Saturday, August 20, 2011

Credit is Available... But Confidence is Not!!!

Doom and gloom has rarely served anyone well.  But reality is a tough pill to swallow at times.  Revisiting a time when the stock market's "floor" was put in somewhere in 2008, I never really bought it.  After all, while the pundits blew the "All clear call" from the beach most of us understood that the waters were still shark infested. 

Unlike the Great Depression, credit is readily available in this economy.  That is the biggest lesson that was learned from the Great Depression...  our economy runs on credit.  Unfortunately, this time around we too will realize that our economy runs on employment.  And the persistence of long-term unemployment will not only cause a continual ripple effect through the economy, but also destroy one of the things the entire world economic system has taken for granted; the U.S. consumer's disposable income.

Splinter groups like the Tea Party call for less government, less taxes, less regulation, and an end to all entitlements, most agree that the Republican's meant everybody else's pork not their own.  But the Tea Party would suggest they meant EVERYBODY's pork.  Democrats are slowly realizing that this means structural changes to entitlements that both parties have long favored namely Medicare and Social Security.  It is my belief that the Tea Party will eventually become a third party, as neither Democrats or Republicans have the wearwithall to stomach some of the proposed cuts.

Stock Watch
D  held since 2006
20% Gain (Plus approximately 2.00 per share dividend)

Janzen's Short Play LULU
-20% Loss (From recommended peak)

Silver Coins
Purchased July 2007

Monday, August 15, 2011

Buffet on Taxes

(Reuters) - Billionaire Warren Buffett urged lawmakers to raise taxes on the country's super-rich to help cut the budget deficit, saying such a move will not hurt investments.
"My friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice," The 80-year-old "Oracle of Omaha" wrote in an opinion article in The New York Times.
Buffett, one of the world's richest men and chairman of conglomerate Berkshire Hathaway Inc , said his federal tax bill last year was $6,938,744.
"That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income - and that's actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent," he said.
Lawmakers engaged in a partisan battle over spending and taxes for more than three months before agreeing on August 2 to raise the $14.3 trillion U.S. debt ceiling, avoiding a U.S. default.
"Americans are rapidly losing faith in the ability of Congress to deal with our country's fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness," Buffett said.
Buffett said higher taxes for the rich will not discourage investment.
"I have worked with investors for 60 years and I have yet to see anyone - not even when capital gains rates were 39.9 percent in 1976-77 - shy away from a sensible investment because of the tax rate on the potential gain," he said
"People invest to make money, and potential taxes have never scared them off."
(Reporting by Santosh Nadgir; Editing by David Holmes)

Thursday, August 11, 2011

All the King's Horses and All the King's Men...

[02950000] Large
At U.S. Megatrends, we have never completely bought into the illusion that the U.S. or world economies were completely on solid footing.  Quite contrary, we have speculated before that government intervention has in many regards only temporarily averted market meltdowns, and more importantly contagion. In 2008 and 2009 several of us including the Axman and myself had placed short positions as a hedge on a market that we both understood to be fundamentally flawed.  

Personally, I am thankful that the government has tools in the toolbox of the Department of Treasury and Federal Reserve to address these issues.  The good of our country, and the economic recovery that had ensued to this point has had less to do with market fundamentals and more to do with intervention.  And many of us understood the intervention to be a temporary fix, not a true solution to the problem. ITulip's Eric Janszen explained (paraphrased)  That attempting to re-inflate the F.I.R.E. Economy (Finance, Insurance, and Real Estate) would only prolong the pain by treating the symptoms, not addressing the cause of our true economic problems.

Now what once appeared to be a small crack in the world economy has now become a deeper rift not only played out in financial markets, but also in the streets of places like Athens, Tel Aviv, Damascus, Tripoli and of all places London. London should be a city of particular interest as what was once a spark over a police shooting (Click Here) , has erupted into a maelstrom of looting a pillaging.  A darker shadow has reared its head, one that has revolutionary overtones.  Not one particular ethnic group or social class is to blame for the riots, but a generation of youths who have a bleak outlook on their future.  (Click Here)  This is by no means defense of the youths, but more  it clearly identifies a group with at explanation behind their behavior.
I do not believe the riots will continue in London. But there is a reasonable chance that the conditions are right throughout the world for riots in other locations. Every country has populations like this. In difficult economic times their presence is more pronounced.

We realize that globalization will take a few steps backward during this next decade... and it will take at least a decade to straighten this mess out...  And whatever emerges as the economic and political order, we must understand that it will be new and different from the old one.  For now financial markets will continue to reel under the weights of fear and more importantly a deeper mistrust of financial institutions and sovereign debt.

In the United States, we have seen a group of anti-tax free market capitalists known as the Tea Party who are willing to shut down the government in order to save it.  And whether the Tea Party is right or wrong in their actions, they have clearly helped move the political football down the field. The Republican Party to a degree has been radicalized by this movement.  And the movement tends to be based on economics as well as a table-turning political as well as social agenda.  Many Americans thought they were Tea Party members until they learned that the Tea Party was going to cut their favorite government programs as well.

Investments will center around a few simple themes.  I do not believe the stock market is broken.  I do believe it will not continue to be business as usual.  A more aggressive effort must be made to win back the confidence of the people.  The term bankster was a term given to bankers during the 1930s.  And it will be more difficult to erase the image this time around.

Investment Watch
Long Positions in Silver and Gold (both physical and silver).
Long Positions in stocks that pay dividends (particularly those with stable balance sheets).
Sector Specific Plays  (As some sectors do see tangible growth in spite of economic conditions).
Shorts Specific Plays (Stocks that rely on discretionary spending and middle class income).

A renewed belief that the best money invested is a product or service that you have direct control of.  Just throwing money into the wind, and hoping that it grows does not work long-term on Wall Street.  Rely more in your own abilities to develop a cash flow system, and less on the good will of Wall Street. 

Friday, August 5, 2011

Charter Schools and the Lack of Accountability

Charter School Company Told to Open the Books

***  Did you know that charter school conglomerate, White Hat Management, had refused to open their books and accounting to state officials?  A judge has ruled that the state and the public has the right to know what happens to our tax dollars.


A judge in Ohio has ruled that a private management company that operates a group of publicly funded charter schools must turn over financial records requested by the schools' governing boards.
The Wednesday ruling in Columbus comes in a lawsuit in which the boards of Hope Academies and Life Skills Centers in Cleveland and Akron asked to break their contracts with Akron-based White Hat Management LLC.......

.......Among records the boards seek are those related to school operations as well as money spent on lobbying for the 2007 law. The judge says White Hat must only turn over records related to the use of public funds.

Here is the story from the Dispatch:

....Common Pleas Judge John F. Bender ruled that White Hat Management Co. is required to disclose the financial information under Ohio law.

State law “clearly and unambiguously requires operators of community schools to provide their governing authorities with a detailed accounting of how public funds are spent,” Bender wrote in a 12-page decision on a request by several charter schools in their ongoing lawsuit against White Hat....

.....Under contracts with the schools, White Hat receives 96 percent of the state aid they receive.....

OMG!  White Hat Management only gave 4% of their total state money to the actual charter schools for salaries, supplies, etc.??????  4%????  There are two things that are clearer now:

(1) This explains why David Brennan is able to give millions of dollars to Republican candidates because he is using your state money for his political objectives.

(2) This also helps provide information on why the White Hat charter schools performs so poorly--- the students are not getting the materials and support they need.

from the Stubborn Liberal