Sunday, November 11, 2012

OVER THE EDGE? - LESSONS FROM THE FED

COMING DOOM
We are going to hear more about more about the fiscal cliff and how it will bring the country to its knees.  In reality the fiscal cliff should be a great opportunity for both parties to achieve a level of success and implement a long-term strategy for fiscal and economic success for our country.

Unfortunately our elected officials don't live in reality and the election results suggest to the President that raising taxes is the course the people have demanded.  On the other hand, Republicans, spurned by voters will hold fast their fidelity to the "producers" and attempt to keep taxes low for the highest income earners.

Truthfully, no outcome will really work as the politician's plans for 10 year deficit reduction and projections about reigning in spending are all simply made up accounting garbage.  The healthcare mandate alone will have cost overruns well beyond anything estimated and our other entitlements won't fare much better.  Despite this truth, our politicians aren't in the business of taking serious aim at real issues, they are in the business of dividing and wrangling for a small victory on a meaningless issue to be able to say to their special interest that they got something for them.

WWFD?
So why is this important?  As odd as this seems after writing the text above, I'm pretty convinced that the Dems and Repubs will do exactly what the Fed would do and do more of what got them in this mess in the first place.  Since we know that the Fed's response to all negative news and all empirical data that shows that what they've been doing hasn't helped is simply to do more of their devaluation and do it in bigger size, we can guess that Congress and the Senate will do exactly the same!

The solution is not to fix anything or change structurally any spending or tax course, it will be to simply defer entitlement cuts and agree to raise tax rates slightly.  The grand bargain will allow both sides to win and will damn our country to lose.  The country's loss won't matter though because both political sides will be able to crow to their supporters that they did what was best and achieved a great deal.

This non-solution course will buy time and isn't that what leadership is all about?  Look at the ECB as it deals with Greece.  Look at the Fed dealing with banking solvency.  Look at our President in dealing with Middle East issues.  The problems are so big that leaders simply work to defer the day of reckoning as often there is no other way to handle the massive problems.  As we know though, if you lie and put off recognition of issues they often become unmanageable and can't be handled in a fashion that limits damage.  After years of Presidents and Congressional leaders putting off the tough issues, we are about to see just how out of control they are.  The incredible $1 trillion deficit spending we've had over each of the last 4 years has only brought the issue to the top of the heap, these issues were there already, they just can't be put to the side like they have been so often before.



GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/    

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

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/    

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


But when they said, “Give us a king to lead us,” this displeased Samuel; so he prayed to the Lord. And 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. As 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. Now listen to them; but warn them solemnly and let them know what the king who will reign over them will claim as his rights.”
10 Samuel told all the words of the Lord to the people who were asking him for a king. 11 He 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. 12 Some 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. 13 He will take your daughters to be perfumers and cooks and bakers. 14 He will take the best of your fields and vineyards and olive groves and give them to his attendants. 15 He will take a tenth of your grain and of your vintage and give it to his officials and attendants. 16 Your male and female servants and the best of your cattle[a] and donkeys he will take for his own use. 17 He will take a tenth of your flocks, and you yourselves will become his slaves. 18 When 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.
19 But the people refused to listen to Samuel. “No!” they said. “We want a king over us. 20 Then 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

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

Thursday, October 25, 2012

THE END OF GROWTH



I found an interesting video about growth and how growth itself is unsustainable.  In this video, Professor Albert Bartlett shares his very rational and realistic understanding about simple math and how growth has some unsettling implications on the way we live as a nation and as a human race.

THE END OF GROWTH
http://www.planbeconomics.com/2012/10/14/professor-albert-bartlett-on-the-end-of-growth/



As I expected when I first started watching the video we do end up in some of the usual places that liberal professors go.  Ultimately, Professor Bartlett found his way to the concept of population control and resource scarcity.  I think if we let him continue and were off camera we'd witness the professor explaining the benefits of abortion, euthanasia, and championing China's one child policy.   Fine, I'll put up with that as his story is one that applies to just about everything we deal with in the markets and investing.

Clearly, uncontrolled growth (even slow growth) causes really big problems three and four generations out.  This is why we need to have seriously responsible leaders in the Congress and the Presidency to deal with government spending, inflationary costs, and declining energy resources.  Unfortunately, we don't have these leaders, we have children that would rather line their own pockets with stock picks based on insider knowledge and we insist on candidates that tell our special interests "Yes" when they should all be told "No".

Below are three or four key areas where growth will cause major life-altering changes in the way we live;

US Debt
Energy usage versus available resources
Food
Water

Just another pleasant topic to lift you up for the day!

TRADING UPDATE
We've seen a 3% to 4% drop in equities this week as earnings reports continue to come in with misses despite earlier downward revisions and guidance.  In fact, even future guidance is suggesting lower earnings as well.  I am beginning to hear mixed stories from my clients about business orders and what larger customers are doing, but I still continue to hear that small businesses are fearful and they will not hire till they get through the election.  Many of these owners are very against President Obama even though their current business seems to be improving.  Notice what I just wrote, business is improving, but they don't give Obama credit, they feel like the recovery is just due to normal cycles.  

We may be back to the sector rotation where instead of cyclicals, industrials, financials, and technology are the place to be, we are seeing a move to utilities, consumer staples, and healthcare.  This is a recessionary fear rotation and is evident by the way that CAT and others have been clobbered.

Treasuries also have started to rebound and even high yield and corporate bonds have sold off a bit.

TAXING FUTURE
I don't want to forget to highlight that many of the "safe haven" sectors and dividend payers we've highlighted and invested in over the last two year may also become the target of significant selling pressure even if they fit into the healthcare, defense, consumer staples, and utility space.  The reason for this is that many investors will attempt to take their tax lumps right now in 2012 before capital gains rates go from 15% to 20%.  Add in the Medicare tax for high earners, and this could go as high as 23.8%.  In all, investors will pretty good gains in these dividend paying stocks may be inspired out of a fear of higher taxes to sell in the next two months to avoid higher capital gains rates in the future.  Significant selling will obviously bring the markets down.

In addition to tax-based selling, we are seeing firms guide earnings lower, in fact 100% of healthcare companies and 100% of energy related companies that have reported earnings have ALL guided future earnings prospects down!!!  That can't be good.

FACEBOOK
Stop.  Before you buy Facebook remember these three things.  Facebook is no longer cool.  Second, who is buying stuff on mobile and who really wants to buy stuff through their Facebook page?  (Goatmug does not have a FB page by the way).  Last, more than 1 BILLION SHARES will be unlocked for employees and investors to sell in November and December.  WHY WOULD YOU BUY BEFORE THAT TSUNAMI HITS THE SHORE?  I am happy for those that saw a 25% increase in the price of Facebook this week, just know that you'll be able to buy this stock 75% lower than today in less than one year.


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

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

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/