Since I'm on the subject of leadership as I just posted in FAMOUS FOR NOTHING..... Love the line "Leadership is not proposing a plan". Well, if that is the criteria for great leadership, I've been wrong for some time and the Senate and the President are great leaders. Pretty funny. Enjoy the video. Personally, I'm not so convinced that a balanced budget saves us because we still haven't addressed the run away entitlement spending and defense spending. Yes, it caps deficit spending, but at the end of the day the goal is not to max out our government size, it is to have a small government. We already know that what the government does, it doesn't do well - except in the case of our military.
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/
In the last week or so I've had to continue rereading my own posts to ensure that I am clear as to where I think we are heading. As I stated last week this whole debt ceiling is an odd affair that is more like theater rather than an exercise in leadership, although this is exactly the kind of result I was looking for, going through it is frustrating. As readers know I suggested that the drama would unfold and the participants would use the tension to drive markets lower and add to the urgency to get "any" deal done.
Unfortunately we received the exact prescription I ordered. The market for its part has handled the mess pretty well as it has been conditioned to believe that any close call will be met with the not-so invisible hand of the Fed, Treasury, or President Teleprompter each time. I hate to admit it, but the President and the Democrats have this game of politics quite in hand and they have managed to make the Republicans negotiate against themselves and the RINOS have looked fragmented, unpolished, and inept. While I don't believe the US should default and feel like a deal could have been cobbled together in a better manner, the Republicans have simply looked like amateurs. Reading this you may feel like I'm bashing the "Tea Party Faction" of Congress, but you'd be wrong. These are the only folks that have stood for a reasonable approach through this entire mess. They have clearly laid out their expectations and have continually restated their demands. As usual the press and everyone else has blasted them as unreasonable and part of a fringe, however they are the folks that have been on the leading edge emphasizing their position from the beginning. I think Boehner and the President and the Democrats simply assumed that they would come in line just like all politicians do. I think what all of the power players are finding is that the rookies are actually principled and mean what they say.
Remember, the Republicans got burned during the last set of negotiations, so it isn't so weird to think that they remember passing a bill with the expectations that billions were to be saved only to find out that nothing was actually cut. If I was embarrassed like that, I would be demanding a pound of flesh this time. My point in describing this issue is that I think it is the miscalculation by the Republican leadership, Democrats, and the President that has gotten us to the brink of a "default". They expected a different outcome and therefore played their hand. Now I will praise Boehner in all of this because he is a classic politician and he is weaker than previous Speakers because he promised that the Republicans would not add any earmarks to bills, in other words he'd stop the process of bribery that we've seen all too often. (Remember Obama and his promises to the Nebraska leadership on healthcare?). Because he isn't using this tool, he doesn't have the carrot to get our dirty little congressmen to come along with his crummy deal.
As a final update on this, it looks like Boehner and Cantor have added the tea-party requirement that there must be a balanced budget, and it appears like this will pass the house. It is absolutely necessary to send this over to the Senate because this puts Senator Reid and the President back on the hot seat. They have talked about not passing this bill, but will they actually kill the bill knowing that THEY caused the default? Who knows, but it will be interesting and it puts pressure on them. At this point Boehner and Obama are famous for doing nothing on this issue. Essentially they are non-leaders and that is clearly my feeling about the President. While he likes to talk a lot on TV and use that teleprompter, he has little substance. He postures and relates how things should be done, but never follows through. Where is the President's plan to cut spending? He has none. If he doesn't get his way he vocalizes how its not fair. At this point the President, Reid, Pelosi, and Boehner remind me of the world's most famous tennis player, who by the way never did anything. She wasn't any good, never won a tournament, and never competed strongly at the highest levels, but she clearly was the most famous tennis player for years.
These times demand that our leadership reign in spending and come up with real solutions that are lasting. Cutting $100 Billion each year for 10 years is a complete waste of time. S&P told us we needed to cut $4 Trillion in spending, where is the disconnect between this dire circumstance and what these hacks are producing? The Keynesian experiment where we blow out all budgets to stimulate the economy with massive government spending has failed, today's GDP revision has proved that. If deficit spending failed there is only one solution left, to cut spending. Our leaders need to get to work on their craft and stop working on being "famous".
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/
I found an interesting video on CNBC (yes, all fluff and they try to make all things positive). The CNBC gang interviews Nick Colas who tracks internet searches on Google to attempt to find trends that might indicate where companies and the economy are going.
Clearly everything in the economy is not roses as he responded several times, "that's a tough one" meaning that because the search term was showing up more and more that didn't mean that things were getting better. Essentially this interview highlights one of my issues with the CNBC hosts, they enter into the interview with the thought that these indicators are to reveal bullish information, hence the panelist is in a position to defend the data and almost apologize if the data is negative. Truthfully, it isn't hard to figure it out, you just examine the results, question it, and then accept it.
Here are the search trends he follows;
GOOGLE SEARCHES FOR HOME BUYING - I get this one, I hadn't thought about that. I would state though that I'm hearing more and more complaints from realtors and mortgage lenders that they can't get buyers that can get financing. In my city this is really blowing up potential deals and causing slow sales.
SEARCHES FOR USED CARS - He doesn't share with us the numbers for used cars, but this would be useful to see if folks are going to try to buy new cars or buying used. I keep hearing lots of optimism from the auto industry about their growth prospects and how things have changed. I wanted to examine these indicators for myself and so I used the Google Automotive Search Index results as a high level "smell" test. Interestingly the index values show a couple of striking things. First, we are currently at a level that is much higher than last year, which was horrible. This is wonderful and you can see how the executives at the manufacturers are excited that things are looking up. Despite the good news, we see that this is also a level that is similar to 2007, which wasn't exactly awesome. On top of that you must account for a growing number of searches as people are using media and search more, much more than they did 4 years ago, so this too should make us pause a little. Finally, we have just exited the typical peak point in sales and searches in terms of seasonality. Last week I posted a chart on GM, I'm not getting long anytime soon. - GM CHART FROM 7/22/11. Take a look at the Google Search Index for Autos below.
SEARCHES FOR GUNS -
I'm not exactly sure that guns are a great indicator of improving financial health as Nick tried to spin this. His angle is that guns are a $300 to $500 durable good like a washing machine or refrigerator. Somehow I'm not thinking that gun searches are a marker that citizens feel confidence in an improving economy. I believe that folks feel like the system is breaking down and the government cannot protect them. Perhaps folks aren't looking to prepare for Mad Max times, but their search for the best gun for them may mean that they are concerned about the increasing risk of break-ins and their security. Oh yes, if you are in the market for guns you might consider the Mossberg 500 or 590 and the Glock 23 as a starting point in your research.
SILVER AND GOLD -
We've discussed this at great length, people across the world are buying gold and silver as the un-currency and as an inflation hedge. If "investors" are looking to buy gold and silver, they don't have a lot of confidence in traditional investments.
FOOD STAMPS -
The Goatmug Blog tracks food stamp usage every month, but I like the idea of watching these trends to see how many searches are being performed in real time. This approach may give us insight into what numbers will look like several months in advance. Regular readers know that we report these dismal figures in the monthly update and last month's figures show that almost 45 million people are on the roles and as the panelist described one in five families receive food stamps. How disgusting!
GOOGLE TRENDS
If you have a desire to check out some of these you can look at Google Trends to examine word searches and also you can use this link in Google Finance - http://www.google.com/finance?q=GOOGLEINDEX_US:AUTO
I did searches for durable goods and other items and many of the results show how poor the us consumer is right now in terms of discretionary spending. Durable goods searches are at 7 years lows, but it is beginning to tick up compared to last year's horrible totals in year over year trend! Wow!
At the end of the day I like this approach it may give us a view of coming changes in trend in a real time format. At least Google's spying is good for something right?
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/
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/
I had a discussion about the rare earth elements and the ETF for those firms (REMX). These firms have all clearly had great bounces and REMX is actually now in an upward channel. Upper resistance in the upper channel is $26.40, if we charge through there we could see $27.00 quite easily.
If REMX bounces around the channel top and heads back down we could see a move to $25.00.
While the purchase of REMX gives you exposure to many rare earth metal miners, most folks that are in this trade aren't in it for a 5% move, they want more potential for upside and don't mind the volatility. Let's look at another option here for some rare earth dynamite.
REMX
MCP
While REMX looks like a fine set up that is still bullish, please view MCP (Molycorp). MCP has rocketed off a low around $51.50 that was posted almost 10 days ago! Wow! Just observing this move makes we want to hold off on buying into that, expecting some sort of slow down and retracement. The bulls will need to observe $62.00 closely. If MCP can powerfully move through that resistance level then a move to $66 or even $71 could be at hand. Those that feel like the stock needs a breather could take a short here and work for a move back down to $57.50.
The bottom line here is that if the overall macro picture continues in the same vein of a stronger Euro and weaker dollar, we'll have the underpinnings of a sizable move in MCP. If for some reason reality wakes from its 2 year slumber and the USD drives higher, MCP could face substantial headwinds along with the rest of the equity markets and commodity markets.
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/
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