Goatmug Blog - Financial Perspectives from the Mountain Top: Obama

Showing posts with label Obama. Show all posts

Monday, June 10, 2013

YOUR INNER-MOST THOUGHTS BETRAY YOU

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/

Tuesday, January 22, 2013

GOVERNMENT IS HERE TO PROTECT YOU

A PREPPERS NIGHTMARE
Ever wonder what happens when there is a believable threat of government intervention into a market? I took a trip to the local sporting goods store the other day to ensure I have ample supplies for the coming zombie apocalypse. As I reviewed my list, I discovered I was a bit short on stores of ammo for my soon-to-be outlawed Glock 23 with a 13 round magazine.

As I wandered over to the ammunition isle I was "shocked" to find that the shelves of the store were bare and void of any .40 caliber shells. It is simply disturbing to think that all those gun nuts out there are swarming stores to get themselves stockpiles of lethal lead and copper.

I found out also that when and if the store receives new shipments, they will limit the purchase to one box of 50 shells per customer.

So, in God's greatest nation on earth you may have the right to bear arms, you just won't be able to fill it up with any projectiles.

GOT AMMO?

GOATMUG

Monday, December 10, 2012

BRINGING HOME THE BACON - FOODSTAMP REPORT

GOVERNMENT SUCCESS!
The SNAP program (Supplemental Nutrition Assistance Program) is enjoying a record amount of success as it recorded a huge monthly increase. The Federal Government released September data showing that the foodstamp roles added more than 600,000 participants, the largest monthly gain since December of 2009.

The current count shows that we have more than 47.7 million Americans obtaining food through the program, this is about 15.5% of the US population. The projected MONTHLY cost of this support is $6.4 Billion.

THE FOODSTAMP CHALLENGE!
As the number of citizens and non-citizens on foodstamps increase the politicians cannot help themselves but wade into the mess and attempt to make the folks on SNAP feel good about themselves. In fact, politicians like Corey Booker, mayor of Newark, NJ go further and attempt to make the point that the nation should INCREASE foodstamp benefits for recipients.

NEWARK MAYOR SHARES FOODSTAMP CHALLENGE
Corey Booker tweeted his experiences and shared the misery of living on $4 a day which is about the amount that he would receive as a single person that qualifies for benefits in the program. Unfortunately, Mr. Booker hasn't keyed in on a significant part of the program that is revealed in the name, which is SUPPLEMENTAL ASSISTANCE. The foodstamp program is not intended to be the food source for 100% of a participant's food and is not envisioned to be a long term provider for a single person or family.

In my opinion, the real reason Mr. Booker took the challenge and has made this a big issue is that he has grand aspiration of higher office like governor or senator.

BRINGING HOME THE BACON
Politicians understand how this works better than most of us. See, Mr. Booker sheds light on just how hard it is for his constituents to live on foodstamps, and he is perceived as a guy who fights for the poor. The federal government increases their monthly allotment and then they vote for him. Or, sometimes it is the other way around. They vote for him and then they expect him to "BRING HOME THE BACON". At least that is how Joann Watson of Detroit believes it should be done.

Fox 2 News Headlines

My guess is that Mr. Booker will get elected to some office and he'll deliver more taxpayer money to more foodstamp participants ensuring that they get something extra. I personally wish that we'd work to add jobs not an extra portion of hog.

WASTE AND FRAUD
The federal government has a target of 3.8% error or fraud rate for the SNAP program, that means they are hoping to only waste or have stolen $2.5Billion this year!

ATTITUDE
I think one of the largest issues I have with the SNAP program is that our federal government attempts to "sell" this program as if it is good to everyone. Here are a couple of examples;

Advertising to add more recipients - The SNAP program spent millions earlier this year in LA and Texas attempting to add more people to the foodstamp roles. They purposefully try to reduce the stigma associated with "getting some bacon".

Politicians tell us it just isn't enough. Mr. Booker is a perfect example of this problem. There would never be enough to satisfy people. Even if we raised the benefit by 50% we'd be told that the amount isn't enough to buy organic fresh veggies or meat.

Sales - For some reason the USDA believes that it needs to sell taxpayers on the merits of the program. Their website tells us that for every $5 dollars spent on the program it generates $9.2 in economic activity! Yeah! Frankly, I don't need to be sold on the need to help someone out and get them back to work. I actually support the idea of the SNAP program and don't need to be sold on the idea that the program is good for the economy.

WE NEED SNAP

Don't get me wrong. There are people that are in poverty that need "temporary assistance" to get to a self sustaining level. I feel strongly that programs like SNAP, housing assistance, free Obama phones, and more make life more comfortable than it should be FOR MANY able bodied men and women. I think the fact that SNAP continues to increase despite all of our government's reports that show how the economic situation is improving. If our economy is better and the employment rate is lower, how is it possible that the SNAP program continues to expand at an even greater rate?

GOATMUG

Tuesday, November 20, 2012

USEFUL PAWNS FOR POWER

LARGER CONFLICT
Obviously the Middle East situation is serious and all the countries in the region are using the Palestinians as their tool to achieve their goals. The recent use of rockets by Hamas is said to be at the prompting of Syria and Iran in an attempt to draw more blood in the region and complicate any move to remove Assad from power.

Israel needs to respond strongly in this situation to achieve their own political motivation as there is an election coming and PM Netanyahu must strengthen his position and solidify his support amongst rival political parties.

DISTRACTION IS THE TOOL OF CHOICE
Egypt's new leadership will play a familiar set of cards where they blame Israel and make every effort to make its neighbor's life hard. Why take ownership and responsibility for how you lead your country when you can create a distraction about how evil the people are in the country across the way? We are beginning to see the delicate balance that the Muslim Brotherhood must walk where they have very strong ideological feelings on one side, but the harsh reality of actual war on the other. In a sense, the radical Egyptian leadership suddenly sees how difficult it is to really rule and manage tough situations. The good news is that at this point they haven't gone "all in" nutso like Syria and Iran and still value life somewhat and their hate of Israel isn't strong enough for them to sacrifice the lives of their people for their ideas. The bad news is that for decades we haven't had to worry about the level of fanaticism in Egypt, but now we do.

GIVE ME POWER
Hamas, is well, Hamas where they will gladly shoot off thousands of rockets and bring retaliation on their people all in the name of "struggle" which is actually simply a tool to reinforce their power within the Gaza strip. They make political calculations and gamble with the lives of innocent civilians knowing that their attacks will result in the deaths of many of their own.

If the situation in Israel and the Middle East wasn't so dangerous, it would be funny.

Here is a perspective on Hamas you should see.

GOATMUG

Tuesday, November 13, 2012

4 REASONS YOUR HEALTH INSURANCE WILL INCREASE BY 50% IN THE COMING YEAR

I haven't seen much information that is helpful to aid employers in preparing for the impact of the implementation of Obamacare in 2014. Today, I happened to read a great blog post which summarizes the real results that will come from the passage of the greatest change to our entitlement system since Social Security and Medicare. My friend, the owner of Texas Health Design penned a great article that needs to be read and reposted and retweeted. With his permission I've included it here in the Goatmug blog for your reading. If you are in many of the southern states and need health insurance, make sure to go to his site and get a quote. www.texashealthdesign.com

Also, I suggest that you add his blog to your blog visits. He posts pretty infrequently, but when he does, it is worth the read. http://texashealthdesign.com/thdblog/

BAD NEWS NOW IS BETTER THAN LATER
I hate to tell you the bad news, but it is best to get a dose of reality earlier than it is to have a shock when bad things hit. Despite the fact that our leaders told us that we could expect lower healthcare rates, you’ll be paying more for health insurance next year. Politicians have a funny way of doing things and often the name of their legislation is an indication of the coming irony. While the sweeping healthcare law that passed in 2009 became dubbed, “Obamacare”, the formal name for the legislation is the Patient Protection and Affordable Care Act. Washington insiders must have simply chuckled as they must have known that the law would do anything but make healthcare affordable!
The re-election of President Obama ushers in the notion that Obamacare is here to stay and while Republicans will gnash their teeth and complain and threaten to defund specific portions of the bill, they really cannot do anything to prevent the wholesale change to the healthcare distribution system in the United States. Don’t get me wrong, the medical and healthcare system is cracked, but I’m not sure the solution is to simply break it off entirely and throw it in the trash. Many of the anti-capitalists and socialists in our country proclaim that this “fix” is the ultimate deathblow to evil insurance companies and will usher in a one-payer system for the United States. Perhaps we’ll see this, but one thing about those insurance companies, they are pretty smart. In recent months we’ve seen them acquire large physician and medical practice specialty groups, purchase medical billing firms, and also electronic medical record firms in an attempt to own the entire process. In their eyes you may squeeze their profitability on the insurance side, so they’ll simply own everything.

Now the election has passed, insurance companies have about 13 months to prepare for all of the final steps of implementation required by January 1^st 2014. Because of this, every purchaser of health insurance (whether a mega corporation, small business, or individual policy buyer) will get a rude awakening over the next year. How is it possible that the Affordable Care Act could make health insurance unaffordable? It really is simple, there were provisions within the law that mandated specific changes to how health insurance premiums were calculated and also requirements that prescribed how much or little insurance and risk could be taken. In the following paragraphs I’ll highlight four reasons why your health insurance premiums will increase by 50% by your next one or two renewal cycles. These mainly focus on group plans, but the same metrics will affect individual policies too so we’ll see a convergence to higher prices in the coming year.

As you read this you might be inclined to interpret this as condemnation that the law’s application is wrong. I would argue that I’m not saying that at all. I am simply reporting what the impact will be on health insurance purchasers. The key change that is made through all of their adjustments is simply that there is a fundamental cost shift going on. In the past, sick and unhealthy people or folks that used the system or cost the system more paid more. In the new system, sick and unhealthy or statistically higher users actually pay less AND their portion is shifted over to the healthy non-users. That is the key, just because the sick people pay less doesn’t make the cost disappear, they end up being the cost of other people. I argue that this is fundamentally wrong.

GENDER NEUTRAL PRICING
Let’s face it, women consume more health and medical services than men on a typical basis. I know this because my wife visits the doctor once a year even if she isn’t feeling poorly. Men on the other hand don’t often use their preventative care benefits and won’t even visit a physician even if they are ill or know that they are in need of attention. While I’m making a broad generalization, it is true from an actuarial perspective as well and insurance companies created pricing for men and women based on their consumption of health services. As a result of this evidence, men received cheaper health insurance rates than women. Obamacare legislates that insurance companies can no longer do this. The effect of the law is that men and women will no longer receive prices that are different based on their gender. As a result, we may see some policies for women go down in price, but policies for men will go up significantly. This is the first example of cost-shifting.

AGE BASED PRICING
A sixty-four year old will go to the physician much more than a twenty year old typically. As a result of this, insurance companies were creative enough to create pricing metrics that essentially included eight pricing bands where as a policy holder aged their premiums would go up. To clarify, that meant that age based calculations could be a factor of eight to one where the older person could pay eight times the amount of a young teen. In the new system, the spread between an eighteen year old and a sixty four year old insured can only be three times higher, meaning that there is much less difference in available pricing for insurance companies to target. In this case the impact will mean that younger people that consume significantly less health services will pay much more for their coverage because insurance companies will tighten up their factors and raise the lowest premiums and slightly reduce the premiums for older folks. Again, just another example of how the new law passes someone’s actual cost to others.

INABILITY TO ADJUST BASED ON PRE-EXISTING CONDITIONS
The third blow to consumers in the legislation is that insurance providers cannot rate a policy based on a person’s health conditions. In other words, a fifty year old applicant with cancer and a history of four heart attacks will receive the same price as a fifty year old personal trainer with no medical history. As a result of this stipulation, healthy purchasers of insurance will absolutely pay more as the average premium that insurance companies receive must rise to absorb the new influx of sick people that will rush to obtain health insurance. In the past, individual insurance policies could be declined as a company would not want to insure a person with a history of cancer and four heart attacks. In 2014, the health insurance provider MUST insure them and therefore they will adjust pricing for everyone to make up for the higher costing sick applicants they will receive in the future.

MANDATED LOWER DEDUCTIBLES
I think many have discussed one or two of the pricing adjustments discussed above, but one other change that is required that will hurt many is simply not being discussed. A provision of the Affordable Care Act requires health insurance plans to have a minimum of $2000 deductible. As health costs and health insurance costs have risen over the years, employers have struggled to find a way to afford health plans to provide their employees coverage. As a result of increasing premiums, employers have decided to offer higher deductible plans in an effort to control their expenses. The Affordable Care Act simply attacks this coping mechanism by mandating that employers cannot offer plans with higher deductibles to their employees. I estimate that more than 50% of the small employers here in Texas use plans with a deductible that is greater than $2000. What this means is that employers must now purchase a lower deductible plan which will increase their monthly premium costs significantly.

I am currently working with a small general contractor that has two families on their health plan. In their situation I just quoted a $4000 deductible Blue Cross plan which cost $2683 per month to extend coverage. The same plan with a $2000 deductible plan would cost the firm $3216 per month or 20% more!

WHAT WILL EMPLOYERS DO?
If 50% of the employers are “under-insured” they will certainly take several actions in response to the realization they are facing significant price increases. Remember, not only will health insurance prices go up due to the deductible mandate, but they will go up for other reasons including the pre-existing pricing issue, gender neutral pricing, and age based pricing requirements. In response to the looming price hikes, what do we expect employers to do?

First, if the small business is subsidizing the amount employees pay for coverage, they will reduce the amount of financial help they are providing. By law, employers are required to pay at least 50% of the employee-only health insurance costs. If the employer is paying 100% or 75%, they will certainly drop their contribution to the minimum of 50%.

Many employers will stop paying a portion or all of family coverage for their employee’s dependents.

Many small employers will simply stop offering coverage.

Finally, employers that have at least 50 employees will begin cutting hours of existing employees to ensure that their employees work less than 30 hours per week. By reducing their hours, employers can avoid the requirement to offer and provide employer health programs. This move alone will have a dramatic impact on our overall economy.

BUSINESS KILLER
I think we’ve done a good job outlining the issues created by the Affordable Care Act. I recently visited with a company that is a retailer (alcoholic beverage industry) that has 500 employees. This successful business has been working and growing for thirty years and has expanded throughout a few states. The owners of the firm are some of the hardest working people I have ever met and they continue to work sixty and seventy hours a week despite the fact that they are extremely wealthy and sixty years old. As we visited about their business and the impact of the healthcare legislation they became very serious. They see this as an attack on their business that could kill it. Their business has razor thin margins and they simply cannot afford a 50% or even a 20% increase in their expenses. While our leaders express that the rich can pay their “fair-share” and that everyone deserves health care they really are saying that hard working people will pay everything for others. I asked what they planned to do in response to the coming changes in 2014 and I was shocked by the seriousness of their response.

First, they planned to reduce the hours of every employee that was not a manager to 29 hours a week.
Second, they would consider dropping their current health plan entirely and paying the penalty of up to $2000 per full-time employee if the increasing cost burden was too much to handle.
Third, they would close all but their most profitable stores as the margin compression they see might be too great to keep those average stores open.
In this example, the penalties this firm could face could be as much as $1 million per year (if all the current employees were full-time). Have you considered what you would do if someone came up to you and told you that because a law changed you would now need to pay an additional $1 million per year!?? In their minds, this is simply robbery. We will hear more stories like this as large and small employers grapple with the impact of the sweeping changes that will without a doubt increase health insurance premiums by 50% in the coming years.

INDIVIDUAL PLANS
If you are reading this post and wiping your brow saying, “whew, I have an individual plan, I’m glad this doesn’t impact me”, you are wrong. All of the pricing stipulations also apply to your policy so you will be soon paying significantly more for your policy. Essentially what I’ve been saying is that there will be a price convergence of individual policies to meet or match employer pricing. While we do have 13 months till the final implementation of the Affordable Care Act you can still review your options and attempt to lock in decent pricing before the health insurance carriers really begin to factor in all of these provisions.
If I can help you examine the impact of the law changes on your existing employer plan or your individual plan please let me know, I’d love to help you navigate this process to help you manage your benefits and costs.

Please contact us at info@texashealthdesign.com anytime!

GOATMUG WRAP UP -
There you have it, a great article and great perspective on the health insurance market that will really impact the US economy. As Nancy Pelosi promised, we'll have to pass it to see what's in it..... she wasn't kidding was she?

GOATMUG

Thursday, November 8, 2012

PRESIDENTIAL THOUGHTS

Our country's voters (and probably a few voters that are not from our country) have cast their ballots and re-elected Barack Obama. I am not shocked by the outcome of the election, although I did think that Romney might win the popular vote only to lose the electoral college vote, so the end result is the same.

How did we get here? I'll list a few major themes that allowed Conservatives and Republican's to lose another major election.

NO ONE WANTS A PRESIDENT FROM MASS.
1) Republican's selected a John Kerry-like candidate for their man. As wonderful and honest a man as Romney is, he is a Boston RINO from the upper crust of society. He is soft spoken, cultured, and totally dry. Poor people and minorities would not give this guy a chance simply because he is typical "white guy" that hates them or doesn't understand them in their view. Romney could give 100% of his annual earnings to charity and the poor and this would only reinforce to them that "rich whitey" has so much money he didn't even need it. While we don't want to say it, many of the religious right and the African American religious did not support Romney because Mormanism is perceived as a cult. It was not until mid October when the Rev. Billy Graham endorsed him that some Evangelicals came into the fold, but I am sure this was an issue for more than a few people.

FALSE PARTY
2) Republican's are not conservative. The Republican machine did a pretty good job of co-opting the Tea Party movement in 2010 and essentially neutralizing the threat of those wacky tea-party people. Right-wing conservatives are waking up to the fact that the Republican party is very similar to the Democrat party on 90% of the issues with the exception of three social issues. These issues are immigration, sexual orientation, and sex/life issues. While the Republican's all speak a ton about fiscal control and limiting the size of government, they somehow don't think that applies to two major things as they end each sentence with, "We'll never cut defense spending and don't tax the wealthy". So, effectively they don't believe in reducing government or fiscal control. Real conservatives are tired of this bull and the facade that Republicans are their party is falling apart.

47% OR WAS IT REALLY MORE?
3) 47% is really closer to 51%. Romney said some pretty politically incorrect things when he was video taped speaking to wealthy donors. The only real issue with what he said was it was correct. The unfortunate truth is that the demographics are really worse than the 47% he spoke about and we are now entering a stage where I believe it will not be easy to reverse. When almost 1/2 of the electorate relies on government for some sort of service or income, it is difficult to sell them that "free stuff is not a good thing". Obama has used the economic crisis to increase dependency and the future is very bleak for politicians that promise austerity and cuts to bring the US fiscal house into order. Right now, Republicans are saying we'll cut your benefits and Democrats are casting them as evil and promising more help. If you were the 50% of American's on some sort of government program or service, who would you support? Another strike against the Republicans is that this 50% is the only group that is growing (having kids or coming across the border). Hispanics, African Americans, and others have birth rates that far exceed those of conservative whites. This growing group of voters will clearly vote for candidates and policies that force the wealthy to support them.

A SOCIAL CHANGE
4) Social issues need to frankly go away in the Republican talking points. Yes, conservatives love to talk about how they hate abortion, gay marriage, and other moral high-ground issues, the problem is that the US is no longer moral. Our country is a collection of people that simply desire to distract themselves with sex, sexual expression, drug use, and technological distraction. As long as they are "satisfied" with cheap food, a home, electronics like cable tv, games, and computer access, a sexual partner, and transportation their basic needs are met. The secularization of America simply means they don't care what God says and they feel they have no right to judge that gay guy or child molester as long as it doesn't bother them. Anything goes in the US today as long as it doesn't interfere with Joe 6 Pack's time in front of the toob or on his IPAD. If the Republican's want to win, they must drop the social platform and simply answer every question about social issues with the following statement, "My personal view on XXX doesn't have anything to do with government, I think we need to concentrate on making the government smaller and more efficient and getting American's jobs. The bigger government is, the more it crowds out the private sector. Next question." Until the Republicans master this statement, they will be doomed to run out a bunch of vanilla candidates that often times will be found as adulterers and will lose every election.

Now my fellow Christians might be offended that I am saying to repress my/our thoughts on social issues that are sin and an abomination in the eyes of God, but I will state emphatically that we must know the real state of the country we live in and realize that we will never have elected officials win positions of power with our current approach. Our children have been fed daily doses of inclusiveness and have been told that all people deserve to win even if they don't make an effort. Even in children's sports we award the worst team a trophy encouraging poor results and essentially reducing the accomplishments of the winners. Kids are told they are told to never discern between right or wrong as wrong might be "right" for those people. The liberal agenda has been successful in destroying the moral fiber in much of the United States and it is getting worse. Those kids that have been the target of this re-education are now voting!. My point here is simply that real conservatives need to focus on the issues that will put them in power, after election they can then attempt to change the tide of moral bankruptcy as leaders.

LADIES
5) Finally, the Republican's didn't win women. As crazy as it sounds Democrats did a great job of painting Romney (and all Republicans) as monsters that don't want to let them have contraception or abortions. Think about this just how low our country has fallen when a single issue defines if a person votes for a candidate.. For younger women the election hinged on who would allow them to get the pill and abortions so they could have sex without consequences!!!! When this is as far as our female voters think, we really are in trouble. Once again, this issue underscores that voters are now more concerned with their own welfare and pleasure than that of the country. The Declaration of Independence states that we are endowed with the Right of Life, Liberty, and Pursuit of Happiness. We now are a nation that believes we have a right to Free Food, Free Healthcare, Free Homes, Free Phones, and Judgement Free Pleasure. Notice that I used the word FREE not Pursuit. The issue for the Republican party here is that they need to address the economic situation of these women and leave the moral choices out of the political arena. Telling women that they cannot have birth control will not endear themselves to the new voting women.

RACE
6) I planned to end this post here, but I'll state what I've thought since last election in 2008. I am proud that my country elected Obama as our first half-black man to the office of President. Race hustlers like Al Sharpton and Jesse Jackson will tell you that our country is terrible and that racism in this country is pervasive, but clearly that isn't true as we would never have elected Obama had that been the case. A huge group of white women and white young people re-elected President Obama this cycle. Frankly in my mind, it is simply more supportive of the fact that the US is not racist as we elected President Obama twice. It is hard not to argue one single thing though, that African American people are racist. Exit pooling data suggests that black voters voted 12:1 for Obama, meaning that only about 8% of African American voters went for the other guy. That is pretty much block voting and that suggests to me group-think rather than individual assessment and analysis. Group think is essentially racism. My contention here is simple, that black voters voted based on the color of the candidate and not based on the merits, skills, talent, experience, or the record of the two people. Perhaps it is like Obama said, it was revenge, but I've never seen revenge work out well for anyone involved. Ultimately African-American unemployment is higher than it was 4 years ago and I see very little that this President has done to improve conditions for our minorities except promise them help. Republicans better find a minority candidate that will appeal to African-American voters or else they will remain on the outside looking in if African Americans continue to vote based on color. You might counter and simply say that Republicans just don't address or represent the issues that blacks are concerned about, but I'd simply say, till we have a viable African American candidate we'll never know.

WRAP UP - GASOLINE, GOLD, AND SILVER
To wrap this up, I've considered this election cycle to be entertaining and revealing. I still believe that no matter who would have won, the US is in a terrible situation and the financial consequences for our collective irresponsibility will hit home very hard in the next four years. The reality is that the winner of this election is/was going to be a big loser and receive the blame for the "big one" that is coming. Perhaps Romney will be grateful that he didn't win as the situation unfolds.

Continue to watch the Middle East as this win puts Israel in a position that it is alone and now will act in a fashion as a person that feels cornered and unsupported.

The election of President Obama bodes well for gold and silver as Bernanke now has received a clear mandate to continue what he does best. I also like gasoline here and am actually buying UGA.

GOATMUG

Monday, November 5, 2012

TECH WRECK - GRPN UPDATE

COUPONS EVERYWHERE
In November of 2011 I posted an update on Groupon and essentially said it was terrible as it made its IPO debut.

A BAD TASTE IN YOUR MOUTH

Ultimately I felt that Groupon (GRPN) was a strong short because its business model was easy to replicate and it really wasn't fairly valued after its IPO which vaulted it into the stratosphere. I made the argument that GRPN was simply a tech bubble fantasy that would crash back to earth.

A ZERO?
In early November, Groupon reached a price of $30.00 a share and on the 22nd of November it was already trading at $22. In my year-end kickoff post, CONFIDENCE LOST, 13 PREDICTIONS FOR 2012, I went further as I wrapped up the article with the following quote;

"Groupon will be one firm that is out of business in the next 5 years and therefore it is clearly an equity to focus on (to short) if it can ever gain any traction and get a bounce."

Let's check back in on this great technology story and check out where it is trading and where it might be headed. Please examine the chart below;

WHERE IS IT HEADED?
I will spare you the sophisticated technical analysis on this $3.90 stock, and summarize this view on GRPN with this final thought on "Groupon still hasn't formed a bottom".

OTHER TECH NAMES
As I wrote in an recent article, I have softened on LinkedIn (LNKD), I think that is one of the few "internet firms" that has a real business and could be amazing. The chart looks ok here too, unless it falls through $101. I love to shop using Priceline (PCLN), but that chart looks really shortable after the monster gap up last week.

THE FUTURE
The election is tomorrow and I am simply praying that God would give us the candidate that he has for us rather than the leader we are asking for. I'll give you a hint about the people of Israel, it didn't work out very well when Saul was named their king.

1 Samuel 8: 6-20

⁶But when they said, “Give us a king to lead us,” this displeased Samuel; so he prayed to the Lord. ⁷And the Lord told him: “Listen to all that the people are saying to you; it is not you they have rejected, but they have rejected me as their king. ⁸As they have done from the day I brought them up out of Egypt until this day, forsaking me and serving other gods, so they are doing to you. ⁹Now listen to them; but warn them solemnly and let them know what the king who will reign over them will claim as his rights.”
¹⁰Samuel told all the words of the Lord to the people who were asking him for a king. ¹¹He said, “This is what the king who will reign over you will claim as his rights: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. ¹²Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. ¹³He will take your daughters to be perfumers and cooks and bakers. ¹⁴He will take the best of your fields and vineyards and olive groves and give them to his attendants. ¹⁵He will take a tenth of your grain and of your vintage and give it to his officials and attendants. ¹⁶Your male and female servants and the best of your cattle^[a] and donkeys he will take for his own use. ¹⁷He will take a tenth of your flocks, and you yourselves will become his slaves. ¹⁸When that day comes, you will cry out for relief from the king you have chosen, but the Lord will not answer you in that day.”
¹⁹But the people refused to listen to Samuel. “No!” they said. “We want a king over us. ²⁰Then we will be like all the other nations, with a king to lead us and to go out before us and fight our battles.”

Have a great week

GOATMUG

Tuesday, October 23, 2012

DEBATABLE RESULTS - ROTATION

I think it is clear that the election is important, yet I get a depressed feeling when I see the two candidates trade jabs and lie to each other and this country. The false choice that each present is quite clear as Romney agreed with Obama throughout the evening, illustrating how it doesn't really matter who you choose.

Before you make a bunch of comments that suggest that I am one sided, negative, or simply misinformed, I'd interject that Obama is actually quite like Bush and in fact more bellicose than I would have ever expected given his pacifist words. Likewise, Bush shocked us all when he went soft on immigration and attempted to do amnesty light and ran up tremendous deficits and grew government. Ultimately, we have to identify the men and women behind the scenes like Karl Rove or David Axlerod that set the agenda and create the platform for Presidents to stand upon.

To lighten my mood I've provided this nifty little video that I've had in the queue for a while. This post has nothing to do with any market related topics and is simply here to make me laugh at how humans are just entertaining.

The guy in the video is a CEO and founder of a Korean company. Unfortunately I've heard his business skill is not as good as his singing, dancing, and video production.

TRADING UPDATE
The DJIA is down 250 points as I'm typing after Dupont, UPS, and 3M reported poor earnings. It seems that the safe-haven dividend paying multi-nationals are being taken to the woodshed. It is possible that a major sector rotation is now underway. FB reports after the close and AAPL (who is responsible for almost 95% of the gains for the entire SPX for this year) is going to unveil an I-Pad Mini (who cares). I don't think either of these two events will revive the markets today. Ultimately, no matter which candidate gets elected the increase in tax rates bodes very poorly for the stock market and so you need to begin crafting your equity exit post election or pre-New Year.

GOATMUG

Tuesday, October 9, 2012

FREE FALLING

UPDATE - 1:45 EST - MISSION ABORTED - I will keep you updated. See the disappointment on Felix's face.

NEW HEIGHTS
Today, we can witness an attempt to break a 50 year old record. Later this afternoon, Felix Baumgartner will free fall from 120,000 feet (23 miles) in a quest to achieve four milestones.

1) Felix will break the sound barrier (record is 614 mph)
2) Jump from the highest altitude ever - previous record is 102,000 feet
3) Eclipse the longest free fall time of 4 minutes and 36 seconds.
4) Felix will also shatter records by having the highest blood caffeine content ever recorded as Red Bull is the sponsor for this attempt and he has been receiving Red Bull via IV for the last 24 hours (ok, I made that up, but it sounds good).

The entire jump and process will be shown live. Watch the amazing attempt here...

WATCH THE EVENT LIVE

Space capsule

Here is an image from businessinsder of the capsule he'll use to get to altitude.
http://www.businessinsider.com/

ADVENTURERS AND LEADERS?
In the same spirit that Felix attempts his feat, I wish we could find a brave politician that would lead us on a quest to spend less and save more, cut expenses, grow manufacturing, and destroy special interest lobbying in Washington. Unfortunately, Romney or Obama are not the leaders that yearn to achieve these great feats. It seems the debate has thrown the political contest on its ear and I now find myself interested in watching the race closely although I feel strongly that there will be little meaningful difference between candidates and final outcomes no matter who is elected.

US FREE FALL DEAD AHEAD
Ultimately, I feel like this is the Republican's last shot at Presidential governance and we only have to look at Venezuela to see why. While it seemed that there would be almost no way that Hugo Chavez would be elected, he was. I have no doubt that there was fraud, but there was also a very powerful force working as well. This power was the power of promises to care for and provide and gift government largess to poorer people. Chavez' socialist system continued to buy votes and votes and more votes. It takes a mature person to vote against receiving free stuff to see that there might be a greater growth and good in the future. It is hard to recognize that governments involvement in the social system often will destroy incentive and lowers the economic benefit for the entire country. Unfortunately, I think we (the US) sit on the precipice just like Felix Baumgartner will later today. The US is so close to tipping into the Socialist abyss where the 47% Romney mentioned grows to 50% and more and the message of self reliance and greater opportunity are easily replaced with government care and compassion and fairness.

TRADING UPDATE
I keep hearing more and more that the market is primed for a big sell off. The more I hear that, the more I don't believe it. I felt much better about that theory when everyone was bullish, but now, everyone is just waiting for the correction. I will update more with a post on the markets tomorrow, until then, enjoy the live feed of Felix getting his caffeine high on and exceeding 614 miles per hour.

GOATMUG

Friday, September 21, 2012

11 THINGS THAT BLOW MY MIND.....

CAN YOU BELIEVE THIS IS TRUE?
I'm up at midnight on a Friday night and just am confounded with random thoughts about how crazy life is and what a screwed up world we live in. We live in the most awesome country in the world where each and every day people work to try to make it unawesome or convince us that it isn't awesome. We are blessed beyond the wildest imagination of any human civilization that has lived (even the entire world is healthier and wealthier than ever), yet the benefits of this blessing has made us desensitized, dependent, and frankly ignorant.

Here is simply a quick list of things I'm pondering that are just awe-inspiring in a very negative way. Many are political, and perhaps that is because so many of these thoughts are just pent up frustrations.

1) IS THIS OUR BEST? We have two candidates that are battling for the position as President that are complete goofs. Can't we do better?

Obama is an inexperienced dreamer who bases the implementation of policies on nothing more than utopian best-case hopes without real practical substance. Without Hitler-like oratory skills and amazing superficial charm, he wouldn't have gotten elected to city council in an Illinois township.

Romney is a Wall-Street silver-spoon that may have wonderful pedigree, but he has a tremendous inability to attract people to him personally, has difficulty connecting to the 99%, and is just about as bad as Obama when speaking in an unscripted forum. While his message is sometimes on point, he is simply brutal to listen to with that whispery voice. I think he is a foreign policy noob just not as naive as Obama.

2) FREAKING CUT THE DARN BUDGET
Do either one of them understand we are spending too much? Romney's plan for spending reduction is to cut government spending in each year by 2016 by $500 Billion (if GDP is at 4%). We are on track for a $1.2 Trillion deficit this year and there is no way you are going to get to 4% GDP if you are cutting government spending. And there is no way he can repeal Obamacare, it is a lie. I'm sick of it.

Obama is even worse, there are no cuts in sight for this guy, and his Senate hasn't even passed a budget in 3 years! What makes us think he'd even submit a budget and have it approved after another election?

3) IPHONE MANIA
If I see another report of some stupid kid with the latest IPHONE 5 gleefully prancing around excited to have the newest electronic device that will be thrown away in 18 months, I'm going to puke. When obtaining a new phone is the climatic personal achievement in one's life for a week, month, or year, you have a great indication that your generation and or your country is in total decline.

4) THE FED WILL PRINT TILL WE REACH FULL EMPLOYMENT
HA! This is probably one of the funniest jokes I've heard. The Fed's actions pretty much assure us that we'll never reach full employment. How's that record high September gas price on the lowest demand for fuel in 15 years treating you? If the FED ever gets us to full employment we won't be able to afford to drive a car and fill it up to get to work.

5) NFL REFS AREN'T BEGGING TO GET BACK ON THE FIELD
I think it will only be one more week and old NFL refs will agree to just about anything to get back on the field. There have been a few minor screwups, but nothing major. As long as the scabs don't blow a game this weekend, the old refs will sign any agreement the NFL owners put in front of them. And rightly so, I'm so sick of unions. The refs are not the focus of the game and as we've seen, we can do without the best of the best. How an NFL referee deserves a pension is only an argument that a union could try to justify.

6) WE BELIEVE ANYTHING THE ECB SAYS
How many times will it take investors to realize that the ECB says whatever it can to make the market happy and then it checks with its member states that actually have to approve it.. I'm tired of rallies based on unactionable promises without any substance.

7) WE HAVE ALMOST 47 MILLION ON FOODSTAMPS
We have almost 15 percent of the US population obtaining free food from the government and we are questioning if our leadership in Congress and in the Oval office (or running against him) are the right people for the job.

8) OUR ELECTION DEBATES ARE OVER WHO IS GOING TO BUY THE PILL FOR WOMEN
We have the stupidest media in the world. Any viable candidate would answer every distraction like this simply by saying, "WHAT THE FOOK DOES THIS HAVE TO DO WITH GETTING AMERICA BACK TO WORK? THIS IS A DIVERSION AND I WON'T EVEN DISCUSS IT". If Chris Christi, Santa Claus, or Margaret Thatcher were running and said that, they'd have my vote in an instant. Of course we don't have a candidate that can clearly focus on what matters, we have to discuss past tax returns and videos of Romney speaking about the 47% that would never vote for him.

9) PENALTIES FOR OBAMACARE
I haven't heard anyone speaking about 2014 and the impact it will have on small and even large businesses. Here is what I'm looking at with many of my clients. How would you like it if you had this happen to you?

Here is an example of a 50 full-time employee company that doesn't offer health coverage AND has at least 1 that will use the health exchanges (which they all will). (If you employ under 50 full-time employees you are not subject to a penalty.....yet).

The large employer does not offer coverage, and one or more full-time employees receive credits for exchange coverage. The annual penalty calculation is simply the number of full-time employees minus 30, times $2,000. In this example (i.e., 50 full-time employees), the penalty would not vary if only one employee or all 50 employees received the credit; the employer’s annual penalty in 2014 would be (50-30) x $2,000, or $40,000

Get that $40,000 just went POOF for this owner because he decided to own a business and have 50 employees!

Now before you give me the line that he is rich and making lots of money, think again, this is a small burger franchise that pays these people minimum wage. Essentially, Justice Roberts just hammered this guy and raised his employee cost significantly. Is it his responsibility to give health benefits to a guy he employs? Why is it his responsibility? Who came up with that?

Imagine you owned a liquor chain or clothing store or any other business. Imagine employing 500 employees. How would it feel to now have to pay $400,000 more in expenses just because Congress and the President make back-room deals and passed a law that we'd have to pass to know what was in it.

I'm guessing that every business owner with 50 employees might suddenly need to let one or two folks go due to the downturn of the economy. I would, wouldn't you? If that incremental one employee saves you $40,000 you'd be an idiot not to fire them or make them a part-time employee.

10) CAN YOU TRUST EITHER SIDE OF THE CLIMATE CHANGE STORY
I have to admit it, I think there is an angle where someone is actually making big money on climate change and the green, earth-love religion. Yes, I recycle like crazy, but I'm not a big believer in man made global warming or even "climate change".

First, when we have to change the name of the movement, errrr religion, you know we are missing the whole story. We started with "Global Warming" and now we have "Climate Change". I'd love to see a definitive study that rules out volcanoes and solar activity as the source of global warming. I don't want to destroy economies based on the fact that "man has to be the cause." Also, I am not sure if I want to sign up for anything that includes every bank and trading institution that suddenly is excited to trade carbon credits. Clearly big money is at play if these guys are involved and it would make sense that global warming skeptics and supporters would throw gobs of cash to spin stories and propel governments to create regulations.

11) THE ILLINOIS TEACHER'S UNION'S PENSION REDUCED THEIR RATE OF RETURN ASSUMPTION TO 8.0% DOWN FROM 8.5%.
Are these guys nuts? Until we reduce the rate of return assumption for all pension plans to 3% or 4% there is no way that we'll ever be able to have a real conversation that will be based on sustainable math. How is a pension going to ever make an annual rate of return of 8% and not take excess risk? Wouldn't we want to build these plans with a cushion that builds in the ability to under-perform the 100 year average of the stock market? Aren't pensions allocated a little differently than the stock market?

Yes, I know, if we changed the pension return assumptions to 4% it would require the plans to kick in significantly more and all of these unfunded liabilities would be immediately due and frankly unpayable, but are they payable now? Isn't this just one of the many lies we all see plainly yet the entire system simply avoids discussing. The pension system in the US is so much like the Madoff Ponzi scheme and our government and large companies are all participants. Better hope your pension payments aren't greater than that US PENSION guarantee of $48,000 a year.

EXHAUSTED...
Ok, that is it. I've been typing for about an hour and a half and I'm tired of sharing my inner rants. Let me know if I missed any and if I offended any of you believers of the Green Religion please show a bit more restraint than the practitioners of the Religion of Peace and don't murder twenty or thirty people around you, torch cars, and foreign embassies, or leave nasty comments on the blog. Have a great weekend.

GOATMUG

Monday, May 21, 2012

THE DECAY OF THE AMERICAN DREAM

I EXPECT TUITION, A JOB, A HOUSE, AND RETIREMENT
As most of you know I keep a running list of stories that I want to post and then as I have time I will work on them and post them when complete. Some stories take so long to get back to they become dated and I simply trash them. I was about to discard this one when I took a few moments to rewatch it and I was simply stunned by how easily our American values have been sapped from us and how it has only taken one or two generations for us to become convinced that independence and personal responsibility are not core tenets of American society.

In the following 5 minutes clip we see an interview on Fox News with a Valencia College professor Jack Chambless. Professor Chambless describes an exercise he has students complete in the beginning of the year where they write an essay explaining what the American dream is to them and also what the role of the federal government should be in their lives. Unfortunately, the results of the assignment highlight the extent our attitudes have been warped and how quickly we have created a citizen base that expects care from an external entity for life. Is it any wonder that the Obama campaign created the internet campaign video on the Life of Julia where the government provided assistance in every stage of her life? This wasn't some odd mix up or some ill-conceived campaign idea, they were creating a video that targeted the very beliefs that many young people expect and want! Conservatives better not brush this off as some stupid liberal foul up, this was an intentional advertisement highlighting the things that liberals identify as a goal and now many young people believe are important!!!

THE WAR IS COMPLETE WITHOUT FIRING A SHOT
While a small percentage of students simply wanted the government to leave them alone (10%), a staggering 80% see the government as a mechanism to provide them a college education, a home, employment, and retirement. As I see results like this I am simply aghast and am reminded of writings by J.R. Nyquist that suggested that Russian Communists had planned and schemed throughout the last 40 years to infiltrate our college professor ranks to wage an ideological war from within the US. If this idea of a long term war of ideas driven by intellectuals is in fact true, we can see that their efforts must have been more successful than their wildest expectations as they have destroyed the very basic principles of capitalism in that there is no expectation of success AND failure along with reward AND risk. In corporate banking and finance we have nationalization and at a personal level we have the social nanny state.

I will concede that college aged students are typically more liberal and frankly inexperienced in real life but this shocking interview reveals that our youth expect "someone" to care for them and that they have a right to anticipate that some benevolent force will pay for the things they need or want in life. Unfortunately, I don't think that these kids realize that often just like in trading, when you minimize your downside (some government provides everything for you) you often limit your upside as well. Second, I'm sure they haven't thought that they too could be the source of government redistribution as everyone is willing for the government to take and take and take as long as they are the beneficiary. When you are the target of the asset confiscation, suddenly we all become proponents of a free market system!

GOATMUG

Monday, January 2, 2012

NEW YEAR - SETTING THE TONE - GET PHYSICAL AND PROTECT YOURSELF

Thanks for all of your patience as I have made it through the busiest time of year for my business. I am beginning the 2012 Outlook and will also do a post on the 2011 Review in the coming days and weeks. Before we get to that, I want you to take a moment and read or listen to the interview between Jim Puplava and Ann Barnhardt.

Ann Barnhardt was a commodity futures broker that was quite successful that suddenly quit her business in November as MF Global collapsed. The fall of that company and the theft of client funds to her was the final straw that indicated that our financial system was a complete sham and would result in losses of her customer's money. With the release of an open letter, she wrapped up the firm and quit the business.

Jim's firm runs the amazing website www.financialsense.com and I highly recommend their work. As I've mentioned often, Jim's son, Chris Puplava is one of my favorite bloggers and I read him every Friday without fail.

Please use the following link to read the transcript of the interview between Jim and Ann; other than some of the Kyle Bass interviews I've posted, this has to be the best of 2011.
AWESOMENESS - BEST INTERVIEW OF 2011

To hear the interview, you can go to the site and select the player you desire or download it in mp3 format.
HEAR THE INTERVIEW

If you don't want to click away, I have cut and pasted the text of the interview here, please note this is the property of www.financialsense.com and not the work or product of Goatmug.

Transcript for Ann Barnhardt Interview

Jim Puplava: Joining me as my special guest on the program today is Ann Barnhardt, formerly of Barnhardt Capital Management. And Ann, you were a commodity broker for eight years and then you formed your own independent brokerage for six years. A couple of weeks ago you made the painful decision to shut your doors because you felt your clients’ money and positions were no longer safe. What led you to draw those conclusions?

Ann Barnhardt: Well, obviously, it was the MF global collapse and more specifically the fall out after the MF Global collapse and the reaction by the CFTC, the SEC and most especially by the Chicago Mercantile Exchange [the “Merc”]. The actions, specifically by the Merc after the MF Global collapse were unprecedented, unfathomable and completely and totally intolerable. The Merc itself basically did the equivalent of sticking a nine millimeter in their mouth and pulling the trigger by not stepping forward, backstopping the MF Global client accounts and at the very least, the Merc should have allowed the MF Global customers to liquidate their accounts and then transfer to other firms. What the Merc did was the worst possible thing—they froze those people out of their accounts and didn’t allow them to liquidate while the markets continued to trade. And I cannot over-emphasize the importance of that, the risk that those people were exposed to in the cattle business (and my forte is cattle. I am actually a cash cattle person. My brokerage business was geared almost exclusively towards livestock and grade. I have a lot of contacts in the cattle industry who didn’t necessarily do their futures business with me but were contacts of mine who did do business through brokers that cleared through MF) who lost tens of thousands of dollars on hedge positions that they wanted to get out of but could not get out of in the week and a half after the MF Global collapse.
This has never happened before. This was a complete breach of fiduciary duty by the Chicago Mercantile Exchange itself to the point that it literally has destroyed the entire paradigm. I got to the point where I could no longer tell my clients that their free cash customer funds, not even exposed to the market place—just their cash sitting in their account, non-margined—was not safe. I couldn’t tell them that their money was safe. At that point it was morally incumbent upon me to get my client out of this completely dysfunctional, basically destroyed marketplace. Get them off of those railroad tracks and get them away from the risk. Now, I didn’t clear through MF, but with the European collapse and knowing what we know about how these financial entities are leveraged in European paper and the cascading nature of all of this I had to act before the proverbial poop hit the fan because if you sit around and you wait until after the poop hits the fan it is too late. You wouldn’t get anybody out. To me, it wasn’t really a painful decision. It was a complete no brainer.

Jim Puplava: In the past, when firms went under customer funds were intact and the exchanges would step in, as you mentioned earlier, to backstop everything to keep customers 100% liquid. And normally, a quick transfer from the bankrupt firm, the bankrupt firm would be immediately replaced. Why do you think they did not allow that to happen this time?

Ann Barnhardt: You tell me. I will use the word again, it is suicidal. What they did was suicidal. So you are absolutely right. Up until last month on Friday, October 31^st, the customer segregation of funds rule was utterly sacrosanct. Even when Refco imploded and imploded quite dramatically in 2005, no customer funds were gone. It was on the prop trading side of the company but the customer funds were there, were accounted for, and it is the onus of the Mercantile Exchange to audit these FCMs [Futures Commission Merchant]. MF Global was under the auspices and under the supervision, of the auditing supervision, of the CME. And I believe that MF was audited not just annually, but quarterly. Also, there is the question of how in the world can the Merc miss the margin being posted. The Merc is supposed to be moving equity and doing margin wire transfers twice a day every day. How could those customer funds be “missing”. They aren’t missing. They were stolen. They were stolen by Jon Corzine and his cadre of associates at MF Global. So yes, again, to your listeners who may not fully appreciate the gravity of this, this has never, ever happened before. Nothing even close to this has ever even happened before and it is the function of the Mercantile Exchange itself—the reason why the exchanges exist is that they stand in the middle of every transaction and they act as the de facto counterparty to every single transaction so that, for example, my clients never had to worry about the credit worthiness of the other individual, whoever it might be, who is on the other side of any trade that they did.
Now, for every buyer there is a seller and it is a one-for-one, zero-sum game; but to ensure the credit worthiness and the integrity of the market, the function of the Mercantile Exchange itself is to stand in the middle of every transaction and be the guarantor. So a year ago when Terry Duffy held a press conference [watch it here] and said never in the history of the Mercantile Exchange has a customer ever, ever lost funds resulting from the collapse of a firm, he was telling the truth a year ago. Everything changed on Halloween of this year though. And that's why I had to shut the doors of my brokerage because I could not in good conscience continue forward knowing that the Mercantile Exchange was no longer going to fulfill their fiduciary duty.

Jim Puplava: In the futures market, which is highly leveraged, if you open up a futures contract you are usually leveraged 10-to-1, so they require an exceptional firm base on which to function. And the major integrity of the whole system is the segregation of customer funds. That was breached by MF Global. And let’s not sugar coat this, Ann, basically management stole all of the non-margin cash, invested it in highly speculative securities and what has astonished me has been the reaction of the exchange and regulators—where is the investigation into Jon Corzine?

Ann Barnhardt: Well that is the point of this. We are now living in a lawless, Marxist, Communist, usurped, what used to be a representative republic but is no more. This is no longer a nation of laws. This has now transformed into a nation of men. It doesn’t matter what crime you commit. In the case of Jon Corzine, this man has stolen in excess of a billion dollars. I think by the time it is all panned out it is going to be closer to $3 billion of customer funds that he stole. Why did he do it? Is he stupid? Well, of course he’s not stupid. This is a former head of Goldman Sachs. This man doesn’t have a low IQ per se. Why in the world would a man wake up in the morning one day and say you know what, I think I am going to steal all the customer seg funds in this FCM that I’m running, which is the biggest FCM in the country. Yeah, that sounds like a good plan. No. Why would a man like that even engage in a nefarious plot like this? Because he knew going into it he could get away with it. And the reason he could get away with it is he is in tight with the Obama regime. He is one of Obama’s highest fundraisers. Earlier this year Jon Corzine had a fundraiser dinner at his New York City apartment for Barack Obama where it was charged at $35,000 a plate. Okay? He bundled high six figures for Obama in one evening! He is a crony of the regime. This is Marxist Communism. There is no rule of law. And these people, these poor MF customers are just sitting out here helpless to do anything because there is no law enforcement because this is no longer a nation of laws. The rule of law no longer exists. There is no longer justice in this nation. And no nation, no culture, no society can survive if there isn’t a foundation of justice. That is why we are teetering on the precipice of collapse and I foresee civil war coming within the next several years.

Jim Puplava: You know, we had Gerald Celente on this program and he had an account with Lynn-Waldok, which was eventually taken over by MF Global, and he's been trading futures in gold. He had a plan when he built up enough he would eventually take delivery. Well, they stopped him out of his trade, sequestered his margin (or his cash) and forced him out of a trade and closed his account.
[Click here to listen to Gerald Celente's MF Global experience]
So what you are talking about—because the exchange did not backstop and then froze customer accounts—is they forced, would you say, millions if not hundreds of millions of dollars of losses on these customers?

Ann Barnhardt: Absolutely. If we are talking several billion in customer seg funds then the losses that were incurred could easily by the customers in that week, week and a half that they were frozen out could easily, easily get into the hundreds of millions it might even breach into the low billions. No question about that. And yeah, and even with options. You know, I talked to cattleman who have put options on as hedges to put a floor underneath the price of the cattle in case—so imagine this, you buy a put option four months ago, you pay the premium. You post that money. Then this happens, you are frozen out of your account. Your account gets transferred to another firm, without your consent. By the way, none of the customers were allowed any input into this. Their accounts were just sent to RJ O’Brien and other firms like that without their consent. And then once the positions were transferred, even if it was a risk limited position like a long put option, then the new clearing firm called them the next morning after the trade settled and said there was no equity in your account because all that money got stolen. So you are going to have to pay the premium for this put option again. So it's doubling the cost essentially for a lot of these people out here who are dealing in what is supposed to be the very risk limited paradigm of long options. The entire situation could not have been handled any worse. In fact, I would take it a step further. It was handled so poorly I can’t imagine that these people are that stupid at the Merc and at the CFTC and so forth. I can’t believe that the bankruptcy trustee is that stupid. This almost seems like it was so bad that it had to have been nefarious.

Jim Puplava: You know, Ann. You believe that MF Global is just the tip of the iceberg. That there is massive industry exposure to European sovereign debt. In fact, the day you and I are doing this interview the Fed just engineered a major swap with central banks. It was a central bank love fest on Wednesday of group money printing. That tells me that central banks acting in unison the way they did shows they are afraid that there's something big out there that is about to happen and that they are trying to maybe plug a hole in the dyke.

Ann Barnhardt: Well, if anybody out there understands fourth grade arithmetic you know from metaphysical certitude that Europe is done. Europe is mathematically impossible. It cannot be saved. You want to make a start. You even want to make a start at trying to bail out Europe we are talking $25 trillion just to start. And it would then—if you were going to bail out the entirety of Europe—you would now be talking about hundreds of trillions of dollars. Okay, people, there isn’t that much wealth or money on the surface of the earth. The total gross domestic product of the entire planet earth is I think just under $70 trillion. And we are talking about in excess of $100 trillion to bail out Europe? This is now mathematically impossible. These people have so leveraged themselves and so leveraged these governments in these countries giving their brain dead citizenry free hand outs and entitlements that it is now mathematically impossible to save the paradigm. It's not a matter of if the global financial system is going to collapse. Oh, it's going to collapse. You better trust and understand that. It's just a matter of when. And these piddling little maneuvers that these people are making that the Fed is doing. Oh, we are going to give Europe some money. Okay. What I saw this morning, what the Fed is getting ready to do in terms of Europe, is keep Europe going for another seven days. Well, fantastic. Thanks for that. That is literally the brain dead mindset of these politicians. All they are doing is looking to kick the can down the road. At first it was kick the can down another 10, 12 years. Then it is kick the can down the road for another year. And then it was well, let’s kick the can down the road for another few months. Now we're literally to the point where all we can do is kick the can down the road for a matter of a few days. It's not going to make it. I will be very surprised if we make it until Christmas.

Jim Puplava: You know, one would have thought Ann, after the 30 to 40:1 leverage leading up to the financial crisis of 2008, pre-Lehman, that financial firms would have learned. And especially a guy like Jon Corzine that saw Goldman have exposure to AIG with $13 billion in credit default swaps which we bailed him out 100 cents on the dollar. Apparently, this lesson was not learned at MF Global because the leverage, what was the figure? I think it was 100:1—it was just astounding.

Ann Barnhardt: The only lesson that these criminal degenerates learned from the 2008 situation was that they could do anything they want and that pimp daddy government would bail them out. You have to understand, people like Jon Corzine, these are evil, evil people. He went into MF Global looking to rape that company personally for his own good. And that's what the motivation of a lot of these people are. You have to get your heads around this. You have to get your heads around the fact that there are truly evil people in the world who do not give a crap about anyone or anything except themselves, their own personal wealth and their own personal power. And they would sell their grandmother to the Nazis for a nickel without hesitation if they thought they could get away with it. It's the same with people like Jon Corzine, and then we have talked about the fact that Jon Corzine is tied into the Obama regime. And we now know that the government is absolutely stuffed to the gills almost exclusively with this same type of moral degenerate culture. These people that are in the government—not just the Congress and Executive Branch but also in the bureaucracy—they are in it for themselves. They are in it for the money. And two weeks ago when we had the 60 minutes exposé on the insider trading, those of us who have been in the business have known intuitively that that was going on for a very, very long time. We knew that there was front running going on by politicians. A great example of this is someone like Harry Reid. When he entered Congress, Harry Reid had a low six-figure net worth. He now has an eight-figure net worth. And he's never done anything except be a United States Senator. The salary I think of which is something like $170,000 a year. How does that happen? How does a man with $170,000 a year salaried position go from having a six-figure net worth to an eight-figure net worth? That doesn’t make any sense unless he is doing nefarious, illegal, insider trading type deals.
It is obvious what's been going on. You have to start acknowledging these people for what they are, and that is moral degenerates who are basically sociopaths and psychopaths. Meaning they don’t feel any sympathy or empathy for other human beings. The only thing they care about is themselves. They will do anything. They will steal. They will lie. They will cheat. They will lie to your face. They will look in the camera with this tremendous earnestness and lie with fork tongues through their teeth in order to advance their wealth and power. And if we, as a people, don’t get real about this, if we keep having these Pollyanna visions that these people are all on our side and they are really looking out for us. And they are doing the best they can. We will be cork screwed into the ground and this nation will be reduced to a smoldering rubble. You've got to wake up.

Jim Puplava: I would like to go back to MF Global for a second. There is something even worse as you look into the details—it's been hinted and that there could be possible clawbacks. I’m wondering if you might explain that possibility and what a clawback means for, let’s say you had an account at MF Global and, I don’t know, you didn’t feel comfortable with the commodities market—the volatility. So you pulled the money out. There is a possibility they can go after you.

Ann Barnhardt: Oh, absolutely. Clawback is a fairly common tactic in bankruptcies. And what it is is looking at the bankrupt entity and looking at the money that went out of that entity in the time period immediately preceding the collapse. And I don’t know what time frame they would look at MF. I don’t know if it would be 30 days or 60 days or 90 days—I have no idea. But the trustee has in the last two weeks said that yes, clawback is on the table. So what that means is, let’s say for example, you are a savvy individual and you are a good steward of your money. And you are doing business with a firm that clears through MF Global. You are looking at MF Global’s publicly available bond yields. And you see in the six weeks before the collapse that their bond yields spiked parabolically [see chart here]. They went from 6% to 18%. That is a sure, sure sign of massive trouble. And so being an intelligent, informed, aware person who is a good steward of their wealth, what do you do? You say I’m getting out of this company. I am getting my money out of MF Global because something bad is about to happen looking at these bond yields. You can also do the same thing looking at the stock price. You could do the same thing looking at downgrades by the ratings agencies. There's all kinds of ways that you can come to these conclusions.
The other thing is if you're a hedger. If you are a bonafide hedger—if you had positions on and the market moves in favor of your hedge position on the futures side, you don’t leave that equity sitting in your account. What your broker like me does is they wire that money home because you are using that money probably to either offset a cash transaction or to pay down a revolving line of credit. You're not getting any interest on your money sitting at MF Global so you might as well get that equity out of there, send it home and pay down your line of credit so you are not paying interest on that money. So there would organically have been lots and lots of money flowing out of that company in the period immediately before the collapse. Either due to natural hedges, organic in and out functions or due to intelligent people looking at the bond yields and saying uh oh we better get out of here. The bankruptcy trustee can legally claw that money back. Say okay, I am going to go and I am going to dive into your pocket now. And I am going to claw back your money which you, in your responsibility and in your good stewardship pulled out of a company that you knew to be in trouble. Oh yeah, so these MF customers will essentially be raped three times—they will have their cash stolen out of their accounts, they were then locked out of their position so they couldn’t trade and were fully exposed to market risk, paralyzed, unable to do anything for excess of a week. And then, number three rape, is having the bankruptcy trustee come back and literally seize money out of your own personal checking accounts and business accounts and so forth. And clawing it back to feed this bankrupt entity. And you know what the cherry on top of the sundae of all this is? And this is what blows my mind—the bankruptcy trustee, right now, as this is being recorded on the 30^th of November. The bankruptcy trustee is still allowing MF Global to trade proprietarily for itself, for the company proper.
It is unbelievable. The rule of law is dead in this country.

Jim Puplava: You know, adding to this just prior to that was the restructuring of Greek debt, where the derivatives association announced that it was a voluntary restructuring so therefore the bankers didn’t have to pay out on credit default swaps. So what you have here, Ann, I believe is a system where the government is protecting the too-big-to-fail at the expense of the customers. And with it, the rule of law is thrown out to protect Wall Street, what does that say about the integrity of the system? It is no wonder people are losing faith.

Ann Barnhardt: There is no integrity in the system. And let’s make it simple—it is not just about the government protecting the “too big to fail banks". It is about criminal oligarchs as individuals protecting each other. They don’t give a crap about the customers of JP Morgan or you know, Citi or Goldman or anything. What they care about is each other. The Obama regime is protecting Jon Corzine proper, the individual. Because he is one of them. He is one of these criminal oligarchs. And for your listeners who may not remember, Jon Corzine is a former congressman. But immediately preceding MF Global he was the Governor of New Jersey and he just cork screwed Jersey into the ground. It is Chris Christy who beat Jon Corzine to become the governor of New Jersey. So yes, this Republican, Chris Christy, was elected in New Jersey—uber liberal, blue state New Jersey—because Corzine financially destroyed this state. And again, this guy Corzine is former head of Goldman. He is not stupid. You have to stop thinking that these people are just misguided or that there is some sort of a difference of opinion on economic theory. These people are nefariously trying to destroy everything in this country. It's called the Cloward-Piven strategy. Go in and destroy and collapse the entire economy, everything and then rebuild a new Marxist, Socialist, fascist state out of the burning rubble of this destruction. This is intentional. This is nefarious. This is not a function of incompetence. It's a function of malice of forethought and conscientious theft and destruction.

Jim Puplava: What would you advice? I am a long term believer in the bull market in commodities, but how do you play commodities when the futures market is no longer secure? And what does this do to the proper functioning of the markets? In other words, now that you've closed your firm because you don’t believe in the integrity of the system and we just listed a series of reasons why—not honoring contracts, appropriating funds, not allowing trades to go off. Not one investigation, in fact, this goes even further than that. We had Bill Black on the program recently, who helped make prosecutions in the S&L scandal. And at that time, 2,000 individuals went to jail. There has not been one criminal charge brought by the justice department since the 2008 crisis. So given that this is where we are, what do you advise and what will you do personally?
[Listen to Bill Black's tell-all interview on why no one has gone to jail]
Ann Barnhardt: Well get the hell out. Get out of all paper and it's not just the commodities markets. This is going to cascade through everything. It is going to get into the equities. It is going to get into 401ks and IRAs, it is going to get into pension plans and so on and so forth. Total systemic collapse. Get out! I don’t know how I can be anymore plain about this. I say this over and over and over again and then I get scads of emails saying, well I can’t get out of my 401k. Yes, you can. Yes, you can. Take the penalty and get the hell out of there. What would you rather do? Would you rather pay the 10% penalty or would you rather have it all go up in smoke? Because that's what we're staring down the barrel of. Number two, we seem to have this backwards. In terms of what I do, cattle and grain specifically, the futures markets are the derivatives. The futures markets are derived from the actual cash commodity market. Now, I am blessed because my area of expertise is actually in the physical cash market, actual cattle on the hoof. So I have a consulting firm and I'll continue to teach cattlemen how to trade actual physical cattle. But, yeah, to all the people out there listening—you are going to have to get away from paper and get back into physical commodities, the real deal. Anything that is on paper anything that involves a promise or a commitment is no longer valid because as we said there isn’t a rule of law anymore. People can steal from you. Your money can be confiscated. And think how easy now it is to confiscate people’s wealth. Most of our wealth in this society exists as zeroes and ones on a computer server. It takes no effort whatsoever to steal zeros and ones on a computer server. So what I have been telling people is you need to get into physical commodities. And the rule of thumb is if you can stand in front of it with an assault rifle and physically protect it, then it's real—it's a real commodity. That includes food, that includes water, that includes long guns and ammunition. That includes fuel. That includes precious metals—gold and silver coinage. Most especially silver coinage because silver is the metal of barter and transaction and currency. Gold is the storage metal because it's so valuable per ounce. And also, silver is extremely undervalued relative to gold because that market has been synthetically suppressed for the last several years by again, these nefarious actors. So yeah, reallocate into physical commodities.

Jim Puplava: How do you know that somebody like just as we saw in 2008 or recently with MF Global—that is somebody like a Goldman, a JP Morgan that is writing credit default swaps on European debt—how do you know if you have an account with this group that they pledge your assets for collateral or they comingle them with the firm’s assets and then what do you do?

Ann Barnhardt: Oh, exactly. Corzine isn’t alone in this. The reason the MF Global situation happened the way it did is as we eluded to earlier because Corzine had that company just suicidally leveraged. He took those customer funds and then leveraged it into European, sovereign, junk paper at about 100:1 ratio. Massive. Massive leverage. That is why his collateral call was the first one to come and why it took him out because he was so heavily leveraged. Don’t kid yourself. These other entities are doing the same thing. It is just that they are not as heavily leveraged as Corzine was. So yes, the entire paradigm is no longer trust worthy. There is no meaningful government or industry wide regulation and I have been saying this for years. That regulation in the financial industry in the United States both government based and private regulation—private industry regulation—is a monstrous, monstrous joke. The top tier of those organizations are evil, nefarious people. The mid level are halfway stupid, halfway evil who again, are just there to collect their salary paycheck and will say and do anything that they are told and who really don’t understand the business that they are trying to regulate. And then the lower level, the grunts, the actual auditors who go out on site, a lot of those people are super incompetent, affirmative action hires. And yes, I said it and I am not ashamed of it. They are affirmative action hires. They have no business being there doing what they are doing. They are also hiring a lot of kids 15 minutes out of college who are literally reading off the script and couldn’t audit a company if their life depended on it.
So what they do is they send these incompetent people out into the field and into lower management. And then when the poop hits the fan, they blame them. It is absolutely evil and it is a complete joke. And Madoff was the first proof of that. There have been other ponzi schemes since Madoff happened that haven’t gotten as much notoriety, but there was a big one in the futures industry that all of the FCMs were invested in. And the regulatory body of the futures industry the NFA, they audited that Ponzi scheme, they totally missed it. They even admitted that they signed off on it because they really didn’t understand what they were doing. I mean, that is the level of incompetence and evil that we are talking about in terms of these regulatory bodies. The only way to fix this is to shut the whole damn thing down and start from scratch. I am personally looking in the next decade for the emergence of a new exchange within the United States [that is, a replacement of the Chicago Mercantile Exhange]. Word on the street is it might happen in Dallas and I would be fully in favor of that. Start over from scratch.

Jim Puplava: Alright. Well the message: get physical and protect yourself. We have been speaking with Ann Barnhardt, formerly of Barnhardt Capital Management. Ann, I want to thank you for coming on the program and sharing your thoughts.

Ann Barnhardt: Thank you for having me, it's been a pleasure.

Hmmm, an industry pro completely shuts down their business and all they can say is buy physical commodities and get some guns and ammo. Makes you think that she is a nut job or she really knows something. I am betting against the former and wagering heavily on the second option.

Please check back soon, I am getting started on the other items as life has finally slowed a bit.

GOATMUG

Goatmug Blog - Financial Perspectives from the Mountain Top

Monday, June 10, 2013

YOUR INNER-MOST THOUGHTS BETRAY YOU

Tuesday, January 22, 2013

GOVERNMENT IS HERE TO PROTECT YOU

Monday, December 10, 2012

BRINGING HOME THE BACON - FOODSTAMP REPORT

Tuesday, November 20, 2012

USEFUL PAWNS FOR POWER

Tuesday, November 13, 2012

4 REASONS YOUR HEALTH INSURANCE WILL INCREASE BY 50% IN THE COMING YEAR

Thursday, November 8, 2012

PRESIDENTIAL THOUGHTS

Monday, November 5, 2012

TECH WRECK - GRPN UPDATE

Tuesday, October 23, 2012

DEBATABLE RESULTS - ROTATION

Tuesday, October 9, 2012

FREE FALLING

Friday, September 21, 2012

11 THINGS THAT BLOW MY MIND.....

Monday, May 21, 2012

THE DECAY OF THE AMERICAN DREAM

Monday, January 2, 2012

NEW YEAR - SETTING THE TONE - GET PHYSICAL AND PROTECT YOURSELF

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