the media, you would have thought that the earth had never experienced a Winter with as much snow and as cold of temperatures as this year. And in the first quarter of 1979 the economy grew by well over 1%, and that was during the depths of the Carter malaise.
So much for the "Winter weather" excuse for a slowing economy. In this upside down world of Obamanomics, the stock market has abandoned any pretense of being tethered to the economy's performance or the earnings of the companies that participate in it. The financial markets have left the tracks of common sense and fundamentals, instead opting for an unholy marriage to the Federal Reserve. And the Fed has also abandon its charter and has willingly allowed itself to acquiesce to its unhealthy union with the market, judging its success based entirely on market performance. A performance the Fed has assured through its ability to print money and pump it into a market that otherwise would be feeling the effects of a flaccid economy.
It causes me a great amount solicitude to realize that those who I thought occupied positions in the last vestiges of reason and common sense, those in the financial industry, are no more being lead by intellect than a teenage boy at a nude beach. There are a few brave souls in the financial world who are actually ringing the alarm bell of this debilitated economy. But they are called outliers and kooks by the vast majority of the Obama sycophants who occupy positions in the financial media and institutions.
This morning, the weekly initial claims for unemployment will be released. The administration and their lapdogs in the markets have been beating themselves senseless with joy because the number of people applying for first time benefits has been dropping. They claim this is a sign of an improving job market. But with a plunging Labor Force Participation Rate, the drop in first time claims only means the economy is operating with a skeleton crew of workers, and there are fewer working people to be laid off. It is like a morbidly obese individual going on a diet and exercise plan. In the early weeks, the pounds melt off in double digits. The more weight that is lost, the fewer pounds remain to be lost.
This country can hardly afford anymore Obama "growth." But I fear that the American people have forgotten what real prosperity looks like. It has been a long time since the 6-7% growth of the Reagan economy, or even the recent 3-5% growth of the George W. Bush economy. When our financial leaders are so cowed as to not recognize the obvious signs of a slowing economy, then truly the America of prosperity and financial freedom is a foggy quaint memory of a past we have convinced ourselves was a dream.
Those in government and the financial industry have blamed Winter weather for the decrease in growth. But even accounting for the "severe" Winter, their expectations for first quarter growth were 1.2%, which is of course 12 times the actual number reported. Talk about a miss. The Winter of 1978-1979 was much worse than this Winter and actually broke more weather related records than this year's Winter season. But listening to the media, you would have thought that the earth had never experienced a Winter with as much snow and as cold of temperatures as this year. And in the first quarter of 1979 the economy grew by well over 1%, and that was during the depths of the Carter malaise.
So much for the "Winter weather" excuse for a slowing economy. In this upside down world of Obamanomics, the stock market has abandoned any pretense of being tethered to the economy's performance or the earnings of the companies that participate in it. The financial markets have left the tracks of common sense and fundamentals, instead opting for an unholy marriage to the Federal Reserve. And the Fed has also abandon its charter and has willingly allowed itself to acquiesce to its unhealthy union with the market, judging its success based entirely on market performance. A performance the Fed has assured through its ability to print money and pump it into a market that otherwise would be feeling the effects of a flaccid economy.
It causes me a great amount solicitude to realize that those who I thought occupied positions in the last vestiges of reason and common sense, those in the financial industry, are no more being lead by intellect than a teenage boy at a nude beach. There are a few brave souls in the financial world who are actually ringing the alarm bell of this debilitated economy. But they are called outliers and kooks by the vast majority of the Obama sycophants who occupy positions in the financial media and institutions.
This morning, the weekly initial claims for unemployment will be released. The administration and their lapdogs in the markets have been beating themselves senseless with joy because the number of people applying for first time benefits has been dropping. They claim this is a sign of an improving job market. But with a plunging Labor Force Participation Rate, the drop in first time claims only means the economy is operating with a skeleton crew of workers, and there are fewer working people to be laid off. It is like a morbidly obese individual going on a diet and exercise plan. In the early weeks, the pounds melt off in double digits. The more weight that is lost, the fewer pounds remain to be lost.
This country can hardly afford anymore Obama "growth." But I fear that the American people have forgotten what real prosperity looks like. It has been a long time since the 6-7% growth of the Reagan economy, or even the recent 3-5% growth of the George W. Bush economy. When our financial leaders are so cowed as to not recognize the obvious signs of a slowing economy, then truly the America of prosperity and financial freedom is a foggy quaint memory of a past we have convinced ourselves was a dream.
Thursday, April 17, 2014
U.S. Stock Market, Modern Day Nero
Roman mythology says that first century Roman emperor Nero was so oblivious that he played his fiddle while Rome burned. The recent behavior of the stock market is reminiscent of Nero's obtuseness. But instead of ignoring a city in flames, those in the market have ignored economic data that would need an extension ladder just to rise to the level of mediocrity, corporate earnings that can barely jump the hurdle of the market's lowest expectations, and a brewing civil war in Ukraine orchestrated by Vladimir Putin.
The market has reached new highs even as the economy makes its obvious lurch towards recession. This slowdown is not only evidenced by the economic data that is worst than last year at this time, which was no great shakes even then, but by companies reporting first quarter results that, even when they meet lowered expectations for earnings, have missed on revenues. And even companies who have met expectations on both earnings and revenue, have not, for the most part, met their previous year's sales. Of the nation's three biggest banks, JP Morgan Chase, Bank of America, and Citigroup, the two former missed even the lowered expectations for earnings, and Citigroup barely eked out a mediocre performance.
Author Michael Lewis recently penned a tome called, "Flash Boys," in which he surmises that the stock market is rigged by high frequency traders. High frequency traders are those who ply their trade in the milliseconds between when an order for a stock purchase is made and when it is filled on the exchange. They use high powered computers near the exchanges, and even higher powered mathematical algorithms to intercept these trades and make fractions of a penny on millions of shares, thousands of times a day.
The market is rigged, not by high frequency traders, but by the big money players. That is why the market no longer responds to economic data or corporate earnings like it should. Instead, the market is like a marionette, having its strings pulled by the likes of Warren Buffet and others who control its direction. When the Federal Reserve's insanely low interest rates for the last 6 years, and their quantitative easing program which has pumped three trillion dollars into the market, is added to the mix of big money players, the market becomes a rigged game, no more honest than a street level version of Three Card Monty.
The mid and low level brokers who are successful, do not acquire that success through studying market fundamentals and corporate earnings, but through following the money flows of the "Big Guys." In other words, what drives the market is the old adage, "Follow the money." And while the "Rome" of our economy and the stability of geopolitical relationships "burn," the Neros in the market continue to "fiddle," oblivious to anything but driving stocks higher simply because they can.
The market has reached new highs even as the economy makes its obvious lurch towards recession. This slowdown is not only evidenced by the economic data that is worst than last year at this time, which was no great shakes even then, but by companies reporting first quarter results that, even when they meet lowered expectations for earnings, have missed on revenues. And even companies who have met expectations on both earnings and revenue, have not, for the most part, met their previous year's sales. Of the nation's three biggest banks, JP Morgan Chase, Bank of America, and Citigroup, the two former missed even the lowered expectations for earnings, and Citigroup barely eked out a mediocre performance.
Author Michael Lewis recently penned a tome called, "Flash Boys," in which he surmises that the stock market is rigged by high frequency traders. High frequency traders are those who ply their trade in the milliseconds between when an order for a stock purchase is made and when it is filled on the exchange. They use high powered computers near the exchanges, and even higher powered mathematical algorithms to intercept these trades and make fractions of a penny on millions of shares, thousands of times a day.
The market is rigged, not by high frequency traders, but by the big money players. That is why the market no longer responds to economic data or corporate earnings like it should. Instead, the market is like a marionette, having its strings pulled by the likes of Warren Buffet and others who control its direction. When the Federal Reserve's insanely low interest rates for the last 6 years, and their quantitative easing program which has pumped three trillion dollars into the market, is added to the mix of big money players, the market becomes a rigged game, no more honest than a street level version of Three Card Monty.
The mid and low level brokers who are successful, do not acquire that success through studying market fundamentals and corporate earnings, but through following the money flows of the "Big Guys." In other words, what drives the market is the old adage, "Follow the money." And while the "Rome" of our economy and the stability of geopolitical relationships "burn," the Neros in the market continue to "fiddle," oblivious to anything but driving stocks higher simply because they can.
Wednesday, April 9, 2014
How George W. Paved The Way For Obamanomics
In the wake of the 2008 financial meltdown caused by the government's propagation of the sub-prime housing market, George W. Bush implemented the Troubled Asset Relief Program, TARP for short. His then secretary of Treasury, Hank Paulson and Chairman of the Federal Reserve, Ben Bernanke, advised the beleaguered president it was the only way to prevent a financial Armageddon. His vice president, Dick Cheney, advised against it, ultimately being right on this issue as he was on so many others.
TARP, as its name implies, was 700 billion taxpayer dollars that were earmarked to buy the mortgage backed securities comprised almost entirely of sub-prime loans made to people who were unable to repay them. The loans were required by bad law pushed mainly by Democrats to make the mortgage industry more "fair" to low income buyers. However, somewhere along the line, Bernanke, Paulson, and company decided it would give the government more control over the situation if they used much of that money as loans to banks that did not need or want the money, ultimately to enable government to manipulate the banks into submission.
It was a lie that the banks needed the liquidity the TARP money provided. Prior to the crisis, U.S. banks had more money held in reserve than at any other time in history, a hefty 680 billion dollars. The banks' lack of liquidity needs was also demonstrated by low deposit rates. In a free market system, when banks need liquidity they raise deposit rates on CDs, savings accounts, and other deposits to attract customers' money. Deposit rates have actually been driven down over the last six years because of government interference.
Those who claim that "all the TARP money was paid back in full," are ignorant at best and disingenuous at worst. While the TARP funds that were loaned out were repaid, many within 18 months, that only accounted for about 75% of the total funds allocated. The other 25% slipped into the Twilight Zone of government bureaucracy known as "administrative costs." Almost the same amount, 25% of the total, was given to the quasi-government agencies at the epicenter of the sub-prime market, Fannie Mae and Freddie Mac. Recently, it was reported that Fannie Mae and Freddie Mac had paid back the TARP money, with interest. But being an agency of the Federal government, the "pay back" was more of an accounting trick than an actual repayment of funds.
The worse part of the TARP boondoggle was not so much the hard earned taxpayer dollars given to banks that did not need it, it was the flood gates of spending and regulations that were open wide enough for President Obama to fly Air Force I through on his way to the golf course. It is apropos that many misdirected folks on the Right defend the TARP bailouts, seeing as how the taxpayer dollars used to fund the program were misdirected so horribly from their original purpose of buying up toxic assets backed by sub-prime loans.
It is curious that those who defend the TARP bailouts point to the funds being repaid as the only metric of success. But to those interested in the truth, the recent Fed ruling giving banks until 2017 to rid their balance sheets of the toxic assets that TARP was created to discharge, is proof of the program's failure. The recent government case against Bank of America and its former CEO, Ken Lewis, for bad loans on the books of Meryl Lynch, which BofA was forced to buy at the behest of the Bush administration, is an example of the real purpose of TARP. TARP was meant as a governmental power grab over the financial industry, first in the waning days of the George W. Bush administration, and then exponentially in the Obama administration. Dick Cheney and others knew that the heavy hand of government, exemplified by programs like TARP, only serve to weigh down the free market and prolong the agony originally caused by government incursion into those markets.
TARP, as its name implies, was 700 billion taxpayer dollars that were earmarked to buy the mortgage backed securities comprised almost entirely of sub-prime loans made to people who were unable to repay them. The loans were required by bad law pushed mainly by Democrats to make the mortgage industry more "fair" to low income buyers. However, somewhere along the line, Bernanke, Paulson, and company decided it would give the government more control over the situation if they used much of that money as loans to banks that did not need or want the money, ultimately to enable government to manipulate the banks into submission.
It was a lie that the banks needed the liquidity the TARP money provided. Prior to the crisis, U.S. banks had more money held in reserve than at any other time in history, a hefty 680 billion dollars. The banks' lack of liquidity needs was also demonstrated by low deposit rates. In a free market system, when banks need liquidity they raise deposit rates on CDs, savings accounts, and other deposits to attract customers' money. Deposit rates have actually been driven down over the last six years because of government interference.
Those who claim that "all the TARP money was paid back in full," are ignorant at best and disingenuous at worst. While the TARP funds that were loaned out were repaid, many within 18 months, that only accounted for about 75% of the total funds allocated. The other 25% slipped into the Twilight Zone of government bureaucracy known as "administrative costs." Almost the same amount, 25% of the total, was given to the quasi-government agencies at the epicenter of the sub-prime market, Fannie Mae and Freddie Mac. Recently, it was reported that Fannie Mae and Freddie Mac had paid back the TARP money, with interest. But being an agency of the Federal government, the "pay back" was more of an accounting trick than an actual repayment of funds.
The worse part of the TARP boondoggle was not so much the hard earned taxpayer dollars given to banks that did not need it, it was the flood gates of spending and regulations that were open wide enough for President Obama to fly Air Force I through on his way to the golf course. It is apropos that many misdirected folks on the Right defend the TARP bailouts, seeing as how the taxpayer dollars used to fund the program were misdirected so horribly from their original purpose of buying up toxic assets backed by sub-prime loans.
It is curious that those who defend the TARP bailouts point to the funds being repaid as the only metric of success. But to those interested in the truth, the recent Fed ruling giving banks until 2017 to rid their balance sheets of the toxic assets that TARP was created to discharge, is proof of the program's failure. The recent government case against Bank of America and its former CEO, Ken Lewis, for bad loans on the books of Meryl Lynch, which BofA was forced to buy at the behest of the Bush administration, is an example of the real purpose of TARP. TARP was meant as a governmental power grab over the financial industry, first in the waning days of the George W. Bush administration, and then exponentially in the Obama administration. Dick Cheney and others knew that the heavy hand of government, exemplified by programs like TARP, only serve to weigh down the free market and prolong the agony originally caused by government incursion into those markets.
Friday, April 4, 2014
2014 Is 1984
In George Orwell's classic novel 1984 about a society ruled by big government statism, the Ministry of Information was responsible for propagating the lies with which the government leaders used to oppress the average citizen. Today we have an entire media complex that has become nothing more than a Ministry of Information for the Democrat party generally, and for Barack Obama specifically. The sycophant nature of the media is not just limited to the news media, but traverses all media outlets whether they be sports, entertainment, or even financial.
Yesterday morning the government released the first time claims for unemployment for the prior week, an exercise that becomes more irrelevant because of the record number of people that are unemployed, therefore leaving few workers in the work force left to be laid off. The report showed there were 16 thousand more laid off workers applying for new unemployment benefits than the prior week. This was not the Orwellian part, that being reserved for the story on the CNBC website that went along with the news. They so casually stated that the government, i.e., the Obama administration, had changed the model used to figure weekly unemployment claims in order to make it more "flexible" when adjusting for seasonal fluctuations. The Obama administration also changed the data going back to 2009 using this new model.
So not only have the central planners in the Obama administration changed a model used to figure a key economic data point, as they did with the decades old formula used to calculate the unemployment rate, but they have changed historical data to make it reflect more favorably on Obama policy. These actions are eerily similar to ones that would have been taken by the statists in Orwell's novel. The Democrat party has been well practiced at changing history and convincing Americans that what they saw, or lived through, did not actually exist.
I suspect in the decades to follow, the Obama economy will be hailed by those on the Left as a boon time, with a chicken in every pot and a paycheck in every pocket. After all, I have actually talked with Democrats that believe the economy was prosperous and growing under Jimmy Carter and it only declined once Ronald Reagan became president. And the economic data for that time period would inform any interested party of the Carter malaise which was followed by the Reagan economic boon. How much more likely is it for the politically blind and ignorant to believe in the myth of Obama prosperity with data that has been manipulated to support it.
As I read Orwell's 1984 as a high school student in the 1970s, I took it as a cautionary tale that had about as much chance of becoming reality as something like the World Wide Web. Today the Internet is a daily part of almost everyone's lives, and Orwell's world of an ever powerful state has come to fruition in the full operation of the Obama administration. Yes, Orwell had it right, only he was thirty years early on his predictions. The world of 1984 is the world of 2014.
Yesterday morning the government released the first time claims for unemployment for the prior week, an exercise that becomes more irrelevant because of the record number of people that are unemployed, therefore leaving few workers in the work force left to be laid off. The report showed there were 16 thousand more laid off workers applying for new unemployment benefits than the prior week. This was not the Orwellian part, that being reserved for the story on the CNBC website that went along with the news. They so casually stated that the government, i.e., the Obama administration, had changed the model used to figure weekly unemployment claims in order to make it more "flexible" when adjusting for seasonal fluctuations. The Obama administration also changed the data going back to 2009 using this new model.
So not only have the central planners in the Obama administration changed a model used to figure a key economic data point, as they did with the decades old formula used to calculate the unemployment rate, but they have changed historical data to make it reflect more favorably on Obama policy. These actions are eerily similar to ones that would have been taken by the statists in Orwell's novel. The Democrat party has been well practiced at changing history and convincing Americans that what they saw, or lived through, did not actually exist.
I suspect in the decades to follow, the Obama economy will be hailed by those on the Left as a boon time, with a chicken in every pot and a paycheck in every pocket. After all, I have actually talked with Democrats that believe the economy was prosperous and growing under Jimmy Carter and it only declined once Ronald Reagan became president. And the economic data for that time period would inform any interested party of the Carter malaise which was followed by the Reagan economic boon. How much more likely is it for the politically blind and ignorant to believe in the myth of Obama prosperity with data that has been manipulated to support it.
As I read Orwell's 1984 as a high school student in the 1970s, I took it as a cautionary tale that had about as much chance of becoming reality as something like the World Wide Web. Today the Internet is a daily part of almost everyone's lives, and Orwell's world of an ever powerful state has come to fruition in the full operation of the Obama administration. Yes, Orwell had it right, only he was thirty years early on his predictions. The world of 1984 is the world of 2014.
Saturday, March 22, 2014
Momma Fed Continues Legacy Of Economic Ignorance
This week saw the first Federal Open Market Committee meeting to be presided over by Janet Yellen, the new chairman of the Federal Reserve. And while the Fed's bought and paid for lapdogs on Wall Street, and elsewhere in the financial industry, gave Ms. Yellen high marks for her comments, one would expect nothing less from a coddled industry that has received the benefit of over three trillion created-out-of-of-thin-air dollars from the Federal Reserve in the last four years. But to this realistic viewer of the economy as it is, Chairman Yellen was a worthy successor of the dimly lighted torched passed to her from Ben Bernanke, the previous Fed Chairman.
Proof of Ms. Yellen's firm grasp of the title Glittering Jewel of Colossal Ignorance was exemplified by one statement she made at her press conference after the two day meeting. She said that the Fed would eliminate the trigger of a 6.5% unemployment rate to increase its interest rate from the historic low of zero to a quarter percent it has held since 2008. She said the reason was that the employment situation has improved more rapidly than expected. I do not know what dim bulbs like Janet Yellen had expected, but thank God her expectations were not met, seeing as how after five years into an economic recovery, the nation has a record number of working aged persons unemployed, and the lowest percentage of that population participating in the work force in almost 40 years.
The stated goal of the Fed's Quantitative Easing program was to stimulate the economy and spur job growth. After more than three trillion dollars, neither of these goals has been met, unless one considers record unemployment and sub-two percent GDP growth an acceptable outcome for the money. And while companies stock prices have done very well in the age of easy money from the Federal Reserve, earnings of those companies have only done well to the extent that expectations have been dropped so low they would have to look up just to see mediocrity.
The dirty little secret about the Fed's bond-buying program is that since 2011, the Chinese have been severely curtailing their investment in U.S. bonds, having calculated that they are no longer a good investment. This was about the same time that Standard and Poors downgraded the U.S. credit worthiness for the first time in history. With the Fed's current tapering seeing an end to their bond-buying by this Fall, the Chinese reducing their investment in U.S. debt, the Russians threatening to flood the market with their sizable stash of U.S. bonds, and the threat of hyper-inflation as a result of the Fed's irresponsible monetary policy over the last few years, this country is headed for economic hardship that will make the 1930s seem like an economic boom.
Of course Momma Fed was left an untenable situation by Poppa Fed Bernanke, who will now be paid gobs of money to be a university president and/or give speeches about economic issues after having helped ruin the U.S. economy. And We The People will be left holding the bag of a rapidly deteriorating economy caused by the crony capitalism of the Obama years.
Proof of Ms. Yellen's firm grasp of the title Glittering Jewel of Colossal Ignorance was exemplified by one statement she made at her press conference after the two day meeting. She said that the Fed would eliminate the trigger of a 6.5% unemployment rate to increase its interest rate from the historic low of zero to a quarter percent it has held since 2008. She said the reason was that the employment situation has improved more rapidly than expected. I do not know what dim bulbs like Janet Yellen had expected, but thank God her expectations were not met, seeing as how after five years into an economic recovery, the nation has a record number of working aged persons unemployed, and the lowest percentage of that population participating in the work force in almost 40 years.
The stated goal of the Fed's Quantitative Easing program was to stimulate the economy and spur job growth. After more than three trillion dollars, neither of these goals has been met, unless one considers record unemployment and sub-two percent GDP growth an acceptable outcome for the money. And while companies stock prices have done very well in the age of easy money from the Federal Reserve, earnings of those companies have only done well to the extent that expectations have been dropped so low they would have to look up just to see mediocrity.
The dirty little secret about the Fed's bond-buying program is that since 2011, the Chinese have been severely curtailing their investment in U.S. bonds, having calculated that they are no longer a good investment. This was about the same time that Standard and Poors downgraded the U.S. credit worthiness for the first time in history. With the Fed's current tapering seeing an end to their bond-buying by this Fall, the Chinese reducing their investment in U.S. debt, the Russians threatening to flood the market with their sizable stash of U.S. bonds, and the threat of hyper-inflation as a result of the Fed's irresponsible monetary policy over the last few years, this country is headed for economic hardship that will make the 1930s seem like an economic boom.
Of course Momma Fed was left an untenable situation by Poppa Fed Bernanke, who will now be paid gobs of money to be a university president and/or give speeches about economic issues after having helped ruin the U.S. economy. And We The People will be left holding the bag of a rapidly deteriorating economy caused by the crony capitalism of the Obama years.
Tuesday, March 18, 2014
U.S. Stock Market: A Government Sponsored Enterprise
One may wonder why, with the tinder box in Ukraine and the free falling economy at home, the stock market continues to reach new highs. This question can be largely answered by examining the behavior of Fannie Mae and Freddie Mac's soaring share prices just before the financial crisis of 2008. But even years prior to the crisis, their balance sheets were almost entirely constructed of toxic assets backed by sub-prime mortgage loans they bought from the banks who were forced by government authorities like the Justice Department to originate, knowing they would never be paid back.
If you have not guessed by now, the thesis of this post is that the stock market has become a Government Sponsored Enterprise, somewhat in the mold of Fannie and Freddie. Partial evidence of my theory is something I read today, the theme of which has become the dominant driver of the market over the last five years. The piece I read seriously considered how the Federal Reserve could prop up the market if the situation in Ukraine escalated. We have long ago abandon a time in this country when the financial markets were coupled to the economic health of the nation. Recently it has become clear that the markets see themselves as insulated from the economy. Because no matter what happens, Big Momma Fed will be there with her trillions of monopoly money to pour into the empty hole of the market.
More evidence that the market has become a prattling child grasping tightly to the apron strings of the Federal Reserve, is the anticipation of new Federal Reserve Chairman Janet Yellen's forthcoming comments this Wednesday. The direction of the market being dependent upon what some government official says or does not say is a sign of an unhealthy relationship between the markets and government. There was a time when the market rose or fell based on hard economic data, not based on some artificial solace provided by a shill of the administration.
Barack Obama, shortly after he became president, said he wanted to "even out the markets so there were no busts or booms." When the market does not reflect economic reality in this way, it loses its credibility and becomes a buffoonish instrument of the administration. As such, the market becomes impervious to reality because it lives in a manufactured world where Momma Fed is ready on the pump handle to flood it with trillions of created-out-of-thin-air dollars.
The problem with this approach, besides the obvious hyper-inflation that is bound to come, is that government has removed the natural fear from the market. The two emotions that run the market are fear and greed. Each emotion keeps the other in check when their counterpart begins to dominate. When government interferes and upsets this natural balance, greed in the market becomes out of control and causes a much bigger fear-induced crash when the Fed can no longer mask and veil the very real and fearful aspects of the economy.
The government sponsored enterprise of the stock market is bound for failure like any other private sector business controlled by government. The reason is simple: Those who populate government in general, and especially those who populate it specifically in the current administration, have the hubris to think they can run private enterprise, coupled with the severe ignorance as a result of never having worked in the industries they control. This leads to spectacular failure like the one caused by Fannie Mae and Freddie Mac, which were at the epicenter of the crisis of 2008. Of course those in government that cause the crash are never held responsible, in fact their disastrous economic theories and ignorant policies are recycled and repackaged as some new "brilliance" in the future that is bound to start the cycle all over again, and it is the average American who pays the price for such foolishness.
If you have not guessed by now, the thesis of this post is that the stock market has become a Government Sponsored Enterprise, somewhat in the mold of Fannie and Freddie. Partial evidence of my theory is something I read today, the theme of which has become the dominant driver of the market over the last five years. The piece I read seriously considered how the Federal Reserve could prop up the market if the situation in Ukraine escalated. We have long ago abandon a time in this country when the financial markets were coupled to the economic health of the nation. Recently it has become clear that the markets see themselves as insulated from the economy. Because no matter what happens, Big Momma Fed will be there with her trillions of monopoly money to pour into the empty hole of the market.
More evidence that the market has become a prattling child grasping tightly to the apron strings of the Federal Reserve, is the anticipation of new Federal Reserve Chairman Janet Yellen's forthcoming comments this Wednesday. The direction of the market being dependent upon what some government official says or does not say is a sign of an unhealthy relationship between the markets and government. There was a time when the market rose or fell based on hard economic data, not based on some artificial solace provided by a shill of the administration.
Barack Obama, shortly after he became president, said he wanted to "even out the markets so there were no busts or booms." When the market does not reflect economic reality in this way, it loses its credibility and becomes a buffoonish instrument of the administration. As such, the market becomes impervious to reality because it lives in a manufactured world where Momma Fed is ready on the pump handle to flood it with trillions of created-out-of-thin-air dollars.
The problem with this approach, besides the obvious hyper-inflation that is bound to come, is that government has removed the natural fear from the market. The two emotions that run the market are fear and greed. Each emotion keeps the other in check when their counterpart begins to dominate. When government interferes and upsets this natural balance, greed in the market becomes out of control and causes a much bigger fear-induced crash when the Fed can no longer mask and veil the very real and fearful aspects of the economy.
The government sponsored enterprise of the stock market is bound for failure like any other private sector business controlled by government. The reason is simple: Those who populate government in general, and especially those who populate it specifically in the current administration, have the hubris to think they can run private enterprise, coupled with the severe ignorance as a result of never having worked in the industries they control. This leads to spectacular failure like the one caused by Fannie Mae and Freddie Mac, which were at the epicenter of the crisis of 2008. Of course those in government that cause the crash are never held responsible, in fact their disastrous economic theories and ignorant policies are recycled and repackaged as some new "brilliance" in the future that is bound to start the cycle all over again, and it is the average American who pays the price for such foolishness.
Monday, March 10, 2014
Warren Buffet: Believing His Own Con
One of the modus operandi of a con man is to constantly reaffirm his trustworthiness. That is how he prompts his marks to keep pouring money into his rigged game. Recently, billionaire investor and con man, Warren Buffet, said he does not think the stock market is a rigged game. This statement by one of the market's richest men is analogous to Vladimir Putin denying that there are Russian troops in Crimea. I am not saying that the average person can not make money on their investments in the market, only that the market movers like Mr. Buffet have rigged the game through their political connections and influence to insure their success.
Primary to my analysis of Warren Buffet is the image he and others have created of him as the king of the buy and hold strategy. This strategy says that if an investor buys stock in a company and holds it for many years, they will make money. This is true if the investor picks the right companies, however, Mr. Buffet does not even live by his own advice to others. Eighty percent of the stocks purchased by Mr. Buffet's Berkshire Hathaway are held six months or shorter, making Warren Buffet a trader eighty percent of the time and a long-term investor only twenty percent of the time.
Mr. Buffet's fraudulent persona is necessary to convince the average investor to zig when he and his cohorts are zagging. Evidence of this fact is that during the period between 2004 and 2007, when the market was hitting new highs every week, Mr. Buffet was putting very little money to work. Which in itself is not bad. But Mr. Buffet used his influence to constantly talk up the market to attract evermore new money into it. Once the market crashed in 2008-2009, Mr. Buffet started buying up the shattered dreams of average Americans who lost much of their life savings.
Buying low and selling high in and of itself is not corrupt. But Warren Buffet used his political connections with the Obama administration to profit. For instance, Mr. Buffet was able to wrangle a deal for preferred shares in General Electric Corporation after the share price had plummeted to $6 a share. This was after he was informed by the Obama administration that GE was going to receive billions in TARP bailout funds. Talk about insider trading!
Warren Buffet, again using his close connection to the Obama administration, was able to invest in Bank of America and essentially receive a dividend on his money, at the same time that federal regulators were denying such payouts to the average investor of BofA shares. This special treatment of the market's power brokers by government regulators is nothing new. Bernie Madoff bilked fifty billion dollars from investors, partly with the help of regulators turning a blind eye to his financial shenanigans. I am not comparing Warren Buffet to Bernie Madoff. However, the way in which government regulators lavished favorable treatment on both men because of their overwhelming statures in the financial markets, is in its process similar even if the outcomes are dissimilar.
Warren Buffet obviously is a shrewd man who has made himself and his shareholders very wealthy. And I am sure that he considers his actions, as fraudulent as they are, to be financially perspicacious. This is, after all, the mark of a good con man, i.e., to believe his own con.
Primary to my analysis of Warren Buffet is the image he and others have created of him as the king of the buy and hold strategy. This strategy says that if an investor buys stock in a company and holds it for many years, they will make money. This is true if the investor picks the right companies, however, Mr. Buffet does not even live by his own advice to others. Eighty percent of the stocks purchased by Mr. Buffet's Berkshire Hathaway are held six months or shorter, making Warren Buffet a trader eighty percent of the time and a long-term investor only twenty percent of the time.
Mr. Buffet's fraudulent persona is necessary to convince the average investor to zig when he and his cohorts are zagging. Evidence of this fact is that during the period between 2004 and 2007, when the market was hitting new highs every week, Mr. Buffet was putting very little money to work. Which in itself is not bad. But Mr. Buffet used his influence to constantly talk up the market to attract evermore new money into it. Once the market crashed in 2008-2009, Mr. Buffet started buying up the shattered dreams of average Americans who lost much of their life savings.
Buying low and selling high in and of itself is not corrupt. But Warren Buffet used his political connections with the Obama administration to profit. For instance, Mr. Buffet was able to wrangle a deal for preferred shares in General Electric Corporation after the share price had plummeted to $6 a share. This was after he was informed by the Obama administration that GE was going to receive billions in TARP bailout funds. Talk about insider trading!
Warren Buffet, again using his close connection to the Obama administration, was able to invest in Bank of America and essentially receive a dividend on his money, at the same time that federal regulators were denying such payouts to the average investor of BofA shares. This special treatment of the market's power brokers by government regulators is nothing new. Bernie Madoff bilked fifty billion dollars from investors, partly with the help of regulators turning a blind eye to his financial shenanigans. I am not comparing Warren Buffet to Bernie Madoff. However, the way in which government regulators lavished favorable treatment on both men because of their overwhelming statures in the financial markets, is in its process similar even if the outcomes are dissimilar.
Warren Buffet obviously is a shrewd man who has made himself and his shareholders very wealthy. And I am sure that he considers his actions, as fraudulent as they are, to be financially perspicacious. This is, after all, the mark of a good con man, i.e., to believe his own con.
Friday, February 21, 2014
Ignorance Is Bliss For U.S. Stock Market
In the capital city of Kiev in the Ukraine, the violence continues to escalate. In Syria, 130,000 Syrians have been killed by their own government and only 3% of Saddam's chemical and biological weapons have been eradicated under the recent Russian deal. Iran, also under the protection of Russia, is moving ever more closer to becoming nuclear-tipped, to the chagrin of both their Jewish and Arab neighbors. The International Monetary Fund has said that the crisis in emerging markets is getting worse. Domestically, job creation, such as it was, has come to a virtual standstill. U.S. companies have reported less than stellar earnings, with warnings of even worse results for the current quarter. Retail sales in both brick and mortar and online stores have plummeted, and manufacturing and home building have decreased more than they have at any time in the last 3-5 years. The U.S. stock market has decided to ignore all these facts and create its own world where it continues to plod ahead towards recent record highs.
The Federal Reserve's nurse-maiding of the markets has turned the once great arbiter of the financial health of U.S. business into an empty haul of economic analysis. Where the market was once a leading indicator of either a bad or a good economy, it has become to the Fed like teenagers waiting at the stage door for their favorite pop idols to emerge with their latest pap on vinyl. Good news is now bad news, and bad news is good. All because a failing economy makes it more likely that the Federal Reserve will employ the teat of free money for those in the market to suckle.
The market, helped in their delusion of a growing economy by the Federal Reserve, is like a run away train that has broken free of the tracks of sanity, common sense, and hard data. And like a run away train, the market is eventually going to come to rest, not so gently I might add, into a mountain of economic realities. The more honest economic analysts have made the bold diagnosis that we are heading back into recession. This is considered heresy by the Obama administration and their lapdog media. A case in point is the way in which they have attacked Doug Elmendorf, head of the non-partisan Congressional Budget Office. Mr. Elmendorf and his organization have had the audacity to point out the millions of jobs that will be lost in the ensuing years because of ObamaCare, and the economic certainty of job loss that raising the minimum wage will cause.
The fragility of the markets delusion is constructed of the very thin veil of monetary policy implemented by dilettantes who know little about the economy of which they have taken the reins, never having actually worked in that economy. The devolution of the free market by the nine hundred pound gorilla of the federal government has skewed common sense in the markets, at least for the short term. But eventually, reality will come rushing back in like it always does to claim its rightful place at the head of the economic table. Causing great consternation among those who have been lulled into a false sense of security by the slippery tongues of politicians and the free money that is not so free coming from an economically feckless Federal Reserve.
The Federal Reserve's nurse-maiding of the markets has turned the once great arbiter of the financial health of U.S. business into an empty haul of economic analysis. Where the market was once a leading indicator of either a bad or a good economy, it has become to the Fed like teenagers waiting at the stage door for their favorite pop idols to emerge with their latest pap on vinyl. Good news is now bad news, and bad news is good. All because a failing economy makes it more likely that the Federal Reserve will employ the teat of free money for those in the market to suckle.
The market, helped in their delusion of a growing economy by the Federal Reserve, is like a run away train that has broken free of the tracks of sanity, common sense, and hard data. And like a run away train, the market is eventually going to come to rest, not so gently I might add, into a mountain of economic realities. The more honest economic analysts have made the bold diagnosis that we are heading back into recession. This is considered heresy by the Obama administration and their lapdog media. A case in point is the way in which they have attacked Doug Elmendorf, head of the non-partisan Congressional Budget Office. Mr. Elmendorf and his organization have had the audacity to point out the millions of jobs that will be lost in the ensuing years because of ObamaCare, and the economic certainty of job loss that raising the minimum wage will cause.
The fragility of the markets delusion is constructed of the very thin veil of monetary policy implemented by dilettantes who know little about the economy of which they have taken the reins, never having actually worked in that economy. The devolution of the free market by the nine hundred pound gorilla of the federal government has skewed common sense in the markets, at least for the short term. But eventually, reality will come rushing back in like it always does to claim its rightful place at the head of the economic table. Causing great consternation among those who have been lulled into a false sense of security by the slippery tongues of politicians and the free money that is not so free coming from an economically feckless Federal Reserve.
Friday, February 14, 2014
Winter Weather Is Obama Pass
You may have heard some people, mostly in the Obama administration and their annex on Wall Street, blame the recent Winter weather for the terrible economic data resulting from Obamanomics. The number of jobs created by this strangled economy has been anything but economically sustaining. But the last two months, the number of jobs created has been even more pathetic than it has been throughout the last five years. And you guessed it, the horrible numbers have been blamed on Winter weather, as if we have never had any before.
In the world of the Obamaites (those on Wall Street being solid members in that club having supported Barack Obama in both of his presidential bids by a ratio of 2 to 1), employers only add jobs in good weather. This theory about job creation being based on weather instead of business needs shows the lack of understanding of how business works by those on the Left, even those whose business is business.
The weak retail sales for January (a drop of fourth tenths of a percent instead of the expected rise of one tenth) was also blamed on the Winter weather. On the surface this may make sense because people shop less when the roads are snow-covered. But Internet sales also dropped by three tenths of a percent, which can not be explained away by inclement weather. The decrease in Internet sales is a sign that the consumer is being financially squeezed by Obama policies like Health Care Reform.
There is no doubt that the economy is slowing, even from the snails pace it has traveled the last 5 years. But it is to the benefit of those on Wall Street, both politically and financially, to feed the charade of a growing economy. Politically, because most of them being committed Leftists can not allow their president to appear as the economic failure he is. And financially, their motivation is to pump up the economy to lure retail investors into ploughing their money into an artificially rising market.
It has been educative of the Lefts complete disconnect from reality to watch the main stream financial media blame Winter weather for the endless stream of bad economic data. The almost pathological desire to make Barack Obama look like a success, and bestow him with achievement where there is none, is endemic of his entire life. There has always been someone there to change his Cs into As, to give him ownership of a bigger house than he could afford on his own, and to ordain him with titles he did not warrant by merit. But now instead of his benefactors being professors at Columbia, Tony Resko, and the faculty at Harvard respectively, it is the majority of the financial industry. And it is done so to the detriment of American liberty and prosperity in which the American people keep their wealth of freedom.
In the world of the Obamaites (those on Wall Street being solid members in that club having supported Barack Obama in both of his presidential bids by a ratio of 2 to 1), employers only add jobs in good weather. This theory about job creation being based on weather instead of business needs shows the lack of understanding of how business works by those on the Left, even those whose business is business.
The weak retail sales for January (a drop of fourth tenths of a percent instead of the expected rise of one tenth) was also blamed on the Winter weather. On the surface this may make sense because people shop less when the roads are snow-covered. But Internet sales also dropped by three tenths of a percent, which can not be explained away by inclement weather. The decrease in Internet sales is a sign that the consumer is being financially squeezed by Obama policies like Health Care Reform.
There is no doubt that the economy is slowing, even from the snails pace it has traveled the last 5 years. But it is to the benefit of those on Wall Street, both politically and financially, to feed the charade of a growing economy. Politically, because most of them being committed Leftists can not allow their president to appear as the economic failure he is. And financially, their motivation is to pump up the economy to lure retail investors into ploughing their money into an artificially rising market.
It has been educative of the Lefts complete disconnect from reality to watch the main stream financial media blame Winter weather for the endless stream of bad economic data. The almost pathological desire to make Barack Obama look like a success, and bestow him with achievement where there is none, is endemic of his entire life. There has always been someone there to change his Cs into As, to give him ownership of a bigger house than he could afford on his own, and to ordain him with titles he did not warrant by merit. But now instead of his benefactors being professors at Columbia, Tony Resko, and the faculty at Harvard respectively, it is the majority of the financial industry. And it is done so to the detriment of American liberty and prosperity in which the American people keep their wealth of freedom.
Tuesday, February 11, 2014
The Deliberate Ignorance Of The Markets
In the practice of delusion over reality one will not find a more willing group of participants than the stock market. This collection of smart people who desire fallacy to fact and mediocrity to merit, react more out of adherence to group think than they do from a close examination of data. A case in point was the release last Friday of the employment number for the month of January, which was a dismal 113 thousand jobs added in the month. The analysts were expecting only a mildly less pathetic number of 180 thousand. The market, which if propelled by data and facts, should have gone down several hundred points, instead made gains across the major indices of about one percent.
One of the favorite activities of the last few years by the market movers has been to rummage through the burnt out structure of what was once a thriving economy and find a charred nickel they can use to say that things are looking up. That charred nickel last Friday was the two tenths of a percentage point rise in the work force participation rate, which is still at a 35 year low. The work force participation rate is the percentage of working aged adults who are employed or actively seeking employment. The market analysts and participants saw the miniscule increase as a positive sign for the economy.
But the work force participation rate did not increase because more people were working, but rather because more people were looking for work. This country, under the leadership of Barack Obama, has its largest group of unemployed individuals of working age than at any other time in our history. Over 90 million persons are unemployed in this country, a record of failure for the Obama administration and its policies.
The reason for the slight uptick in the labor force participation rate recently is the laid off holiday workers, who are much more likely to participate in the labor force as "actively pursuing employment." I would not make the hasty determination that the uptick is a trend, we will see in the coming months if those newly unemployed persons either find jobs or become discouraged and remove themselves from the labor market, thus sending the labor force participation rate tumbling.
It has been my contention that since the Federal Reserve has essentially pumped 3 trillion dollars of wealth into the markets over the last four years, market participants accept data from the government that has become ever more detached from reality. And the Federal Reserve's bond-buying spree has been an abject failure, according to their own metrics for ending the program, which have not been met. But they are smart enough to know that to continue it much longer would completely collapse the dollar. So once again, the people of this country will suffer from higher inflation, chronically high unemployment, and flaccid economic growth because of meddling by academics who have never worked in the private economy they have destroyed through their ignorance.
One of the favorite activities of the last few years by the market movers has been to rummage through the burnt out structure of what was once a thriving economy and find a charred nickel they can use to say that things are looking up. That charred nickel last Friday was the two tenths of a percentage point rise in the work force participation rate, which is still at a 35 year low. The work force participation rate is the percentage of working aged adults who are employed or actively seeking employment. The market analysts and participants saw the miniscule increase as a positive sign for the economy.
But the work force participation rate did not increase because more people were working, but rather because more people were looking for work. This country, under the leadership of Barack Obama, has its largest group of unemployed individuals of working age than at any other time in our history. Over 90 million persons are unemployed in this country, a record of failure for the Obama administration and its policies.
The reason for the slight uptick in the labor force participation rate recently is the laid off holiday workers, who are much more likely to participate in the labor force as "actively pursuing employment." I would not make the hasty determination that the uptick is a trend, we will see in the coming months if those newly unemployed persons either find jobs or become discouraged and remove themselves from the labor market, thus sending the labor force participation rate tumbling.
It has been my contention that since the Federal Reserve has essentially pumped 3 trillion dollars of wealth into the markets over the last four years, market participants accept data from the government that has become ever more detached from reality. And the Federal Reserve's bond-buying spree has been an abject failure, according to their own metrics for ending the program, which have not been met. But they are smart enough to know that to continue it much longer would completely collapse the dollar. So once again, the people of this country will suffer from higher inflation, chronically high unemployment, and flaccid economic growth because of meddling by academics who have never worked in the private economy they have destroyed through their ignorance.
Wednesday, February 5, 2014
The Expansion Through Contraction Theory
The Congressional Budget Office released a report yesterday that estimated ObamaCare will cost the economy 2.3 million jobs in 2021. A steady loss in the ensuing years will be realized do to employers reducing the number of work hours as a means of escaping the new law's mandates for full-time employees. A similar report produced by the CBO in 2011 had the loss of jobs at 800,000, a number that the current report has tripled. As is the case with government accounting, by the time 2021 rolls around, the number of jobs lost to ObamaCare will be well over 10 million.
The CBO report reads like the medical chart of a patient on hospice care, as it outlined growing deficits after a short period of reductions, Gross Domestic Product growth that will struggle to maintain even a modicum of improvement, and unemployment that will not fall below 6% until late 2016. I remember President Obama saying that unemployment would drop below 6% by the end of his first term, and if it did not then it would be, "a one term proposition," for his presidency. Well, the American people rewarded him anyway with a second term even though he failed to meet even the modest goals he set for himself. People sometimes forget that the average unemployment rate for the entirety of the George W. Bush administration was 4.9%.
The way in which the Obama administration has been able to fool the American public into believing in the myth of an improving economy is what I call expansion through contraction. Barack Obama has of course had help in this scheme from his marionettes in the financial media and elsewhere. A data point that illustrates how this work was released yesterday, it was factory orders, which dropped 1.5% in the month of December. But since the analysts seeded everyone's expectations for a 1.7% drop, the markets responded positively to the contraction in factory orders. This "bad news is good news simply because it is not worse news" has been the cornerstone of the Obama administration economic policy for the last 5 years.
The analysts create a positive from overstating a negative. The biggest negative is the fact that the president, as well as those in the media, are still talking about "recovery." Five years after the official end of the recession we should not be in recovery or even talking about it, but enjoying a full blown thriving economy. The reason for the acceptance by those in the financial world of substandard economic data is the bottle of free flowing liquidity the Federal Reserve has held up to the lips of a wino market in the form of its quantitative easing program. But now that the bottle is beginning to be pulled away with the Fed's tapering program, the market is giving a little more weight to actual economic data, hence the recent downturn in the market indices.
The expansion through contraction theory has held President Obama in good stead, as there has been a plethora of bad economic data over the last five years that has given the president an opportunity to trot out the worn, old horse of, "it could be worse." And the American public, by and large, have accepted economic mediocrity as excellence simply because it is not abject failure.
The CBO report reads like the medical chart of a patient on hospice care, as it outlined growing deficits after a short period of reductions, Gross Domestic Product growth that will struggle to maintain even a modicum of improvement, and unemployment that will not fall below 6% until late 2016. I remember President Obama saying that unemployment would drop below 6% by the end of his first term, and if it did not then it would be, "a one term proposition," for his presidency. Well, the American people rewarded him anyway with a second term even though he failed to meet even the modest goals he set for himself. People sometimes forget that the average unemployment rate for the entirety of the George W. Bush administration was 4.9%.
The way in which the Obama administration has been able to fool the American public into believing in the myth of an improving economy is what I call expansion through contraction. Barack Obama has of course had help in this scheme from his marionettes in the financial media and elsewhere. A data point that illustrates how this work was released yesterday, it was factory orders, which dropped 1.5% in the month of December. But since the analysts seeded everyone's expectations for a 1.7% drop, the markets responded positively to the contraction in factory orders. This "bad news is good news simply because it is not worse news" has been the cornerstone of the Obama administration economic policy for the last 5 years.
The analysts create a positive from overstating a negative. The biggest negative is the fact that the president, as well as those in the media, are still talking about "recovery." Five years after the official end of the recession we should not be in recovery or even talking about it, but enjoying a full blown thriving economy. The reason for the acceptance by those in the financial world of substandard economic data is the bottle of free flowing liquidity the Federal Reserve has held up to the lips of a wino market in the form of its quantitative easing program. But now that the bottle is beginning to be pulled away with the Fed's tapering program, the market is giving a little more weight to actual economic data, hence the recent downturn in the market indices.
The expansion through contraction theory has held President Obama in good stead, as there has been a plethora of bad economic data over the last five years that has given the president an opportunity to trot out the worn, old horse of, "it could be worse." And the American public, by and large, have accepted economic mediocrity as excellence simply because it is not abject failure.
Tuesday, February 4, 2014
A Bit About Bitcoins
P.T. Barnum, the great showman once said, "There's a sucker born every minute." No truer a statement has ever included a more willing bunch of suckers as those who currently invest in bitcoins. You may or may have not have heard about bitcoins, the pseudo-currency/commodity that are comprised of computer algorithms and are used by some in exchange for goods and services over the Internet. Many more have traded their valuable currencies and precious metals for this worthless computer code as a means of investing.
Bitcoins, a peer-to-peer electronic payment system, was first suggested in an Internet paper in November 2008, and the first bitcoin block was "mined" in January of 2009 by an individual or group of individuals going by the pseudonym of Satoshi Nakamoto. Bitcoins are "mined" by participants developing algorithms that meet the protocol for discovering a block of bitcoins, which currently equals 25 coins. The protocol has been written to make it difficult enough to discover these blocks that only one is discoverable every ten minutes. Every four years the number of bitcoins per block is halved, requiring 100 years for all 21 million bitcoins to be discovered. The 21 million limit is imposed by the original bitcoin protocol written by Satoshi Nakamoto.
People sign up for the bitcoin network and receive electronic wallet software in which to keep their bitcoins. "Miners" of bitcoins often work in pools because of the enormous computing power it requires to develop the algorithms to discover blocks of bitcoins. Dozens of online websites have begun to accept bitcoins for payment of goods and services. When new blocks are discovered, or transactions with bitcoins occur, they are recorded in the block chain, which is a database tracking bitcoins from discovery through every participants' account they occupy.
The value of bitcoins since their inception has fluctuated between 0.30/USD per bitcoin to 1124/USD per bitcoin. The enormous volatility of the bitcoin is just one reason it is unsuitable to be a currency. The other is that it has an intrinsic value of zero. In other words, bitcoins are comprised of electrical impulses on a computer and have no value other than the perceived value of the participants in the network. One might make the perceived value argument about anything, i.e., something is only worth as much as someone is willing to pay for it. But currencies backed by governments, and precious metals like gold and silver actually have intrinsic value in the full faith and credit of the issuing government and in their physical properties, respectively.
The bitcoin scam is a house of cards built on a foundation of sand in an earthquake zone. Many countries have banned their use, and the European Union has strongly admonished their people to avoid exposure to this Ponzi scheme. But, oddly enough, the United States government has sanctioned their use, which seems to me to violate laws restricting individuals from creating their own currency. The bitcoin "market" is every bit as lawless as the scheme perpetrated on investors by Bernie Madoff, who fooled his clients into thinking they had value in their accounts simply because he said so.
The bitcoin hysteria is like a cruel game of musical chairs. When the music stops, and the blatant worthlessness of bitcoins is realized, those poor souls stuck holding the bitcoin bag will be left poorer and with no recourse against faceless and nameless computers on a network which will have dispersed their money into the ether.
Bitcoins, a peer-to-peer electronic payment system, was first suggested in an Internet paper in November 2008, and the first bitcoin block was "mined" in January of 2009 by an individual or group of individuals going by the pseudonym of Satoshi Nakamoto. Bitcoins are "mined" by participants developing algorithms that meet the protocol for discovering a block of bitcoins, which currently equals 25 coins. The protocol has been written to make it difficult enough to discover these blocks that only one is discoverable every ten minutes. Every four years the number of bitcoins per block is halved, requiring 100 years for all 21 million bitcoins to be discovered. The 21 million limit is imposed by the original bitcoin protocol written by Satoshi Nakamoto.
People sign up for the bitcoin network and receive electronic wallet software in which to keep their bitcoins. "Miners" of bitcoins often work in pools because of the enormous computing power it requires to develop the algorithms to discover blocks of bitcoins. Dozens of online websites have begun to accept bitcoins for payment of goods and services. When new blocks are discovered, or transactions with bitcoins occur, they are recorded in the block chain, which is a database tracking bitcoins from discovery through every participants' account they occupy.
The value of bitcoins since their inception has fluctuated between 0.30/USD per bitcoin to 1124/USD per bitcoin. The enormous volatility of the bitcoin is just one reason it is unsuitable to be a currency. The other is that it has an intrinsic value of zero. In other words, bitcoins are comprised of electrical impulses on a computer and have no value other than the perceived value of the participants in the network. One might make the perceived value argument about anything, i.e., something is only worth as much as someone is willing to pay for it. But currencies backed by governments, and precious metals like gold and silver actually have intrinsic value in the full faith and credit of the issuing government and in their physical properties, respectively.
The bitcoin scam is a house of cards built on a foundation of sand in an earthquake zone. Many countries have banned their use, and the European Union has strongly admonished their people to avoid exposure to this Ponzi scheme. But, oddly enough, the United States government has sanctioned their use, which seems to me to violate laws restricting individuals from creating their own currency. The bitcoin "market" is every bit as lawless as the scheme perpetrated on investors by Bernie Madoff, who fooled his clients into thinking they had value in their accounts simply because he said so.
The bitcoin hysteria is like a cruel game of musical chairs. When the music stops, and the blatant worthlessness of bitcoins is realized, those poor souls stuck holding the bitcoin bag will be left poorer and with no recourse against faceless and nameless computers on a network which will have dispersed their money into the ether.
Saturday, February 1, 2014
The Politics Of The Market
As another earnings season on Wall Street whimpers to a close with a majority of companies having reported their earnings for the quarter ending December 31, 2013, the politics of the financial world have never been more in focus. There is of course the financial media beating the drum of a roaring economy by quoting meaningless statistics, like 67% of S&P 500 companies having beaten analysts' estimates. Those estimates being the result of constantly lowered expectations for profit and sales from companies cutting work forces to the bone in order to just tread water.
Many of the companies that have beaten the pathetically low expectations of analysts have also given guidance (a company's sales and profit estimates for the current quarter just beginning) that is lower than expected. Companies know what the average American knows, which somehow escapes the analysts brilliant minds i.e., the economy is slowing down even from the snails pace it has traveled for the last five years since "The Summer of Recovery" was announced. But the Obama lapdogs in the financial media wet themselves over a pathetic statistic like fourth quarter Gross Domestic Product growth of 3.2%. Which barely equals the average for post-World War II economies, and does not even come close to the 5% or more needed to pull the country out of a recession.
Even when a meaningless statistic like consumer sentiment takes a beating, the analysts see it as good news because it was not worse. The Thompson Reuters/Michigan University consumer sentiment number for January, that was released Friday morning, was a full five percentage points worse than Decembers. But the analysts and the rest of the financial media did hand stands because it was not as low as they expected. This being analogous to expecting your pay to be cut by 25%, and then considering it a raise when it only gets cut by 24%.
One of the few bright spots in earnings season was another record-breaking quarter by Apple, which sent its share price tumbling 10% in the days following their earnings release. Conversely, Google missed analysts estimate for earnings and saw an appreciation in their share price of $40. Once again proving that Wall Street runs as much on politics as fundamentals. Google plays the game with the financial media and curries their favor by schmoozing them before, during, and after earnings. Apple has developed a corporate culture that keeps a tight lid on company business, so leaks to the almighty analysts are not as forthcoming as in other companies, ergo, Apple is punished by never meeting the analysts expectations for it.
One thing is clear from this earnings season, the economy is slowing and companies can not cut anymore from their bottom lines to simulate top line growth. With the Federal Reserve pulling away the candy of quantitative easing, ObamaCare stealing more jobs and wealth from the economy, and a record number of people unemployed in this country than ever before, it is going to be a bumpy ride for the financial markets and for all Americans.
Many of the companies that have beaten the pathetically low expectations of analysts have also given guidance (a company's sales and profit estimates for the current quarter just beginning) that is lower than expected. Companies know what the average American knows, which somehow escapes the analysts brilliant minds i.e., the economy is slowing down even from the snails pace it has traveled for the last five years since "The Summer of Recovery" was announced. But the Obama lapdogs in the financial media wet themselves over a pathetic statistic like fourth quarter Gross Domestic Product growth of 3.2%. Which barely equals the average for post-World War II economies, and does not even come close to the 5% or more needed to pull the country out of a recession.
Even when a meaningless statistic like consumer sentiment takes a beating, the analysts see it as good news because it was not worse. The Thompson Reuters/Michigan University consumer sentiment number for January, that was released Friday morning, was a full five percentage points worse than Decembers. But the analysts and the rest of the financial media did hand stands because it was not as low as they expected. This being analogous to expecting your pay to be cut by 25%, and then considering it a raise when it only gets cut by 24%.
One of the few bright spots in earnings season was another record-breaking quarter by Apple, which sent its share price tumbling 10% in the days following their earnings release. Conversely, Google missed analysts estimate for earnings and saw an appreciation in their share price of $40. Once again proving that Wall Street runs as much on politics as fundamentals. Google plays the game with the financial media and curries their favor by schmoozing them before, during, and after earnings. Apple has developed a corporate culture that keeps a tight lid on company business, so leaks to the almighty analysts are not as forthcoming as in other companies, ergo, Apple is punished by never meeting the analysts expectations for it.
One thing is clear from this earnings season, the economy is slowing and companies can not cut anymore from their bottom lines to simulate top line growth. With the Federal Reserve pulling away the candy of quantitative easing, ObamaCare stealing more jobs and wealth from the economy, and a record number of people unemployed in this country than ever before, it is going to be a bumpy ride for the financial markets and for all Americans.
Thursday, January 30, 2014
The Great Apple Conspiracy
This past Monday, Apple Computer Inc. reported their earnings for the quarter ending December 31, 2013. The company's earnings and revenue beat estimates and they sold a record 51 million iPhones in the quarter. One would expect investors to reward Apple with a spike in their share price, but just the opposite happened after the analysts panned the company's earnings as missing their expectations of 55 million in iPhone sales.
A company's share price can be greatly affected to either the upside or the downside by analysts in the short term, which is why they have deluded themselves into believing that they are demigods of the financial world. But in the longer term, a company like Apple that continues to deliver record breaking quarters will be justly rewarded by investors. Billionaire investor Carl Ichon, who holds almost 4 billion dollars in Apple stock, recently said investing in the company is "a no-brainer."
The big knock on the post-Steve Jobs (the company founder who passed away in October of 2011) Apple is that they are not innovating. But Apple's success has always been one of perfecting innovation, not initiating it. Apple did not innovate the Mp3 player, that was Sony. They did not innovate touch screens and Wi-Fi enabled mobile devices, that was Palm. And they did not innovate the smart phone model, that was Research In Motion with their Blackberry device. What Apple did best was to repackage others' innovations in more reliable and mature technology that they made appealing to the masses. Besides, the first iPods were released late in 2001, the next "innovation" from Apple was the iPhone, six years later in 2007. Their last innovation was the iPad, which was released in 2010, so the claim that they are not innovating as fast as they use to, has no basis in reality.
Since taking the reins of Apple after Steve Jobs died, Tim Cook has presided over record-breaking quarters financially, a nest egg of cash that has topped 100 billion dollars, a share price that has appreciated thirty percent in two years, and additional share value delivered to investors in the form of a generous dividend. He has also recently inked a deal with China Mobilcom, which will make Apple's iPhone available to its 700 million customers.
The reason for the analysts' dour outlook for Apple has more to do with petty animosity than with the company's fundamentals. As a method of criticizing CEO Tim Cook, the analysts speak of Steve Jobs in glowing terms. The fact is they Hated Jobs as much as they hate Cook. But the analysts are like all those Democrats who hated Reagan, and now that history has proven him right, they want to attach themselves to that greatness by saying they "worked with Reagan on many issues." As long as Apple continues to make better and more reliable products than everyone else, and delivers value to share holders, I will continue to support them with my patronage of their products and investment in their stock.
A company's share price can be greatly affected to either the upside or the downside by analysts in the short term, which is why they have deluded themselves into believing that they are demigods of the financial world. But in the longer term, a company like Apple that continues to deliver record breaking quarters will be justly rewarded by investors. Billionaire investor Carl Ichon, who holds almost 4 billion dollars in Apple stock, recently said investing in the company is "a no-brainer."
The big knock on the post-Steve Jobs (the company founder who passed away in October of 2011) Apple is that they are not innovating. But Apple's success has always been one of perfecting innovation, not initiating it. Apple did not innovate the Mp3 player, that was Sony. They did not innovate touch screens and Wi-Fi enabled mobile devices, that was Palm. And they did not innovate the smart phone model, that was Research In Motion with their Blackberry device. What Apple did best was to repackage others' innovations in more reliable and mature technology that they made appealing to the masses. Besides, the first iPods were released late in 2001, the next "innovation" from Apple was the iPhone, six years later in 2007. Their last innovation was the iPad, which was released in 2010, so the claim that they are not innovating as fast as they use to, has no basis in reality.
Since taking the reins of Apple after Steve Jobs died, Tim Cook has presided over record-breaking quarters financially, a nest egg of cash that has topped 100 billion dollars, a share price that has appreciated thirty percent in two years, and additional share value delivered to investors in the form of a generous dividend. He has also recently inked a deal with China Mobilcom, which will make Apple's iPhone available to its 700 million customers.
The reason for the analysts' dour outlook for Apple has more to do with petty animosity than with the company's fundamentals. As a method of criticizing CEO Tim Cook, the analysts speak of Steve Jobs in glowing terms. The fact is they Hated Jobs as much as they hate Cook. But the analysts are like all those Democrats who hated Reagan, and now that history has proven him right, they want to attach themselves to that greatness by saying they "worked with Reagan on many issues." As long as Apple continues to make better and more reliable products than everyone else, and delivers value to share holders, I will continue to support them with my patronage of their products and investment in their stock.
Thursday, January 23, 2014
Barack, Baron Of Bailouts
There are many contestants in the running for the most disingenuous position taken, or statement made by President Obama. So many, that volumes could be filled with his acts of dichotomy, false statements, and flat out whoppers. And those volumes would require an entire building the size of the Smithsonian in which to store them. One of the classic dichotomies of President Obama is something that has weaved its way through his entire tenure as president. It is his demonization of corporate bailouts, while at the same time providing them through his policy.
He began his presidency by rousing the rabble against corporate America while he was providing them with tax payer funded bailouts. Early on in his administration, President Obama sent community agitator types to the homes of AIG executives at the same time he was writing the embattled Insurance company checks totaling in the tens of billions of dollars. He was also using tax payer dollars to bail out the U.S. car industry, General Electric, and so-called green energy companies like Solendra and others. President Obama and his delirious Democrats even wrote into Financial Reform, also known as Dodd/Frank, future bailouts for the country's largest banks.
We have recently learned that the President and his legions of legislative larcenists wrote into the new health care reform law bailouts for insurance companies who, because of the law, have risk models that will not work because they are not getting the young and healthy to sign up in enough numbers to fund the system. Tim Griffin, Republicant House member, has proffered legislation to remove the bailouts. But this may have been unnecessary if Republicants would have read the bill and made the American public aware of its awfulness. The public outcry may have prevented Democrats from even taking up the bill, similar to what happen in 1994 with HillaryCare.
But far from trying to stop tax payer funded bailouts of private sector companies, Republicants have actually enabled them. After all, it was President George W. Bush who laid the ground work for the Obama bailouts with the ill-advised Trouble Asset Relief Program (TARP), during the depths of the financial crisis of 2008. A program sold to the American people as one that would actually return a profit to the treasury, but ended up costing tax payers like every other government expenditure.
Even the trillion dollar stimulus, and the almost half a trillion dollar "son of stimulus" implemented by the Obama administration was a bailout. Most of that money having gone to union thugs, phony green energy companies owned by supporters of the president, and agitator groups like ACORN. Probably the biggest bailout of the Obama presidency has been the one given to Wall Street. To date, Wall Street has benefited from the Federal Reserve's monetary policy either directly or indirectly to the tune of 3 trillion dollars.
Most of the Federal Reserve's bailout of Wall Street has been accomplished with created-out-of-thin-air money. That activity by the central bank reduces the wealth of all Americans by flooding the market with ever more worth less dollars. And at some point the Fed's deleveraging of their spending spree with monopoly money is going to cause significant inflation. But do not hold your breath that there will be any relief for hard working Americans who will pay higher prices for goods and services, while also paying higher taxes to support an ever increasing list of corporate cronies of the president.
He began his presidency by rousing the rabble against corporate America while he was providing them with tax payer funded bailouts. Early on in his administration, President Obama sent community agitator types to the homes of AIG executives at the same time he was writing the embattled Insurance company checks totaling in the tens of billions of dollars. He was also using tax payer dollars to bail out the U.S. car industry, General Electric, and so-called green energy companies like Solendra and others. President Obama and his delirious Democrats even wrote into Financial Reform, also known as Dodd/Frank, future bailouts for the country's largest banks.
We have recently learned that the President and his legions of legislative larcenists wrote into the new health care reform law bailouts for insurance companies who, because of the law, have risk models that will not work because they are not getting the young and healthy to sign up in enough numbers to fund the system. Tim Griffin, Republicant House member, has proffered legislation to remove the bailouts. But this may have been unnecessary if Republicants would have read the bill and made the American public aware of its awfulness. The public outcry may have prevented Democrats from even taking up the bill, similar to what happen in 1994 with HillaryCare.
But far from trying to stop tax payer funded bailouts of private sector companies, Republicants have actually enabled them. After all, it was President George W. Bush who laid the ground work for the Obama bailouts with the ill-advised Trouble Asset Relief Program (TARP), during the depths of the financial crisis of 2008. A program sold to the American people as one that would actually return a profit to the treasury, but ended up costing tax payers like every other government expenditure.
Even the trillion dollar stimulus, and the almost half a trillion dollar "son of stimulus" implemented by the Obama administration was a bailout. Most of that money having gone to union thugs, phony green energy companies owned by supporters of the president, and agitator groups like ACORN. Probably the biggest bailout of the Obama presidency has been the one given to Wall Street. To date, Wall Street has benefited from the Federal Reserve's monetary policy either directly or indirectly to the tune of 3 trillion dollars.
Most of the Federal Reserve's bailout of Wall Street has been accomplished with created-out-of-thin-air money. That activity by the central bank reduces the wealth of all Americans by flooding the market with ever more worth less dollars. And at some point the Fed's deleveraging of their spending spree with monopoly money is going to cause significant inflation. But do not hold your breath that there will be any relief for hard working Americans who will pay higher prices for goods and services, while also paying higher taxes to support an ever increasing list of corporate cronies of the president.
Wednesday, January 22, 2014
The Midas "Touched"
My sympathies are with all those who followed the advice of Glenn Beck, Michael Savage, et al, and bought gold at the beginning of 2013. If you are one of these unfortunate souls, you know better than anyone that you lost 30% of your hard earned money in the gold market, which you were told investing in would prevent you from losing your hard earned money in the stock market.
A year ago, when gold was approximately $1800 an ounce, the radio gold hucksters and others were intimating that the precious metal was going to reach three, four, or even five thousand dollars an ounce. Instead, gold plummeted to its current price of just over $1200 an ounce. Mr. Beck and others were selling gold as a means for folks to increase their wealth. Now that gold has proven a bust as an investment, Glen has changed his sales pitch to push gold as a tangible asset worth having in some sort of Madd Maxx scenario.
Gold reached its all time high in the 1980s, and in order for it to achieve the same inflation-adjusted level today, it would have to reach $2400 an ounce. A real bummer for those who bought at the 1980s high and have held it for 35 years. Even those who bought gold at the market low in March 2009 and are still holding it, have only realized a thirty percent return on their investment since, while stocks have appreciated 150% during the same period. And although the case can be sufficiently made that stocks are riding high on the wave of Federal Reserve stimulus in the form of its bond-buying program known as quantitative easing, the Fed's easy money policy has also driven up the price of commodities, including gold. Just the opposite of what should happen, but more proof of the havoc caused by government interference in the free market.
Part of the goldies sales pitch for their favorite precious metal is to convince an uninformed public of the oft repeated myth that the stock market is a zero sum game. In other words, if someone makes money in the market, someone else must necessarily lose that same amount. The ignorant who believe this think that the pie is only so big and never grows, this being the case, the stock market would be valued the same over time and never change. But one does not have to lose money for someone else to make money. Consider the following example to illustrate my point. I purchase shares of stock in company X for $10 and sell them for $15. The buyer of my shares hold them until they appreciate to $20 and then sells them. We have both made money on the same shares. A real life example is Apple. In the late 1990s, Apple stock was a couple of dollars a share, today it is $550. Millions of people made money on Apple shares over the last 15 years. The pie grew!
I do acknowledge that precious metals like gold can add value to a portfolio, but they must be carefully managed because of their volatility. Buying any precious metal and holding it for long periods of time is not a wise investment strategy. And as for the end-of-the-world scenario about which Glen Beck has fantasized, you can keep your gold. I would much rather have guns, ammo, and fuel.
A year ago, when gold was approximately $1800 an ounce, the radio gold hucksters and others were intimating that the precious metal was going to reach three, four, or even five thousand dollars an ounce. Instead, gold plummeted to its current price of just over $1200 an ounce. Mr. Beck and others were selling gold as a means for folks to increase their wealth. Now that gold has proven a bust as an investment, Glen has changed his sales pitch to push gold as a tangible asset worth having in some sort of Madd Maxx scenario.
Gold reached its all time high in the 1980s, and in order for it to achieve the same inflation-adjusted level today, it would have to reach $2400 an ounce. A real bummer for those who bought at the 1980s high and have held it for 35 years. Even those who bought gold at the market low in March 2009 and are still holding it, have only realized a thirty percent return on their investment since, while stocks have appreciated 150% during the same period. And although the case can be sufficiently made that stocks are riding high on the wave of Federal Reserve stimulus in the form of its bond-buying program known as quantitative easing, the Fed's easy money policy has also driven up the price of commodities, including gold. Just the opposite of what should happen, but more proof of the havoc caused by government interference in the free market.
Part of the goldies sales pitch for their favorite precious metal is to convince an uninformed public of the oft repeated myth that the stock market is a zero sum game. In other words, if someone makes money in the market, someone else must necessarily lose that same amount. The ignorant who believe this think that the pie is only so big and never grows, this being the case, the stock market would be valued the same over time and never change. But one does not have to lose money for someone else to make money. Consider the following example to illustrate my point. I purchase shares of stock in company X for $10 and sell them for $15. The buyer of my shares hold them until they appreciate to $20 and then sells them. We have both made money on the same shares. A real life example is Apple. In the late 1990s, Apple stock was a couple of dollars a share, today it is $550. Millions of people made money on Apple shares over the last 15 years. The pie grew!
I do acknowledge that precious metals like gold can add value to a portfolio, but they must be carefully managed because of their volatility. Buying any precious metal and holding it for long periods of time is not a wise investment strategy. And as for the end-of-the-world scenario about which Glen Beck has fantasized, you can keep your gold. I would much rather have guns, ammo, and fuel.
Wednesday, January 8, 2014
The Dichotomy Of Unemployment Extensions
It must be wonderful to be Barack Obama and be able to speak out of both sides of your mouth and have a slavish media that will convince a low-information public of the legitimacy of all your positions, even when they contradict each other. And the media, ah yes the media. That organized propaganda arm of the Democrat party which has the ability to report government shutdowns because of frigid weather as necessary, but a shutdown of far less government functions resulting from some Republicants standing up for fiscal sanity, as the end of civilization as we know it.
But I digress, back to my original point that we have a President that is as unacquainted with the truth as he is with decency and honor. Leading him and his slobbering devotees in the Senate, House and the main stream of Leftist society to push for an extension of federal unemployment benefits for the non-working. While at the same time they pound their chests about how their policies have brought the job market roaring back to life. If the latter is true, the former is unnecessary. Federal taxpayer dollars should never be used to subsidize unemployment. These kinds of subsidies have been shown by a multitude of studies to lead to more unemployment because of the tendency of the unemployed to wait until their subsidy is ending before they look for employment in earnest.
The breathtaking idiocy of the position taken by President Obama and congressional Democrats was best exemplified by the recent remark by Senate Majority Leader Harry Reid, who said that for every dollar paid out in unemployment benefits, a dollar fifty of economic activity is generated. Further comments saw Democrats actually saying 200 thousand jobs would be lost unless they were given the authority to use taxpayer dollars to subsidize persons not working. If what the Majority Leader and other Democrats are saying was true, then all this country would need to do to create a roaring economy would be to put every American on unemployment and sit back and watch the growth.
The fact is that for every dollar paid out in unemployment benefits, a dollar fifty must be confiscated from the economy by government, the dollar that goes to the recipient and fifty cents to pay for the bureaucracy to administer it. And while unemployment recipients may spend their entire check in the private economy, there is no recouping of the bureaucratic costs involved in the transaction. Additionally, those recipients of taxpayer dollars would actually spend more money in creating economic activity if they had jobs, which would allow them to actually create new wealth instead of simply transferring and redistributing current wealth.
It is illustrative of the Lefts complete lack of compassion for unemployed Americans that they argue for extending the crumbs of government-administered unemployment checks, instead of the creation of jobs so these individuals can buy a whole loaf. But it is exemplary of Leftist policy religiously evangelized by Democrats and others whose only real goal is to grow government by shrinking personal wealth. The unemployed, like so many other "beneficiaries" of Leftist policies, have been damaged, some irreparably, by those very policies whose aim is not to help Americans up but to keep them down under the weight of an increasingly obese federal government.
But I digress, back to my original point that we have a President that is as unacquainted with the truth as he is with decency and honor. Leading him and his slobbering devotees in the Senate, House and the main stream of Leftist society to push for an extension of federal unemployment benefits for the non-working. While at the same time they pound their chests about how their policies have brought the job market roaring back to life. If the latter is true, the former is unnecessary. Federal taxpayer dollars should never be used to subsidize unemployment. These kinds of subsidies have been shown by a multitude of studies to lead to more unemployment because of the tendency of the unemployed to wait until their subsidy is ending before they look for employment in earnest.
The breathtaking idiocy of the position taken by President Obama and congressional Democrats was best exemplified by the recent remark by Senate Majority Leader Harry Reid, who said that for every dollar paid out in unemployment benefits, a dollar fifty of economic activity is generated. Further comments saw Democrats actually saying 200 thousand jobs would be lost unless they were given the authority to use taxpayer dollars to subsidize persons not working. If what the Majority Leader and other Democrats are saying was true, then all this country would need to do to create a roaring economy would be to put every American on unemployment and sit back and watch the growth.
The fact is that for every dollar paid out in unemployment benefits, a dollar fifty must be confiscated from the economy by government, the dollar that goes to the recipient and fifty cents to pay for the bureaucracy to administer it. And while unemployment recipients may spend their entire check in the private economy, there is no recouping of the bureaucratic costs involved in the transaction. Additionally, those recipients of taxpayer dollars would actually spend more money in creating economic activity if they had jobs, which would allow them to actually create new wealth instead of simply transferring and redistributing current wealth.
It is illustrative of the Lefts complete lack of compassion for unemployed Americans that they argue for extending the crumbs of government-administered unemployment checks, instead of the creation of jobs so these individuals can buy a whole loaf. But it is exemplary of Leftist policy religiously evangelized by Democrats and others whose only real goal is to grow government by shrinking personal wealth. The unemployed, like so many other "beneficiaries" of Leftist policies, have been damaged, some irreparably, by those very policies whose aim is not to help Americans up but to keep them down under the weight of an increasingly obese federal government.
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