Sunday, April 10, 2011


I ran across this blog entry from Peter Schiff.  I think he nails it in 11 minutes.  While this blog really is a collection of my thoughts and a tool to organize information into actionable strategies, I sometimes run into stuff that states exactly how I feel and what I'm thinking.  This is one of them.  I believe you can hear the frustration in Peter's voice and it resonates with me because the entire "government shutdown" charade is a complete joke.

Budget cuts amounting to $40 Billion are 1% of the travesty contained in our budget.  If we had ANYONE that was a real leader (and not a play one in some game called politics)  we'd start at 20% across the board cuts and end up with 15% in a "compromise".  What kind of message would it send the world if we cut $600 Billion from the budget this year?  That would get someone's attention.  To walk around and believe that government is so essential and helpful is just deception.  Does anyone remember how effective all that government was in preventing 9/11?  What about saving everyone in New Orleans in Hurricane Katrina?  How's all that government doing in Japan with all of their compliant citizens?  (God forbid anything like that happening in the USA, people would be killing each other in the first 2 hours.). 

There are several key roots to the problem that create this cancer called government. 

First, we have professional politicians.  Full time politicians have nothing to do but legislate FULL TIME.  We must change the system to require them to have real jobs and only work 1/2 a year.  This should apply to cities as well.  Is it any wonder that government encroaches on every facet of our lives?  With full time city council members working full time to enact laws, it is no wonder you need a permit to open a coin shop, to be an internet blogger (Philadelphia), or have a lemonade stand.

Second, we must have term limits of 2 terms maximum for Congress and the Senate.  Without this you end up having crooked, connected, and out of touch oligarchs that don't represent anyone other than lobbyists, much less the people and wishes of their districts.

Finally, Bill Gross came out on Friday stating that he wasn't just completely out of US Treasuries, he is actually short US Treasuries.  In response, futures are going nuts in all the inflation related assets.  Gold and Silver will go bonkers next week.  The Fed is trapped and it won't be long before the bond market finally snaps the trap shut.  Speculators have probably been laying these positions for some time, and all it has taken was a big boy to get in and finally talk their own book.  Since the Federal Reserve actually owns around 1.2 Trillion of bonds, the Fed is subject to interest rate risk and significant losses.  In the industry we measure the sensitivity of $ losses to an increase in interest rates by measuring something called the DV01 or Dollar Value of 1 basis point.  As of February the calculation of the DV01 was that if treasuries lose value and rates move up by 1bps, the the Fed would lose $1.7 billion!  Isn't that nice, if interest rates move up a mere 23 bps the Fed loses that $40 Billion in savings that was so hard to find.  If interest rates rise 3%, the Fed loses $500 Billion!  These are figures based on February's holdings, so we know that the figures are much worse.

It's hard not to be cynical.  These politicians are disgusting.