Monday, February 20, 2012

WHAT IS AUSTERITY LIKE? THE GREEK PERSPECTIVE

If you haven't watched the previous embedded video called "Century of Self" you are missing out! On this non-trading President's Day I suggest that you take an hour or two or four and watch the four part series I've put into one video.  It is really good and really scary.  I have taken a ton of handwritten notes over the course of watching the first 3 hours and I will summarize them soon.

I keep speaking to people that have no sense of what is going on in the world.  I had a conversation the other day with a health insurance client that was talking about buying a $85,000 sports car.  Yes, he is wealthy, but not THAT wealthy.  I finished the conversation with the notion that this gentleman has learned nothing from the financial crisis and he'll be the first one to cry about any catastrophic event that happens in his life.  He is clearly enamored with his wants more than his needs.  In fact, he is the perfect living example of what the Bernays wanted to create in America as highlighted in the video.

What is life like in Greece?  We hear words like austerity and see the riots, but what is the business of daily life like?  I've presented 3 stories below.  The NY Times piece is pretty good and optimistic while the other pieces....not so much.  Enjoy

THE HUMAN TOLL

The Way Greeks Live Now
I found an interesting article in the NY Times the other day about life in Greece and how the financial crisis has changed people's lives.  Some of the information presented in the story seemed to conform to my understanding of Greek life in that there were several brief interviews with families that had lost jobs and were changing their life-styles to cope.  While this information was in line with my way of thinking, the author, Russell Shorto, seems to spend most of his time highlighting successes in the midst of the Greek tragedy.  Several of the article's subjects are doing extremely well and actually increasing business.  Even as he covers the sad stories of families he suggests that since most have family homes in the country, there is still a way out for many that face hard times.

AUSTERITY AIN'T SO BAD?
While I am an optimist, I don't buy all of the good feelings that Mr. Shorto describes as being the normal outcome in what I would describe as a worsening environment.  Since this was one perspective, I wanted to present some other ideas.





The 3 minute piece from RT.com gives us more details about the austerity measures and how they are changing daily life.  Medical services are becoming more limited and citizens are turning to help organizations to meet their needs.  RT clearly has an agenda and a bias, and so it is important to highlight that as well.  They are trying to show that the military has not endured many consequences resulting from economic cuts and the people have endured full force of the results.  There are political realities and deals being made in the process and it isn't surprising to note that Germany and France are tying aid to Greece with back room deals that demand that military purchases be made with proceeds of each life saving infusion of funding.

The New Poor
Unlike the first written piece from the NY Times, this article from Der Spiegel gives us insight into the trends Greeks are seeing that are not improving.  The article highlights how many singles have lost their jobs and then quickly lost everything else.  The homeless shelters and soup lines are seeing waves of "new" seekers looking for their services.

PULL THE BAND-AID OFF ALREADY!
As we begin to hear more and more about a coming Greek default, these stories will get worse.  Upon default the human toll will be more worse as the cost of everything imported will become amazingly expensive.  Imported fuel, food, and everything else will be too costly to many.  Greece will become in time a very affordable vacation destination for richer Northern European countries as Mexico had been cheap for Americans for years.  While this will be painful, it is better to do this now and retain some national assets before selling them off and then defaulting after all the assets have been striped away and lost to global creditors.  Like everything in life, it is better to own up to responsibility and face consequences for actions early as a delay magnifies the damage and only serves to make the outcome more painful.


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/ 

Friday, February 17, 2012

THE CENTURY OF SELF - MANIPULATION AND DEGENERATION


It is a rainy weekend and I've had this video in the hopper for a while so I thought that I would share it with you.  I've often written about "the post" I've been working on that highlights where our US society is going, and along the way I discovered this video.  Ultimately, I think it fits into the theme of the degeneration of our country and grapples with the notion that as citizens that are engaged 24 hours a day, 7 days a week in some sort of mass media, we end up believing the stories that are presented to us.

BEHAVIORAL MODIFICATION THROUGH FILTERING
Think about this for a moment.  The messages that we hear and see drive all of our decisions.  I think a perfect example is that of our current leadership in the White House.  When President Obama was elected he had little real political experience and no foreign policy experience and ran based on a campaign to end all wars and stop all military efforts abroad.  Suddenly, upon election, he refused to end the Iraq conflict, continues to remain in Afghanistan, helped topple Egypt through lack of action, deposed Libya's dictator through the UN, and now looks focused on efforts to engage Iran.  All the while he has kept Gitmo open.  What happened?  How did a pacifist anti-war Constitutional Law professor like Obama become a war-mongering imperialist?

My opinion is that there are two reasons for the changes we've seen with Mr. Obama.  First, someone shared with him that there really are bad guys in the world.  Second, he is probably receiving a steady diet of feedings about how evil folks are by the machine, and reality becomes what the organization wants the President to see and know.  In a way, we are all like this, and this is why I want to present this documentary to you.  We receive filtered information and thus we can be manipulated into believing just about anything.

MAKING ME WANT WHAT THEY WANT ME TO WANT
The video is about creating needs and wants in target subjects and controlling their behavior through the most basic manipulation techniques.  I think I've done a pretty good job with my kids as they have grown up asking them probing questions as commercials are presented to them on kid shows.  They are aware that companies are attempting to sell them stuff they don't need or want.  I hope that their ability to recognize these tricks sticks!

I know the video is long.  Just act like you eating an elephant....and take it one bite at a time.  Come back to the site when you need a break and make sure to shop in our Amazon box at the upper right because you deserve some plastic crap from China or a book or game that only can be obtained through my search box....hurry there is only a limited amount of time to get the best deal!  Maybe click and ad or two and check out our Google Ad sponsors!  (Ok self-serving commercials are over!).

THE CENTURY OF SELF




HERE'S THE STORY, NOW THINK THIS.....
Finally, please check out this story about a software program used by Forbes and a few other outlets. The program actually writes stories and then compiles data and adds pictures.  AUTO-PILOT JOURNALISM

We now have the ability to automate and create stories with depth based on events that happen.  In other words, the computer software that a media giant actually uses creates stories and adds a bias to them without human eyes needing to manage the process.  Now, to make this even more conspiratorial, think about this software in the hands of a totalitarian regime like North Korea or Russia.  Isn't it an easy leap to believe that it would be a great tool to control the masses?

Just something to think about when you feel like putting your tin-foil hat on during this rainy weekend.


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/ 

LET PAPER BE OUR FUEL! - GASOLINE UPDATE

AMPLE PAPER FOR EVERYONE!
The seasonal gasoline trade has been my target for the last two years and so far they have been quite profitable.  I've highlighted trades in WNR, VLO, and UGA and all have done well.  As I have laid out previously there is a seasonal component to this trade, but it is also one based on the view that Benny has our back and he and his central banker pals are finding ways to goose the global financial system through their respective liquidity providing measures.  (Explicit or not).  As they go to work making sure that no civilization is ever short on paper or electronic currency, this forces things with real tangible value like commodities to move higher.

THE GLOBAL FEDOLUTION
Last year around the time the Tunisian riots began to break out I suggested that our Fed could be directly and indirectly to blame because global food prices were sky-rocketing and starving people have little choice but to rise up and take action.  I coined the phrase the Fedolution as we can give the credit or rest the blame for the Arab Spring's spark largely with the Federal Reserve.

As we fast forward, incarnations of Fed action have resulted in a continued liquidity driven asset frenzy that has spilled into other commodities.   Since early 2011 we seen hard asset prices bounce around, but thanks to a significant rebound in December 2011 and January 2012 we see that almost all commodities move higher significantly.  Our economic measures suggest that price inflation is really almost non-existent according to the Fed's definition, but somehow we find that domestic gasoline prices are at the highest level for a January ever.


Average January Gasoline Prices

DEMAND SURGING?
There are legitimate reasons for gas prices to be high including refinery maintenance and supply bottlenecks, but I'm not sure this tells the entire story.  We automatically may tend to jump on the notion that the US economy is rebounding and we are seeing a rise in demand.  Unfortunately that isn't really true as US domestic gasoline demand is at it's lowest point in more than 175 months!  Clearly the US driver is not expressing any positive views on the economic situation by filling up more!




Zerohedge does a nice job of describing why gasoline consumption is tanking here - Zerohedge

NO NEED TO DRIVE
While our cars are more economical, this too isn't the reason we are not using gas.  Frankly, I believe we are not using gas is that we have a huge portion of our labor force shut in and they are simply don't need to or can't afford to drive since they don't have jobs.  Despite my assertions on why gas consumption is low, we still see gasoline prices moving higher and the prospects for even steeper fuel prices are pretty good according to Joe Petrowski, the CEO of Gulf Oil.





There are some really good items in this interview that we need to highlight.  Joe mentions that financial issues in Europe are having some impact on refiners there (remember, Swiss refiner, Petroplus filed for bankruptcy in late January) and this is causing a pricing issue globally.

Summer prices for gasoline could be as high as $4.00.

Brent crude could go as high as $130 in his estimation.

Higher gas prices are impacting C-Store retail sales!!

An Israeli / Iran conflict would driving prices to the point where there would be a rationing effect (I think he is suggesting that demand in the USA would crater due to pricing pressure rather than a rationing scenario where the government would limit your ability to fill up).

Every $.50 increase in gas prices takes $150 Billion out of GDP or about 1%.  A price of $4.50 or $5.00 will result in massive cuts in demand.

BRINGING IT TOGETHER - WHY IT TURNS NASTY
I'm concentrating on this gasoline topic purposefully as I am trying to draw together for you my original thesis regarding how the year will play out.  I do see gasoline prices moving higher over the next few months (UGA probably won't rival the 7/2008 peak of $65.00) but as it moves higher, we will get a forced slowdown in our economy as a result of the gas tax on our economy.  The dramatic impact these prices will have will serve to stifle any potential growth and actually cause our economic momentum to swing the other way.  This is why I feel strongly that we will see the market highs for the year in late April or early May.



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/ 

Thursday, February 16, 2012

PLAY IT LIKE THE BANKERS....DISTRIBUTION AND GIDDINESS

I can't stand it.  Like I said yesterday, with all of my favorite analysts coming to my view regarding the set up for the rest of the year, almost everything in me wants to find holes in that theory.  Sometimes it is better to be alone with a view rather than to feel like you are in a crowded trade!

Despite this new revelation that smarter guys than me have been convinced that I'm heading in the right direction, I'll still stick with my outlook, but I did take some time to look for compelling reasons why we'd have a pull back here, and I found several.  I'll share at least one with you below.  As a side note I saw a rumor that there has been a leak that the ECB has a firm date set for a Greek default and it is about one month away (around March 20th).  If I were a bankster, I'd probably need one more blow off top rally here to unload all my goodies on the masses to prepare for the rumored coming Eurozone breakup .  So, I will reiterate my sentiments from last night, if you have big profits take them, and if you are in new positions, make sure that you have stops on them.  You could potentially make a tub full of cash here in any last gasp surge, but make sure to realize profits when you end up making a bunch too quickly.

Check this out.
BULLISH % INDEX ON SPX



And this one too.
SPX



Admittedly this is a bit hard to see on the blog, but the top chart is essentially a quantification of bullishness in the market.  The second chart is the market.  What we see here is when the top chart is over or hits 85, it signals a period where investors are just too excited and everyone seems to have jumped into the boat.  The problem with these times is that no one is left to buy and propel things higher, so the rallies fall and sometimes fall quite far.  WE ARE NOT THERE YET, but a couple more days like today will seal the deal.  At the closing level of $84, the $BPSPX is near a signal, but be patient, and play this like the bankers.


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/ 

Wednesday, February 15, 2012

HAPPY THOUGHTS - MACRO UPDATE FOR FEBRUARY

IT JUST FEELS BETTER 
Clear your mind for a second and forget that there are these things called bonds, that there is a European economic zone called the EU, and that a small little island country called Greece owes a boat load of money to just about everyone.  Don't you feel calm and relaxed?  I thought you might.  Now that you've erased from your consciousness any troubling aspects related the global economic reality, we can focus on good thoughts and ponder just how great things are getting in the USA.  Are you ready?  Let's hit it!


MONSTER EMPLOYMENT INDEX - http://www.about-monster.com/employment/index/15
The Monster.com Employment Index is a metric I like to follow because it gives us a pretty good look at what Monster.com is doing when it comes to on-line job listings.  January is usually a down month, so we can't get too worried about a decline following the year-end holiday.  Despite the drop, we have see a pretty consistent improvement in year-over-year terms where listings have been on a steady 8.5% to 9% increase over the previous year.

It is critical that we don't see a continued slowdown in the trend here through February as it usually marks the turning point for online job listings for the year and typically we see a peak in the late summer and early fall months.



SCRAP COMPOSITE INDEX-
The Maestro, Alan Greenspan, watched the prices on scrap metal as an indicator of financial expansion.  Who are we to argue with the greatest money printer and bubble blower of all time?  Scrap prices were in a serious decline until December when almost every asset on the planet caught a bid.  The move up may indicate that global inflationary forces are at once at work within our economic system.





FOODSTAMPS - SNAP DATA
I wanted to include this information without further comment.  If you missed the recent post on this data, please go to the link at - WHAT'S UP WITH THE PO' FOLK





BLOOMBERG FINANCIAL CONDITIONS INDEX - http://www.bloomberg.com/quote/BFCIUS:IND
The Bloomberg Financial Conditions Index is still below the 0.00 level which highlights in some improbable way that the economy and markets are still in contraction mode.  How is this possible when market indices are nearing October 2007 levels?  Who knows, but the Financial Conditions Index simply reveals that we are still in a recessionary mode, although we are very close to breaking out into the clear again.  Interestingly, each time we have approached a level that was positive or near 1.00, our markets have corrected significantly.


USD INDEX -
The USD's travels to the lower right corner of my chart below puts the US situation in a pretty clear light as we can really evaluate the longer term trend of our currency.  Don't ever question whether out-going Treasury Secretary Geithner wants a strong currency....(cue Chinese student and Goatmug laughter!!).  Another interesting point is that the USD is near the level we saw in October 1, 2007 at $77.81 right as things US markets attempted for a retest of equity highs achieved in July of 2007.  (On 1/31/12 we ended at $77.86)



USD (CON'T) - http://www.bloomberg.com/quote/DXY:IND
Here is a 1 year view of the USD Index.  The fall of the USD in the last two months has been the fuel for much of the stock market rally.  What happens if the fall doesn't continue?




BALTIC DRY GOODS SHIPPING INDEX - 
I'm about to throw the Baltic Dry Goods Index in the pile of "Who Knows What is Happening Here" as we continue to see a monster decline in spot shipping rates for global dry goods transport.  We have heard all of the reasons for the decline, that there is an over-supply of ships coming into the market, depressing the spot price.  We've heard that China is no longer importing commodities at the rate they did previously.  The one serious take away one can make is that shippers are enduring quite a collapse in prices as this index just a few years ago was over $100,000.  It is hard to imagine any company being able to withstand an implosion of 95% of their pricing.  Did I mention these firms are more debt than Greece?  Can't be a good recipe.




INTERBANK LENDING RATES - 6 MOS LIBOR -
Below is a picture of a 25 year history of 6 month Libor rates.  At .75% we can see the affect that this prolonged period of stress has had on lending rates.  In an effort to provide extreme liquidity in the face of bank distrust, central banks have driven inter-bank lending to historic lows.




Euribor also gives us a tip that something coordinated is going on with the banking environment.  Notice in November rates began going down.  As central banks goosed the system we've seen lending rates decline and equity markets rise.  Coincidence?  Probably not, recall that equity market have simply risen without a red day for the last 2 straight months.





TED SPREAD - http://www.bloomberg.com/quote/!TEDSP:IND/chart
Building on the theme from the Euribor chart above we examine the Ted Spread which is another stress or fear indicator.  According to the Ted Spread, everything is just getting finer!




TRADING UPDATE
The year has progressed right along the path that I anticipated it would and as I laid out in my 2012 Predictions post titled CONFIDENCE LOST; 13 For 2012.  What I mean by, "it's progressed like I laid out", I mean that we are moving much higher in the indices and we are making a strong run into the late April or May top we'll see.  Does this mean that there won't be a few down days?  Can it be possible to have a 5% drop here and still keep this thesis in tact?  Of course, in fact, I am looking for a  drop here as even the $SPX is up 8% year-to-date.  If anything, we'd really have to question what would propel the market higher in such a short time wouldn't we? (Tongue and cheek of course!)

I looked back at a few of the items that I was really centered on in the predictions post and I highlighted a few that have easily hit their targets.  WNR and UGA have already hit $17 and $54 respectively.  Each of these have posted pretty respectable gains since I put those on.  I mentioned that VLO could go to $27 and I still believe that is easily in the cards, but it has clearly lagged WNR, (which was and is my favorite).  Here is the deal though, with almost a 50% gain in WNR and a health 20% profit in UGA, is there any reason to press my luck?  No!  In fact, a drop here would be a perfect set up to leg in and rebuy my positions for a move higher into late April and May.  Profit is profit!

I am still very bullish on gasoline and am staying with that slant through the next few months.  I still think there is a possibility that we move as much as 8% to 10% lower in the next couple of weeks.  

TIRED RALLY?
I am trying to keep an open mind about several positions that look very suspect.  I've played around with very small positions on XHB trying to find a successful entry on a short position, but have managed to take a few flesh wounds in the process and have been glad to have stops all the way up as XHB defied gravity last week.  The open mind here comes in play in that this housing etf could very well scream higher to $23 which is the September 2008 level.  XHB bulls are saying that new housing looks to be improving, that the mortgage settlement will clear the path for more new homes, and housing financing rates are low.  A bear might just hear that and say that lots more housing supply is coming online and no one can get financing anyway.

From a chartist perspective I see that XHB has pushed above resistance at the $19.90 level, but has dropped back through it over the last two days AND was trading previously at a level 2 standard deviations above the 50 day SMA on this 3 Yr Weekly Chart.  I like to think that stocks that trade that high above the overall trend will fade back down to at least the overall trend line, so this has been the basis for my short attempts.  



Finally, I don't have the courage to short this one, but if there is a chart that shows something WAY above it's trend and trading well above 2 standard deviations, it would be this little company.  Everything in me says to short it, the last 3 years of history keep me from doing it.



Domestic economic stuff looks pretty good right now and perhaps the US economy is getting on track.  In early January I anticipated a continued improvement in economic metrics in the first half of this year.  I was a bit worried when two of my favorite writers disagreed fully with my analysis and made projections that the first half of the year would be flat and the back half of the year would be strong.  I think both writers felt that the election cycle would come into play and markets would rally.  I feel almost vindicated as Chris Puplava has intimated that he actually sees a reversal setting up in his outlook where the first half is good and the back half is....not so good, which aligns with my stated market direction.  My other favorite writer also has altered his forecast so there I'm not surrounded by folks that agree with my way of thinking.  (Perhaps it is time to change my view?)

For me, the key is that if we have continued Federal Reserve action we will see gasoline surge higher. As gasoline exceeds $4.00 in early April and May, we will see an immediate drop in US domestic economic activity and all these happy thoughts we've been training ourselves to have won't mean much as our growth grinds to a halt.  I've have more on this topic this weekend.

Be Careful!



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/ 

Thursday, February 9, 2012

WHAT IS IT LIKE TO BE POOR?

WHAT'S FAIR?
I've been thinking about how our President continually describes people in the US as though they are treated unfairly and they don't receive everything they deserve.  Mr. Obama often suggests that "those people should pay their fair share", and I guess the assumption by folks that listen and believe his comments must believe that the "fair share" will somehow be spent on funding services for others, perhaps even themselves.

As readers know, I am absolutely fine with wealthy people paying taxes, I just want someone to tell me where the limits of "fair share" are and then make a constitutional amendment to mandate that taxation cannot ever exceed "fair share".  What I'm getting at is that Obama's "fair share" today may be 50% of earned income or 60%, but we all know that the amount will go up in time as entitlement programs and benefit services skyrocket and the need for revenue increases dramatically in the future.  In other words, without some cap, there will always be someone that thinks those rich folks don't contribute enough to the poor people.

WHAT'S IT LIKE?
I often wonder about the lives of the needy in our country as I tend to pay attention to the amount of services that are available to low income earners because my health insurance business often allows me to speak with desperate people that have no income that need medical care.  In my practice I am able to guide them to services and programs in our state that are available at low or no cost to provide medical care.  As I educate myself on these topics, I often find other services that are made available to our poor and down on their luck citizens.

WHAT CAN YOU GET FOR BEING POOR?
A recent article I found summarizes one program that I've known about for some time called the Lifeline program where people below the poverty level can obtain cell phones or phone lines.  The "grant" provided in this plan will cover about 250 cell phone minutes per month for free to the qualified user.  I found this program because I saw a commercial on television that was advertising to seniors and suggested that they could qualify for a free cell phone!



WASHINGTON FOOTS THE CELL PHONE BILL FOR OUR POOR


Obviously a program like this was started with great intentions, but as you read the article, you will find that there is some segment of the recipients of the program that have the services, but don't qualify, or have obtained cell phones at multiple carriers, therefore abusing the free system.  Ultimately those in either camp are stealing from the US taxpayer and our government oversight is clearly lacking.  As a cell phone or land line user, you pay significant taxes each month to fund this program, you should know about it and should be pissed off that the government assumes there is about $200 million in theft or mismanagement going on in this $1.6 billion program.

Ok, cell phones are paid for and we know that food stamps are available through the SNAP Program that I report on monthly. (See the most recent post where I outline that 46 million of our fellow citizens are receiving benefits - WHAT'S UP WITH THE PO' FOLK?).  We know that states offer Medicaid services for health insurance for low income earners.  We also have heard about housing benefits for those that live in low-income housing (section 8 housing).  Essentially, I'm painting the picture here that many of the basic and not-so basic needs of a person are being met for individuals and families that are below the poverty line in the USA.

Let's dig a bit deeper then and examine the life style of our poor.  I recently found a book that reveals several key statistics about our poorest and highlights while they are "relatively poor" they do live quite comfortable lives.  The life-style of many of these people is not quite like the poverty-stricken, dirty, and hunger-ridden life we might expect.  Scott Rasmussen's book, "The People's Money: How Voters Will Balance The Budget and Eliminate the Federal Debt", highlights some facts that illuminate just how well off our poor really are. - WHAT IS POVERTY IN THE US?

FOOD PROGRAMS -

  • Parent report they have kids that go hungry  - (only .25% of US homes)
  • 1% of households report that they miss a meal in the day


CAR OWNERSHIP -

  • 70% report they own a car
  • 30% report they own two or more cars!

CABLE TV
  • 63% state that they have cable tv or some other tv service


Rasmussen highlights other items like the fact that 23% use TIVO, 50% have a computer, and 53% have a gaming system.  I guess where he is going here is that these are absolutely not necessary and they are considered luxury items....if you are really poor.  I don't really get to worked up about these, but I do get fired up about cable tv subscriptions.  Both car ownership and cable tv come along with monthly costs.  Clearly car insurance is expensive, but you can use a car to work and pull yourself out of poverty.  Unfortunately, cable tv expenses for our least fortunate is not defensible and is really the thing that makes me the most angry.  Cable bills can range from $50 to $200 a month and this service has become a "right" for our poor.  I've met and counseled many struggling families that need assistance with budgeting and debt management.  One of the first items I challenge them to cut is cable and you can't believe the resistance that I receive.  Perhaps I am nuts, but people that are poor don't "deserve" cable television, it is a luxury and that income could be spent wisely on anything else!

WANT THE BOOK?
Buy the book by Scott Rasmussen from our Amazon Link - The People's Money
(Oh yes, and if you buy anything from Amazon, please go through our search box at the upper right hand of our page!)

US POVERTY RATES BY RACIAL MAKEUPhttp://ardd.sph.umich.edu/about_diabetes_disparities.html

  • 25.9 percent for American Indians
  • 25.8 percent for African-Americans
  • 25.3 percent for Hispanics
  • 9.4  percent for non-Hispanic whites.

CORPORATE PROFIT MAXIMIZATION
Unfortunately, we are a nation of entrepreneurs.  (I don't really mean unfortunately in that sense, I mean that we are so good at it we tend to over do it).  Because we have a system where the great big generous government will meet our poor's needs, we have created an incentive for corporations and organizations to try to maximize sales to the beneficiaries of these governmental services, that often could care less if there is waste or fraud involved.  We've seen this example with the Scooter Store, a Texas wheel chair company that misled senior citizens and filed many false Medicare claims.
http://www.justice.gov/opa/pr/2007/May/07_civ_344.html  Ultimately the Scooter Store paid millions to the federal government and the cause of the problem comes back to the fact that the users of the services didn't pay for them!  When you are spending your own money, you actually care how much things cost.

By creating programs that are paid for and "monitored" by the federal government, cell phone companies advertise heavily and attempt to maximize the number of folks using the "free" system.  This is why the Lifeline program is full of waste, companies are marketing to the user, not the payer, and in this case the payer has no limit on how much they will spend.  While I expect more from businesses and owners, you can't help but to admire a firm that recognizes there is an untapped opportunity to harvest gains in the business landscape by exploiting the demands of users who will not pay for the services.

MEETING ALL NEEDS WILL MAKE KEEP SOME PORTION OF PEOPLE.....POOR FOR EVERMORE
Is the welfare life a good life?  I don't think so, but maybe it is compared to working hard and receiving little or no incremental benefit for your labor.  In other words, if I find a job paying $8 an hour and I have to pay for my own cell phone, food, rent, and other basics by myself with no assistance, I may have a bit more money, but I'm worn out and haven't made any real growth.  I can imagine that this is the logical exercise that many participants go through when evaluating their decision to find a job or two or three.  If you are killing yourself and you are worse off compared to receiving benefits and not working, you'd probably make the rational choice to make less or give less effort.  I think this is the problem with making benefits so generous, it clouds the decision making process and makes the decision less clear cut.

The killer here is that if you provide just enough subsistence benefit to placate some people you will create generations of poor that learn to "work the system" and never get out.  I think the best example of this was New Orleans before Hurricane Katrina.  There were many families with three and four generations receiving benefits from governmental agencies providing for all of their needs.  This corruption of the system ultimately hurt an entire city of people that were stuck in a system of poverty for years and years.  Rather than changing the system and educating the public there, we created a legion of benefit experts that could exploit all of the provisions of social security benefits, welfare benefits and all other types of assistance.  Ultimately, the creation of an entire class of people in the USA that receive subsistence help forever was not the design of the safety net system.

BEING POOR....SHOULD SUCK
Finally, I know that this post may be perceived as a "rich goat" not wanting to share his money with the poor guy, and frankly it isn't.  What this post is about is that we as a nation need to determine what level of life-style we will support for our poorest men, women, and children.  If we decide that at x-income level we will provide food, shelter, healthcare, cellphone, cable television, and a car, we are going to actually attract a whole lot of people that decide that level of "minimum life-style" seems quite fine.  Bad incentives often result in poor outcomes.  For example, if we pay women more section 8 housing allowances, SNAP dollars, and other benefits based on the number of children they have, we'll probably end up with more poor children!

I'm attacking the notion that poverty should be comfortable.  Being poor sucks,.....and it should stink enough to prod the marginally poor to improve, work hard, and strive to become productive.  The problem with an ever-increasing demand for the rich to provide their "fair-share" through taxation is that government mechanism for that payment process is inefficient and sucks away a large amount of resources in waste (federal government cost, fraud, and time).  Federal programs have a tendency to get larger and larger and the aim of the programs should be to be so successful that their use declines.

Unfortunately we don't see declining participation in these programs as free money usually only attracts more and more free money takers.  I'd have less of a problem with many of these programs if they were tied to technical and vocational job training certification programs.  We hear from our large manufacturing employers that the skills they need are not met here in the USA and therefore they go to emerging countries to set up plants to find that skilled labor force.  Why not make technical job training programs mandatory to receive housing, SNAP, cellphone, or medicare benefits?  Why not make the poor life-style with paid housing, healthcare benefits, two cars, cable, a DVD player, game system, VCR, and monthly food payments a temporary program that lifts people up into the next group of earners and make a life long stay in an impoverished state a little less attractive?


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/ 

Saturday, February 4, 2012

INSIDER TRADING BY THE REAL INSIDERS

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/ 


Friday, February 3, 2012

MOUNTAIN TOP THEATER - NUCLEAR AFTERSHOCKS

PBS FRONTLINE GOES NUCLEAR

I finally was able to find an embedded version of PBS' expose on the Japanese nuclear nightmare resulting from the earthquake and tsunami off the coast of the island country.  I'm too busy to write much on this right now, but will do a follow up shortly.

The video is in six parts or you can go directly to pbs' website... but it is in 6 parts there as well, so you might as well stay here and hit fullscreen.
http://www.pbs.org/wgbh/pages/frontline/nuclear-aftershocks/


PART 1

Watch Nuclear Aftershocks on PBS. See more from FRONTLINE.

PART 2

Watch Nuclear Aftershocks on PBS. See more from FRONTLINE.

PART 3

Watch Nuclear Aftershocks on PBS. See more from FRONTLINE.

PART 4

Watch Nuclear Aftershocks on PBS. See more from FRONTLINE.

PART 5

Watch Nuclear Aftershocks on PBS. See more from FRONTLINE.

PART 6

Watch Nuclear Aftershocks on PBS. See more from FRONTLINE.


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/ 




Thursday, February 2, 2012

WHAT'S UP WITH THE PO' FOLK? - FOODSTAMPS

It has been a while since I got in the mode of doing monthly macro-reviews.  This lack of posting the monthly update has been related to my end-of-the-year business cycle as it is my craziest time in my work each December.  In an effort to get back in the swing of things I wanted to check in on the SNAP data which is a Federal summary of the Federal Food Stamps Program.  Each state creates their own rules for the distribution of these benefits, but the bill is paid for by you and me (if you pay taxes!).  I really wanted to focus on this data today because I am working a follow up post that will shed some light on who the recipients of these benefits really are.

HALF FULL OR HALF EMPTY?
In America, we have a tendency to lean only two ways when it comes to federal benefits and entitlements.  One side always thinks that people that receive federal assistance are lazy and simply just sucking off the taxpayer .....well you know what I mean.  The other side seems to want assistance for everyone assuming that the government is there to provide each man, woman, and child all of the things they deserve and should have as their God given right.  This group often goes to extremes and feels strongly that the poorest of the poor should have everything provided.  Personally, I think I'm somewhere in the middle, but I find myself leaning more to one or the other based on how many encounters I have with folks down on their luck.

IMPROVEMENT IS GREAT, IS THIS MEANINGFUL?
Before I go any further about that, let me just share the November 2011 data that was just released that shows a continuation (I know, it is small) of the decline of people on the food stamp roles.  We now have two straight months of declines from the peak seen in September of 2011.  This is an important development because this is the first time since January 2007 that we have seen two back to back months of declines in the participation numbers.  This is no small feat, and could be an indication that the US economy, and more importantly the least financially healthy, are making a comeback.




DOES TWO MONTHS SIGNAL THE ALL CLEAR?


Unfortunately, the monthly decrease has not erased the disturbing trends we saw over the course of the year. The 46,133,787 people in the program is a 4.4% increase over year-end levels in 2010 and this represents a 5.8% increase year-over-year from November 2010.  Clearly these figures are lagging, so it is very important for us to see these trends continue.  The decline in this statistic is a great measure that will suggest that people are getting back to work and standing on their own.  We need this improvement badly for the financial health of the country and the psychological health of the nation.


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/