ORWELLIAN THEATER IS BACK
Back in July of 2011 I posted a copy of George Orwell's movie 1984. I went back and looked at the article and discovered that I added because our Congress was providing entertain debate about the debt ceiling and the administration was full of double speak and threats about the future.
With the revelations of our lack of privacy and the confirmation by Edward Snowden of all of the statements made by William Binney, in "The Program", I feel like it is probably time to give readers another shot at the brilliance of Orwell and his uncanny ability to see where things were going 60 years into the future.
I will leave you with these thoughts and questions from the movie.
Ignorance is strength!
The party gives them exactly what they want.
How do you know what exists?
I encourage you to watch it. How Orwell would have ever imagined the things he did when writing it is amazing. I am awed by the idea of the screen in every home and building monitoring every action. It is very much like today as your Xbox with Kinect "hears" what you say, your phone reports your every location, your emails contain every thought, and each search is recorded to provide a profile of your innermost desires and thoughts.
GOATMUG
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/
COMING DOOM
We are going to hear more about more about the fiscal cliff and how it will bring the country to its knees. In reality the fiscal cliff should be a great opportunity for both parties to achieve a level of success and implement a long-term strategy for fiscal and economic success for our country.
Unfortunately our elected officials don't live in reality and the election results suggest to the President that raising taxes is the course the people have demanded. On the other hand, Republicans, spurned by voters will hold fast their fidelity to the "producers" and attempt to keep taxes low for the highest income earners.
Truthfully, no outcome will really work as the politician's plans for 10 year deficit reduction and projections about reigning in spending are all simply made up accounting garbage. The healthcare mandate alone will have cost overruns well beyond anything estimated and our other entitlements won't fare much better. Despite this truth, our politicians aren't in the business of taking serious aim at real issues, they are in the business of dividing and wrangling for a small victory on a meaningless issue to be able to say to their special interest that they got something for them.
WWFD?
So why is this important? As odd as this seems after writing the text above, I'm pretty convinced that the Dems and Repubs will do exactly what the Fed would do and do more of what got them in this mess in the first place. Since we know that the Fed's response to all negative news and all empirical data that shows that what they've been doing hasn't helped is simply to do more of their devaluation and do it in bigger size, we can guess that Congress and the Senate will do exactly the same!
The solution is not to fix anything or change structurally any spending or tax course, it will be to simply defer entitlement cuts and agree to raise tax rates slightly. The grand bargain will allow both sides to win and will damn our country to lose. The country's loss won't matter though because both political sides will be able to crow to their supporters that they did what was best and achieved a great deal.
This non-solution course will buy time and isn't that what leadership is all about? Look at the ECB as it deals with Greece. Look at the Fed dealing with banking solvency. Look at our President in dealing with Middle East issues. The problems are so big that leaders simply work to defer the day of reckoning as often there is no other way to handle the massive problems. As we know though, if you lie and put off recognition of issues they often become unmanageable and can't be handled in a fashion that limits damage. After years of Presidents and Congressional leaders putting off the tough issues, we are about to see just how out of control they are. The incredible $1 trillion deficit spending we've had over each of the last 4 years has only brought the issue to the top of the heap, these issues were there already, they just can't be put to the side like they have been so often before.
GOATMUG
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/
60 Minutes produced this video about our wonder government class and how they have been able to perform investment related acts that would land the rest of us in jail. The work of 60 Minutes added to the investigations of others to finally push our corrupt representatives to make laws that prohibit what is really insider trading. Last week, the Senate passed a bill to make illegal these acts by members of the elected class and their aides and Congress says they will pass their own version next week.
IT TOOK THIS LONG?
I applaud these measures, but one has to ask why it took so long? It reinforces the notion that we absolutely need term limits and I would suggest that a maximum term amount would be two. Professional politicians have run our country right into the ground while they find "legal" ways to profit from the system.
EVERYONE GETS A PIECE
They disgust me (elected officials from top to bottom) and unfortunately the more I see and hear about our government. I believe we no longer hold the high ground in comparison with backward banana republics, except in the fact that we are becoming more backward and we are a heck of a lot bigger.
Enjoy the video. While I personally am astonished to have posted two videos in the Theater Of The Mountain Top from some of the most liberal sources over the last couple of days, you've got to get them where you find them!
GOATMUG
Goatmug
is an investor that cares about you and your family. Goatmug's Blog - Financial
Perspectives From The Mountain Top is a collection of thoughts on our economy
and how it impacts the lives of investors and average people. While several
specific investments are named in many of his posts, these articles are simply
invitations for you to do your own research and reference to these securities
does not constitute financial advice. Your situation is complex and unique and
you should seek professional assistance with your trading and investing. Please
visit Goatmug and share your comments at http://www.goatmug.blogspot.com/
As we come to the end of the debt ceiling debacle for 2011 and 2012 it is important to highlight what our fine leaders and representatives accomplished for us hard working folk. I only want to highlight the key points and I'll add some thoughts below the summary. In addition, I'll talk about market direction in the TRADING UPDATE section.
The compromise allows the debt ceiling to increase by as much as $2.4 trillion dollars in total. Included is an immediate increase of $400 billion dollars. President Obama would be permitted to request another $500 billion increase in the coming months, which Congress could vote to disallow by a veto proof two-thirds margin. A further increase of between $1.2 trillion and $1.5 trillion would be available after a special committee identifies matching levels of additional spending cuts.
The agreement calls for cuts of more than $900 billion over ten years in spending from programs, agencies and day-to-day spending. It would include security-related and non-security-related cuts. According to the Congressional Budget Office, "discretionary" spending would be decreased by $21 billion in 2012 and $42 billion in 2013.
The agreement creates a 12-person House and Senate special committee to identify further spending cuts. The committee must complete its work by Thanksgiving - November 23 - and Congress must hold an up or down vote on the committee recommendations by December 23. The committee could overhaul the tax code or find savings in benefit programs like Medicaid, Medicare or Social Security. Congress could not modify the committee's recommendation.
Should the special committee deadlock or should Congress reject the committee's recommendations, then automatic across the board spending cuts of at least $1.2 trillion would go into effect.
The agreement requires that the House of Representatives and the Senate vote on a Balanced Budget Amendment to the Constitution, although its passage is not guaranteed.
The deal also includes changes to Pell Grants and student loan programs. Pell Grants will receive a $17 billion increase for low-income college students, which will be financed by the elimination of subsidized student loans for most graduate students
Ok, here's a little refresher before we get started. The 2011 budget is slated to be a total of $3.85 Trillion and of that it includes borrowing almost half of the sum to meet those requirements. That borrowing represents a $1.65 TRILLION deficit. Stated another way, we are spending almost double what we are bring in.
OVERVIEW -
I'm fine with bullet one where they parse out the amounts over time. Clearly the President got what he wanted which was a deal to get him through the 2012 election cycle. Hasn't the guy ever heard about serving the public? Who cares about the election, fix the problem!
Cuts of $900 Billion in ten years are a complete farce. There are so many problems with the approach that these clowns took with this deal it is simply appalling. First 2012 and 2013 cuts amount to around $70 Billion. These are cuts that likely will happen, but amount to about 2% of the freaking budget! Who runs a budget like this? In other words, this $900 Billion is a complete joke.
The Special Committee is something that I feel is dangerous. While I like the idea of a group getting together to actually work AND having their ideas implemented, it is dangerous in terms of who will be on the committee and who won't. Effectively we already know that to be considered for the committee you must have voted "YES" for the debt ceiling agreement. That means that many of the fiscal conservatives in Congress will not be allowed to participate. Ron Paul and others that actually vote based on conviction will be excluded, and he is exactly the one person that should be on the panel.
I do like that cuts will be enacted and if not, across the board cuts will come. This is REALLY what has the Democrats shaking in their boots. If the Republican caucus really wants to find cuts they can simply vote the recommendations down and the hammer will come. Of course we all know that the Republicans talk a good game but don't really have a real desire to change anything so we'll see some other compromise that will keep the status-quo going for a little while longer till the house of cards completely implodes.
The Balanced Budget piece has no teeth. It is interesting that almost all politicians say that they want a balanced budget, but somehow it never gets put to a vote. My guess is that we'll have about 99% absenteeism on the day that vote is held. That issue is one where everyone likes to affirm it, but no one wants it really. If we had a balanced budget amendment, the government ponzi scheme would face limits and that can't be good for anyone that derives power from an unlimited and insatiable government.
Finally, the Pell Grant thing is also pretty laughable. We are going to continue down the road of getting our young folks all going to college so they can get in line with the other unemployed folks with useless liberal arts degrees. I actually would support this measure IF and only if Congress required these students to self-fund their expenses until they actually received their degrees (yes loans, working, etc) to make the cost to taxpayers riskless. Second, the government Pell grants would only reimburse students that earned degrees in engineering, science, and other hard-core programs that were technical in nature. Upon earning degree AND working for 2 years in the field the Pell grant would pay off or reimburse a student for books and tuition up to a maximum amount. This would ensure that the taxpayer only pays for success and doesn't pay for Jimmy to "find himself in college" and also makes sure that the graduates that earned the degrees are employable contributors to society. While it sounds tough, too bad. WE HAVE ENOUGH UNEMPLOYED LAWYERS, LIBERAL ARTS LOSERS, AND DROP OUTS in this program, enough is enough. It is our money and it is time to demand responsible stewardship of it.
And yes, all of those scientists could work to create the next generation of these (see video below) which just happen to be some of the coolest planes ever. I really put them here to show you what $1.5 Billion will get you. Now contemplate this, you could buy 650 of these awesome flying wings for just under 1 trillion. My guess is that when all is said and done, we won't have anything to show for our use of $1 trillion in deficit spending this year, so if I have to spend an extra trillion or two I'd rather have the B-2s.
WHO WON?
My first take on this deal is that the Democrats won. Yes the media is howling and stating that the Republicans won and the Tea Party members are terrorists, but that is foolish. The Republicans caved just like I said they would. Essentially they could have gotten anything they wanted if they were willing to push things to the limit, they weren't. The President gets to push this issue out past 2012 so he can concentrate on the election and continue telling everyone that he inherited a financial mess.
While the Tea Party may have scored some points by getting the balanced budget onto the map and even getting the special subcommittee to make cuts, they have allowed themselves to be characterized as a radical fringe group of nut jobs willing to take down the USA to accomplish their goals. They need to be more forceful and vocal stating that they love this country and that the politicians on the left and right simply are part of the political class that could care less about the nation and its people. They must state this emphatically every time and demand recognition that the past policies of Bush and Obama are failures and don't work. The liberals hate the Tea Party and attempt to label them and marginalize them in order to attempt to make others discount them. It has worked so far, but they must fight on.
Unfortunately Republicans are the the guys that are attempting to play the game of politics the best. You can see it in the old veterans. They are loving having a "bad cop" group that they can blame for being on the fringe and then they can go to their constituents and blame the liberal left. They proudly sit in the middle playing both sides off each other. I can tell they believe that they will rise to power in 2012. The problem is though that many of us recognize this game and the time for life-long politicians is waning. We need leaders that make hard choices and choose the side of long term financial strength for our country rather than another election cycle victory.
Here is a list of those that voted for and against the bill in Congress -
Here is a list of those that voted for and against the bill in the Senate -
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/
WORLD MARKETS ARE THE FOCUS
I heard today that the President and CONgress were rushing to try to get some type of debt ceiling done (temporary or not) before Asian stock markets opened for the week (Sunday evening in USA time). I'm struck by this because I'm simply floored by the fact that these politicians are spending any time focused on what equity markets are doing rather than focusing on the task at hand. What I'm getting at is the notion that they are scurrying around to avoid a fall in markets shows me that this is all just a big show for the markets!
Yes, this isn't some new revelation since the timing for all major announcements seem oddly planned EVERY single time to coincide with a Sunday night bombshell or options expiration Friday. As I've noticed these events I've pinched myself saying, "no, it's just a coincidence". However, after having an entire arm covered with red whelps, I am finally of the mindset that a game is being played to juice markets and keep them elevated.
"White House Chief of Staff Bill Daley warned Sunday that the financial markets are starting to have doubts about the ability of Washington to strike a debt deal, as lawmakers scramble to come up with a plan before Asian stock markets open.
The Asian markets will start to open Sunday evening Washington time, ahead of the Dow opening in the U.S. Monday morning. U.S. officials are cognizant of the possibility that a failure to outline a path forward by then on how to raise the debt ceiling could roil the markets."
Now give me a break! We have several days until this deal needs to be done, and rest assured that our friend Ben Bernanke is quite willing to buy up all the debt in the world to keep us from having an interest rate problem. I saw Tim Geithner on tv telling us how irresponsible those Republican politicians are being and how the apocalypse will be unleashed if something isn't agreed to immediately. While the warnings are grave we can retain a sense of confidence in our financial overlords as every other problem we've faced in the last two years has been met with a change of the rules, a bending of all reality, twisting of economic paradigms, and a moratorium on basic math. Forgive my tongue and cheek approach to the drama, but I personally don't think there is any chance of a deal not getting done, and with hours to spare they'll unveil another monstrosity that will solve nothing and only ensure that Amerika's future is just a bit dimmer.
WASHINGTON GENERALS WOULD MAKE GREAT REPRESENTATIVES
Have you been to a Harlem Globetrotters game? I love them and go every time I have a chance. Those guys are funny and entertaining and the kids think they are a blast. My kids haven't figured out that the Washington Generals (the perennial opponent of the Globetrotters) are laying down so the Globetrotters can win. My kids don't realize that the entire game is a show and there is no competition going on down on the field of play. Likewise, I think the entire drama unfolding in CONgress is simply a ruse where each side of the isle is attempting to make the most out of the situation. They are all on the same team, they are just wearing different jerseys to keep up the facade that a competitive game is under way.
So, with that realization, I want to give you the opportunity to watch a movie you may have seen a long time ago. You may have read it in high school back when they actually tried to teach you important ideas and challenge you to think. The entire theater that is Washington relies on all of us buying into the divisions of a two party system where one can be good or one can be bad based on our frame of reference. Let's face it, we all like to be on a team! The problem sets in when you discern that neither one of these teams is good.
I will leave you with these thoughts and questions from the movie.
Ignorance is strength!
The party gives them exactly what they want.
How do you know what exists?
I encourage you to watch it. How Orwell would have ever imagined the things he did when writing it is amazing. I am awed by the idea of the screen in every home and building monitoring every action. It is very much like today.
GOATMUG
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/
Stormtroopers can be found wandering the streets with all of their belongings in their Troopercarts.
CREDIT ATTACKS LEAD TO DOWNSIZING
Stormtroopers throughout the Empire received their pink slips this weekend and were summarily kicked to the curb with all of their belongings and a small severance stipend. As credit problems resurfaced in Europe over the last month, the USA felt like it had dodged a "rebel assault" only to find that all of the radical rating agencies were gearing up for war.
Last week Planet Moody's launched a preliminary onslaught against the Empire's credit domination as a AAA credit by putting the country on credit watch for a downgrade. Moody's cited the lack of fiscal cohesion on the part of the Senate and Congress and their inability to raise the debt ceiling.
Standard and Poors joined forces with Moody's in an unlikely rebel alliance by also placing the USA on credit watch, but stated that it would drop the credit rating of the Empire if significant budget and deficit cuts weren't approved. They stated the rating will be cut within 90 days if these changes were not made.
GEONOSIANS (CHINESE) LAUGH AT THE EMPIRE'S LIES
At a high level economic summit on planet Geonosis, General Grevious (aka Tim Geithner) responded when asked how the USA could simply terminate so many of their Stormtroopers with little notice by saying, "It's expensive to run an Empire and we've got to prove that we believe in a strong dollar)." When concluding his statement, young Geonosian students laughed at the outlandish lie.
While the spending issues in the Empire are the headline stories we are reading, the real drama is playing out in real life as Stormtroopers and Tie Fighter pilots are being furloughed without warning in an attempt to resolve the huge spending deficit.
Many wayward Stormtroopers have been attacked and killed by kangaroos on the dark side of planet Earth. Stormtroopers without jobs are more susceptible to depression and illness and are often unable to defend themselves from vicious predators.
DEBT CEILING AGREEMENT?
So how will this play out? Clearly the CONgress will come to an agreement with the Administration and there will be a debt ceiling agreement. The rating agencies are simply playing catch up here and should have don't this years ago. They are a complete joke.
Who do you think is really telling the truth? I tend to side with Weiss since they are the only independent credit rating firm that earns their money from investors that pay them to look at companies and countries. Standard and Poors and Moody's take their compensation from the companies that issue the debt, which is an obvious conflict of interest. If one of the current rating agencies other than Weiss gives you a rating you don't like, you just stop paying them to rate it! Don't you think they are incented to play nice and give you every chance in the world to have the best rating? This is why the ECB and IMF's interactions with the ratings agencies are a total sham, and why now we are seeing these central banking institutions simply state that they will ignore ratings when purchasing and backing the sovereign debt of Greece and Italy.
(Yes, I'm having fun, please read the story about Jacob French who is an Australian nut job that clearly doesn't have a job who is now walking across Australia to raise money for charity. When I saw the pictures I simply couldn't resist; who can resist a story about a guy in a Stormtrooper costume?).
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/
I want to drop a quick note here. This is a really, really, really big week.
ELECTIONS
We have elections in the US for mid term positions where it is widely anticipated that voters will reject the unfettered spending of the current administration, Congress, and Senate. (Don't forget Bush was also a complete idiot when it came to fiscal controls too and should be held responsible for his completely insane implementation of Medicare Part D which is the worst and costliest entitlement program ever!)
FOMC
Probably more important from a market and economic standpoint we also have a Federal Reserve FOMC meeting on Wednesday. This is the meeting where Ben Bernanke has purposely timed the unveiling of their plans for additional stimulus spending which has been named "QE2" for Quantitative Easing 2. The purpose of this program is to continue to spew liquidity in the form of electronic dollars all over the global economy to ensure that asset prices will rise. As Alan Greenspan has stated, "nothing will help cure the economic conditions as much as a rising stock market!" The real impact of all of this money sloshing around though is that the value of the dollar drops with each keystroke on the economic printing press. QE2 is synonymous with dollar debasement.
DOLLAR DOWN MAKES GROCERIES RISE
Is it a wonder why you are going to see grocery costs rise? Sugar, wheat, corn, rice, and coffee are rocketing higher. Clothes prices are going to rip higher as cotton is at an all time high. Oil and gas are vaulting upwards and it is suddenly possible to see my $100 oil price target prediction actually be met this year. We are seeing all of these hard goods increase in cost, yet personal incomes are dropping. If you hadn't realized it yet, it is almost like this is a war on the poor as these are the ones that will get squeezed the most in this environment. Thank you Federal Reserve, US Treasury, and President Obama. It is odd that the President sits idly by as the Fed rips up and destroys the purchasing power of the poor and the middle class. I guess this achieves his goals though as more and more marginally middle class will slip into poverty and he can be their benevolent care-taker. He can continue to promise to take from the wealthy and give the poor their fair share of hope. The President should be slamming Bernanke and Geithner now and demanding that they quit destroying the value of the dollar. Instead, he tells us that he inherited this mess and that fixes take time. Very directly Mr. President, it takes no time to make a phone call and demand that Bernanke quit this now!
TRADING UPDATE -
Ok, so what do I expect? I expect that the elections will be exactly what has been predicted. Congress will go to the Republicans and the Senate will remain in the hands of the Democrats. The Fed will announce that they will do another $500 Billion of QE 2 and they are going to add more when and as needed with no cap. This announcement will be less than the markets expect, but the added sentence that they will do more when needed will be somewhat of a life preserver. The market should sell off some 3% to 5% (individual stocks could go down 10% or more). At that point, that will be the signal to buy. The Fed is essentially the market's put (floor) and therefore they will step in and buy and float this thing no matter what. In a 1930's analog, this is about the time when the market dropped another 30% to 40% because the FED did not provide stimulus and Congress became budget hawkish and tried to reign in spending. Bernanke will not make this mistake and in fact will go overboard attempting to overwhelm the stagnant real economy. This annoucement is half the real deal and half a promise that there is no end to the intent to provide as much massive stimulus as needed. He will signal with overwhelming confidence that there is no lack of desire or willingness to blow as much money as need to reflate the US stock market.
After the temporary drop in the market due to a smaller than expected stated amount, we will be buying anticipating a huge stimulus inflow courtesy of the Fed. Of course our old favorites will be the targets with a couple of additions. I still like emerging markets, but I will add SLV and DBA. I am more positive on silver than gold right now and I like the agriculture commodities. In addition, although the fertilizer names have run it is possible to see an even bigger move there.
Posts
