The “Junk” Rally

I have warned readers for a few months now that we are living in a government debt bubble economy and are heading for the second drop in a double dip.  Some analysts are discovering that the market’s rally is built on nothing more than speculation and gaming.  The market is actually being driven by short sellers.

A short seller is someone who borrows shares of a stock, sells them at a high price, and then buys them back at lower prices to return to their brokers.  Many times this actually drives the stock prices down.  Short selling was blamed for the initial market plunges a couple years ago.   AP Business Writer Bernard Condon explains that in this case we are in a “short squeeze” which is driving prices up.

Ok, time for some layman terms:

To explain it more simply, short selling would be like this.  On January 1st of this year, you pay your friend $100 to borrow his brand new Toyota with only 5,000 miles on it.  You then sell that Toyota for $17,000.  February 4th, that same model of Toyota has been recalled and has dropped in value.  You buy the same model with 5,000 miles on it for $15,000 and return it to your friend.  You made $2,000 on the deal and your friend made $100 bucks for lending you a vehicle in the exact same shape as the one he got back a month later.  That is essentially a short sale.

A short squeeze is a little more complicated.  Imagine you borrow 100 Toyotas from your friend and sell them all for $17,000 a piece.  That model is recalled and drops in value.  However, as you expect the price to drop further and hold off on repurchasing, the government institutes cash for clunkers and car buyers are happy to take their chances on a Toyota for $2,000 less than the usual asking price.  The value goes back up.

Now it’s March and your friend wants the next month’s payment.  He also sees that the value hasn’t gone down and wants to make sure you can repay him.   He says that if the price continues to go higher you will need to reduce the number of outstanding Toyotas you have borrowed from him.  As a result, you are now buying them back for more than you sold them for.  Your purchases to cover your loan drive the overall price up even higher.  This is the short squeeze.

The result is that worthless stocks are being driven higher in price as short sellers buy even more worthless stocks to cover their loans.  The result, as Condon points out, is that companies who haven’t made a profit in years are seeing their stocks quintuple as bargain hunters buy cheap and short sellers are forced to then buy back high.

Eventually we will run out of short sellers who sold too low.  When we run out of short sellers who sold too low, and the bargain hunters start to see a drop off in price gains, we will see a new round of short sellers who will be as deadly effective as the 2007 short sellers in driving the price down.

This coming market correction, mixed with the stimulus money running out, the deficit completely overwhelming us, and the coming tax increases in Obama’s budget will put us into a full blown depression in less than a year.  We need a new economic course.  Hopefully November will bring some fresh ideas to Washington.

GDP on loan from China

Although the economy shrank overall in 2009, plenty of media outlets and Democrats are overjoyed to point out that the economy grew at a rate in the last quarter that was higher than we’ve seen since all the way back in, well, the Bush years.  The 5.7% GDP growth in the fourth quarter of 2009 was more than a lot of economists expected.  Economists who know what happens when you throw trillions of debt spending at the economy weren’t too surprised.

Once again, debt does not equal wealth.  Obama increased spending by 33% his first year while revenues fell.  This year he is doing the same, even without unplanned stimulus spending.  Every jobs bill Obama thinks up is nothing more than borrowing hundreds of billions more and throwing it at short-term government infrastructure projects.  I still haven’t found out how many times you have to repave the same stretch of road before the government counts as a job saved or created.

If you lend a homeless man a million dollars at a high interest rate, he buys a house, and then the house drops in value to $800k, is his wealth growing?  He does have an $800,000 house that he didn’t have before.  I hate to say it, but our growth in the fourth quarter of 2009 is no different.

In the fourth quarter of 2009 the market value of our domestic product increased by $221 billion.  That’s not bad.  It’s not quite as good as the 7.2% GDP growth Bush’s tax cuts produced, but it’s definitely better than the economic retraction we saw in the first half of 2009.  At the same time though, debt spending increased by $260 billion in the fourth quarter.

So we borrowed $260 billion and the value of our domestic product increased by $221 billion.  Meanwhile more than 600,000 jobs were lost in the fourth quarter.  And lots of roads got repaved again.  Oh yeah, and plenty of Democrat congressional districts got new duck ponds, skate parks, and honey bee insurance.

Now we have to pay for our borrowed growth.  Someone finally read my blog and figured out that Obama is going to raise taxes by not renewing the Bush tax cuts.  Obama has already written Cap and Trade (which would increase energy costs by thousands for each American family) into his budget.  The sad thing is that with all these tax increases we still are expecting a $1.6 trillion deficit for 2011.  This is only twice what Obama was projecting for 2011 when he took office.  For the record, Bush’s worst deficit was just over $400 billion after a year of Democrat control of the Congress.  Bush even inherited the tech bubble, loose fiscal policy, and a decimated terror intelligence community (who couldn’t stop 9/11) from the previous administration.  By the way, if you think Bush inherited a surplus you haven’t been reading my blog.

Obama kept telling us that only government can fix the economy.  Many believed him.  Hopefully we have learned our lesson.  The government doesn’t make money.  The government doesn’t produce goods and services that people want at prices they are willing to pay.  The government cannot produce growth.  All the government can do is beg, borrow, and steal from some and benevolently hand out to others while calling it growth.  If Obama has caused anything to change, hopefully it’s that we finally know better.

Having Sachs in the Oval Office

The buzz in Washington these days is still all about the arrival of Scott Brown and how the Republicans finally have enough votes to join the Healthcare debate.  Meanwhile, a scandal is continuing to brew unnoticed.  It turns out this President is engaged in the same unethical relationships as both his predecessors.  And as I predicted, Tim Geithner may be taking the fall for it.

The White House relationship with Goldman Sachs first became news when Rahm Emanuel, now Obama’s chief of staff, was working for Bill Clinton’s campaign.  Actually, technically Rahm worked for Goldman Sachs and volunteered for Clinton’s campaign.  Goldman Sachs gave as much as they were allowed, had their employees give as much as allowed, and then paid the salaries of Clinton’s campaign staffers so that Clinton wouldn’t have to.  At the time, they said they were hiring Clinton staffers for networking purposes.  This loophole got the Clinton campaign around the campaign finance laws that Obama indignantly called out the Supreme Court for repealing.

The payoff came when Clinton bailed out Mexico and other countries through the IMF after Goldman Sachs had invested heavily in government bonds from those countries and stood to lose it all.  This was just the first time the Government bailed out Goldman Sachs by bailing out what they had invested in.

The Bush administration destroyed it’s reputation as a free market, capitalist administration when Goldman Sachs alumnus Henry Paulson was handed sole control and responsibility of the TARP bailout process.  Half of the left portrayed Bush as an imbecile, the rest saw him as some sort of evil genius.  In this instance it actually was one or the other.  But before those on the left cheer, it was the Pelosi/Reid congress who wrote Paulson’s financial regency into the TARP bill.

Several banks took large amounts of TARP funds.  Goldman Sachs themselves took $10 billion, but many banks were told to take it to avoid creating a stigma on certain banks as worse off than others.  Although the plan didn’t work and AIG, Citigroup, and a handful of failed banks have been destroyed in public opinion, Goldman Sachs managed to stay out of sight through the process.  Although Goldman Sachs has set aside $11 billion for bonuses this year, AIG is the name that comes to mind when Americans think of evil banks who stole our money and spent it on outrageous bonuses.  In fact, it is ironic that one of the greatest mouthpieces for the liberal movement, Michael Moore, shows up in front of Goldman Sachs asking for the American people’s money back.  Moore’s own movie was funded by Goldman Sachs.

Speaking of AIG, they are now under investigation for what they did with some of the billions of dollars in taxpayer TARP funds they received.  What they did was use the money to pay off some of their best investing partners who were going to lose it all.  Guess who one of those major investing partners would be.  In fact, Goldman Sachs was invited to the table when the government decided what to do with AIG.

Up next on Obama’s agenda is far reaching regulations to discourage banks from every doing anything that might make them a profit in the future.  Obama is going to ride in on a white horse and make it so that banks will lend freely and with no risk.  I have no idea how, but then again he has the best in the business like Tim Geithner.  And Geithner is getting the best advice from his chief of staff, former Goldman Sachs lobbyist Mark Patterson.

I’m not a conspiracy theorist, but as unemployment remains above 10% and the economy prepares to begin stage two of it’s double-dip, Goldman Sachs is about to have it’s most profitable year in the company’s history.  If you are keeping score, you might think something was up.

Making Us Comfortable

On Wednesday, Obama will stand before the country and spin like he never has before.  It’s been a rough month for Democrats.

The Scott Brown victory has made many on the left realize that Americans are upset.  They haven’t figured out quite what we are upset about yet.  But one thing they know for sure, if they don’t figure it out soon they might lose big in November.  Robert Gibbs’ theory is that they voted for Scott Brown for the same reason they voted for Barack Obama.  Americans want change.

Obama actually has come closest out of the Democrats in figuring out some of what we might all be upset about.  The economy is terrible, the deficit is way too high, and one in ten Americans wants a job but doesn’t have one.  Obama has tried already to fix the economy by increasing the deficit, creating revolving door jobs in specialized fields and tax-paid government offices, and punishing businesses and banks.  But for some reason it isn’t working.

The economy is just one more area where Obama has promised and tried to deliver one thing and ended up doing the opposite.  Obama had taken a break from the economy, perhaps out of frustration, to work on Health Reform.  He worked very hard on a bill to make healthcare costs go down, expand availability, punish evil insurance companies, and bring open and honest government back to Washington.  Instead, he ended up with a bill that raises healthcare costs, forces all Americans to buy from the evil insurance companies, leaves nearly 25 million still uninsured, and has been crafted behind closed doors by lobbyists and special interest groups.  The good news is that the bill was defeated.  The bad news is that Obama and his party are back to trying to “fix” the economy.

Obama’s new plan to fix the economy includes tougher regulations on banks who are already freezing lending, higher taxes and mandates on businesses who are already freezing hiring, and a mix of tax breaks for childcare and college loans.  Unfortunately, working parents and recent college grads don’t hire people.

Obama is hoping that his populist approach will be the opiate of the masses.  In his State of the Union address he will promise three year freezes on certain domestic spending programs.  Don’t worry, entitlement programs, popular programs, the military and the pentagon are all exempt.  And you can count on pork vote buying being exempt as well.  This is just a recycled broken promise.

Even if a spending freeze were to happen, he will make up for it with billions in spending and “stimulus”.  The deficit for next year will match this year at $1.4 trillion, but economists predict that a three year spending freeze will only amount to $250 billion.  Unless he drops the “doc fix” Medicare bill, that money is already spent.  But what you will hear on Wednesday is how he is cutting the deficit and making the tough decisions.

Next he will talk about punishing Wall Street fat cats and getting our money back.  This is the Liberal way.  Take our money away from us by taxing our employers and the products we buy, and then give it back through social and domestic programs.  To us it appears that Obama is robbing from the rich and giving to the poor.  But in the end, all they have done is make us comfortable as the life ebbs from our economy.

Obama will finish his speech telling us about his new domestic policies.  Instead of pro-business tax cuts and incentives for growth, Obama is going to offer tax credits to the poor and middle class to make us more comfortable in our America.  He will vilify those who break free and work their way into his America and announce how he plans to take care of us until enough employers can overcome his policies enough to start hiring again.

Victory for Free Speech and Call to Vigilance

This past week, in a 5 to 4 decision, the United States Supreme Court protected freedom of speech and overturned a portion of campaign finance laws that had made it illegal for groups of Americans to advertise for and endorse candidates by name.  Previously, if corporations, unions, or other organized groups of Americans wanted to campaign for a politician, they had to cut through the bureaucracy and create a special regulated 529 group to do it.  And even then, the best they could do is make vague comments about issues that candidates may have supported or opposed without mentioning the candidate by name.

In the government’s arguments in favor of campaign finance laws, lawyers told the Supreme Court that if someone wrote a 1,000 page book and finished it with “vote for so and so”, the book would not be allowed to be released within a certain time period  before the election.

What this ruling means is that Americans need to be vigilant.  We need to learn the issues.  A caller on this morning’s C-Span Washington Journal complained that he didn’t think corporations should be able to vote.  Fortunately for him, this ruling has absolutely nothing to do with allowing corporations to vote.  In fact, I would almost prefer a corporate vote to a vote from someone as ill-informed as this particular caller.  But it does demonstrate how easily many Americans will believe the absurd.  The fear is that many Americans will be overwhelmed with the billions of dollars in advertising unleashed by this ruling and will vote for whoever SEIU, Microsoft, and McDonalds tells them to.  That’s possible.  Have you tried the Subway diet because the TV said to?  Do you have a Shamwow and a Snuggy?  Did you get a Lexus for Christmas?

What I think is truly interesting is that the people making the loudest objections to this ruling are the Democrats.  Suddenly the gag rule is lifted.  Corporations can talk about what has been going on.  After the vilification of the banks, what do you think voters will do when AIG runs their side of the story in commercial form?  It will be interesting.

This could be especially damaging to Democrats who have recently all but conceded on their efforts to destroy our healthcare system and now are aiming to destroy our economy instead.  In fact, since the beginning of this week the DJIA has fallen from 2010 highs to nearly below 10,000 again.    It was down 552 points over Thursday and Friday.  Businesses are not excited about Obama’s plans to increase regulations and taxes under the pretense of creating economic recovery.

So why would I consider this ruling a victory for free speech?  If you remember, Obama decided to break his promise of taking public financing and the regulation that comes with it.  Instead, he raised a war chest of campaign funds and poured it into the 2008 election, filling the airwaves with future broken promises.  In the meantime, successful American businesses who would soon be struck by Obama’s policies were denied their freedom of speech.

As far as worried about corporate advertising, who would you have been more likely to believe in 2008?  Would you have believed the young, aspiring and promising Barack Obama?  That bright morning star?  Or the CEO of Freddie Mac trying to explain the Community Reinvestment Act in a billion dollar ad?  Nothing will change about your responsibility to find out the facts for yourself.

Now, as Obama has lost his Senate majority in what many consider a referendum on his healthcare plan in Massachusetts, he has returned to his populist attacks on banks and corporations.  What is Obama going to do when corporations begin running ads showing how many people they will have to layoff under a cap & trade system?  What is Obama going to do when AIG runs an ad showing how much they will need to raise rates to stay competitive when Obama hits them with penalty taxes?  How will Obama respond when insurance companies run commercials with charts showing how much Obamacare will cause their rates to rise?

I think that is why he preferred certain people and groups not having freedom of speech.

“Better Than Nothing”

As Obama’s health insurance industry bailout teeters on the edge, Democrats are going back to the mantra that got them through the pork stimulus bill and cash for clunkers.  It’s better than doing nothing.  Better than nothing was the quote from Democrat House majority leader Steny Hoyer as even Massachusetts voters consider flipping Kennedy’s seat to a Republican and killing the Democrat filibuster proof majority in the Senate.  The last time a Republican held a Senate seat in Massachusetts was 38 years ago.  The last time Ted Kennedy’s seat was held by a Republican was 1946.

What was promised was an open and honest debate on universal healthcare that would cover every American, decrease the deficit, avoid rationing, keep Medicare intact, leave the freedoms of private industry untouched while regulating the evil corporations that cancel people’s insurance plans when they get sick, and of course make the Republican party finally obsolete.  Instead, we got a bill that no one but Democrats, lobbyists, special interest groups and union bosses have actually seen.  Deficits will increase by a couple hundred billion dollars, healthcare will be rationed, Medicare will be cut (according to the bill), and Obama approved insurance companies will receive a bigger bailout than the Auto industry and banks combined when the government starts penalizing you for not buying insurance from Obama approved private corporations.  But it’s better than nothing, right?

Doctors, healthcare providers, and non-union members with high quality insurance plans will be taxed.  Oh, and before the homosexual community pursues gay marriage much further they should consider that Obamacare includes a marriage penalty that will increase health insurance costs by as much as $2,100 more for married couples making $50,000 than couples who are simply living together.  Oh yeah, and no free public option.  But it’s better than nothing.

Part of the reason Hoyer might think the Senate bill is better than nothing is because it makes all American pay for abortion.  The house bill actually protects pro-lifers thanks to Congressman Stupak, who is ironically a Democrat.   The Senate bill does not have the same protections thanks to the now infamous Senator Ben Nelson buyoff.  Democrats seem hellbent on making pro-life conservatives pay for abortions and organizations like Planned Parenthood who break parental consent laws and protect 31 year olds who get 13 year olds pregnant.

If anyone needed to see what healthcare rationing might look like, they need not look further than the H1N1 vaccine debacle.  I don’t remember there being massive shortages of Viagra, Prozac, Riddlin or other popular privately produced and distributed drugs in recent history.  But let’s let the government manage and distribute our healthcare.  It’s better than nothing.

We can hope that a Republican could win in Massachusetts.  We can hope that if he does the Democrats will respect Massachusetts law and not let soon to be former Senator Paul Kirk (Democrat, long time Kennedy friend, and temporary appointee) cast a vote for the bill after his term expires today.  But I think Democrats have worked too hard for this.  Obama can hardly stand up and give his State of the Union address without being able to tout passing healthcare.  In the end we will end up with something that no matter how terrible it is, is “better than nothing”.

The Experts Are Catching Up

Someone once said that debt spending doesn’t equal wealth.  That same individual said that stimulus dollars on so-called “shovel ready” projects  was nothing more than short term revolving door jobs that would not result in growth.   Now I don’t claim to be an economic genius or some sort of scholar or market guru, but it is nice when the experts finally catch up to me and I can once again say told ya so.

Allow me to quote: “But AP’s analysis, which was reviewed by independent economists at five universities, showed the strategy of pumping transportation money into counties hasn’t affected local unemployment rates so far.”

“”My bottom line is, I’d be skeptical about putting too much more money into a second stimulus until we’ve seen broader effects from the first stimulus,” said Aaron Jackson, a Bentley University economist who also reviewed AP’s analysis.”

“Even within the construction industry, which stood to benefit most from transportation money, the AP’s analysis found there was nearly no connection between stimulus money and the number of construction workers hired or fired since Congress passed the recovery program. The effect was so small, one economist compared it to trying to move the Empire State Building by pushing against it.”

This last month we were surprised to learn that 85,000 jobs were lost.  It was supposed to be the first month in two years that we had positive job growth.  Now, with the poor economic progress, Obama is planning a second stimulus bill to give the appearance that he is doing something to solve the problem.  Will another stimulus plan bring unemployment below 10%?

Compare the result of the pork stimulus bill to the results of the Bush tax cuts.  In the six months leading up to the 2003 Bush tax cuts we lost 267,000 jobs.  In the six months after the 2003 tax cuts we gained 307,000 jobs.  We went from 1.7% GDP growth to 4.1%.   And before you argue about Bush’s tax cuts increasing the deficit, it took Obama 7 months to increase the deficit more than Bush did in 7 years.

If we want economic growth we need to take more money out of the hands of government and put it in the hands of small businesses and individuals.  How long until the experts figure out that Cap and Trade, mandatory insurance, and more pork bills are not going to fix our economy?

“The System Worked”

“The system worked“

- Janet Napolitano talking about the Christmas Eve Bomber, Dec 27, 2009

“Our system did not work“

- Janet Napolitano talking about the Christmas Eve Bomber, Dec 28, 2009

In the news this past week, we learned that the terrorists who flew from Nigeria to the US loaded with powder and liquid explosives was trained in Yemen by Al Qaida operatives.

In a completely unrelated story, the UK Times Online is reporting that many of the Guantanamo Bay detainees who have been released are returning to Yemen and rejoining Al Qaida.

On the domestic front, in another completely unrelated story, President Obama is preparing to free more detainees from Guantanamo and help shut down this prison that has become a recruiting tool for Al Qaida.  Those detainees will go home to their countries where one in seven rejoins terrorist organizations.

And in another completely unrelated story, President Obama will be sitting down today with his top security advisers and heads of agencies to try to figure out how someone from Yemen who trained with Al Qaida got into our country with explosives on a an airplane.  And why is Yemen all of a sudden an issue?  What is causing this increase in Al Qaida presence in Yemen? Somewhere there is a disconnect.  Somewhere there is a breakdown in communication.

I sure hope they figure it out soon.

Progressives Once Again on the Wrong Side of Progress

“I believe that involuntary servitude, as it exists in different States of this Confederacy, is recognized by the Constitution.  I believe that it stands like any other admitted right and that the States where it exists are entitled to efficient remedies to enforce the constitutional provisions.  I hold that the laws of 1850, commonly called the ‘compromise measures,’ are strictly constitutional and to be unhesitatingly carried into effect…I fervently hope that the question is at rest, and that no sectional or ambitious or fanatical excitement may again threaten the durability of our institutions or obscure the light of our prosperity”

- Franklin Pierce, 1853 (from his inauguration speech)

Franklin Pierce was one of the three Northern Democrat pro-slavery Presidents leading up to the civil war.  Fillmore, Pierce and Buchanan put policies in place that expanded slavery and prepared the country for the South to leave through their inaction.  They considered slavery to be a constitutional right, argued that it was the law of the land, and called those who opposed it fanatics.  They praised their compromises considering peace and tranquility to be of more value than the freedom of the black man.  Their goal was to provide compromises between the North and South in hopes to keep everyone calm and sedated in the face of the greatest horror in America’s 19th century.

But where is the so-called “Progressive Party” in the face of the greatest horror of the 2oth and 21st century?  Where does the Democrat party stand on the 1.3 million unborn babies who are killed in the womb without enjoying the rights provided to them by the fifth amendment to the Constitution?

“The Democratic Party stands behind the right of every woman to choose, consistent with Roe v. Wade, and regardless of ability to pay… We believe it is a fundamental constitutional liberty that individual Americans — not government — can best take responsibility for making the most difficult and intensely personal decisions regarding reproduction.”

- Democrat Party Platform, 1996

This “progressive” stance on abortion is now to become the focus of the debate on a national healthcare program that forsakes the constitution and forces citizens of the United States to buy health insurance from government approved corporations.   What stands in the way now is whether our government, once of the people, will now be of the corporations AND Planned Parenthood.  Will our government force all Americans, regardless of conscience, to pour our tax dollars into the coffers of the abortion factories?  Once again, it is Democrats alone who will decide.

“The men who have brought us this [anti-abortion funding amendment] don’t single out a procedure that is used by a man, or a drug that is used by a man, that involves his reproductive health care, and say they have to get a special rider…There is nothing in this amendment that says if a man some day wants to buy Viagra, for example, that his pharmaceutical coverage cannot cover it…”

- Senator Barbara Boxer

While Harry Reid is comparing passing this universal healthcare bill to ending slavery, and the progressives are comparing killing the unborn to taking sexual performance enhancement drugs, hopes are beginning to slip away for a conscience protection in this bill.  Unlike Pierce, who believed the people of the various States had the right to choose whether slavery was constitutional, Reid and Pelosi will make every American pay for abortion.  Had Pierce commanded that the North fund the slave trade, those radical, regressive, and uncompromising abolitionist pests may not have waited for the South to secede or Lincoln to lead them.

So what will be the result when Pelosi finds Rep. Stupak’s price?  Already Senator Ben Nelson’s vote on abortion was bought for $45 million, and there are more stimulus pork bills on the horizon.  What will happen when you and I are forced to pay for abortion or face jail for tax evasion?  Will Americans stand once again for true progress?  Will we once again rise up for the rights of those who have no voice?  Or will we choose to be as silent as those who have no choice.

Dear Sen. Nelson, Pt 2

Sen. Nelson,

I tried calling, but your voicemail box is full. Please vote no on this healthcare bill. I know you probably haven’t had a chance to read the final bill yet and may not get to before you vote on it, but according to Obama’s own Health and Human Services department this bill will increase the cost of healthcare by more than $234 billion. I can’t afford that, I know my boss can’t afford that and I can’t afford to lose my job because he can’t afford my healthcare.

In addition, I have friends who have healthcare coverage through a Christian Co-op that has always worked well for them. The Democrat health plan would penalize them for not buying corporate insurance and going through this co-op instead. Isn’t that a violation of our first amendment protections?

The deals made to secure this bill also violate the constitution. Our founders never envisioned a Medicaid program, but they certainly would never have accepted 49 states paying the bill for 1 in order to secure a Senator’s vote on a massive unconstitutional healthcare bill that forces us to buy from government approved corporations. Senator Nelson, that is Fascism, pure and simple. It is also indicative of how socialist governments work. Whoever does a favor for the people in power, gets favors from the people in power. That is not America and I am ashamed of your party.

I know your mind is made up. I wish you were up for election this coming year. Somehow we need change. We need to change course from this current administration’s goals.

Sincerely,

One voice in favor of a return to the Constitutional Democracy we once enjoyed