Our Leading Export? Healthcare Reform... It's a go with NEOP...and other investment ideas Who Can You Trust?

Our Leading Export...
Interesting news in China this week as the Finance Minister is reconsidering China's policy of pegging the Yuan to the U.S. dollar. While most Americans have cried foul all-along, China's revelation shows in many ways, its "sure-bet" policy to own massive amounts of U.S. debt from y.o.y. trade imbalances as the best way to build China.  Now, more pressure from the Obama administration puts China is a position where they have may "have to" absorb some of the world's economic crisis.  This move in Chinese currency rates could in-fact make this week's FOMC meeting anti-climactic at best...  No changes in the current U.S. rates, with China treated more as a whipping boy in this deal.  Still though, the Euro as wel as the dollar could feel a jolt if and when China modifies its purchase policy of T-bills.  This appears to be an almost inevitable outcome. Forbes also suggests that gold could see a sell-off as a result, with oil being neutral to bearish.   See Barons 

What Health Care Reform?
In a recent interview on NPR David Walker from the Peter G. Peterson Foundation Foundation and chief achitect of I.O.U.S.A. cut right to the point: 

"Which budget item soaks up most government spending?"
A.  Discretionary Programs
B.  Mandatory Programs

The Mandatory Programs which Walker refers to as Structural Debt will exist long-after the current recession is over. Walker (who is a conservative) cited both Congressional parties as the culprits of this great undoing, he specifically criticized the G.W. Bush Administration as reckless. However, Walker's concern is that the current administration might even double Bush's mark.

More importantly, Walker believes the current Healthcare Reform Bill, as appropriate but it does not meet four critical criteria: 
It pays for itself over 10 years. It does not add to deficits beyond 10 years. It results in a significant reduction in the tens of trillions of unfunded obligations we already have, and it results in lower health care cost as a percentage of the economy after the passage of the bill than we would have with no bill.
The legislation does not meet those four tests.
1.  It does not pay for itself over 10 years.
2.  It will add to deficits in 10 years.
3.  It does not result in the reduction of trillions of dollars in current unfunded liabilities.
4.  It does not result in healthcare cost as part of the overall economy.
Finally, let us realize the death grip that the American Medical Association has as a collective lobbying group as well as a preveyor of public health policy. The United States is the ONLY industrialized country that has an OPEN BUDGET on health care expenditures. We'll talk about a few remedies in our next blog.

NEOP and other investments
I am hot on the trail of NEOP. Most of my investments have been "fun", and others not too "fun" at all. It is never an investment objective to have fun, but to increase wealth. NEOP has provided me with a wild ride thus far. For instance, it spiked .22 cents on Thrusday before it closed up only .02 cents.  The ultra-conservative CEO BUPP has suggested that LYMPHOSEEK is in the final stages of getting FDA approval.  Should this Phase Three approval come to fruition, it could mean a siginificant move in share price. Other products in development include RIGGS.  For more information click this link.

I placed  few orders for 1 then 9 HBAN calls and 1 then 9 C calls to no avail. I am low-balling as my previous experience has suggested punishment for "chasing" shadows. With Dodd's version of a financial "overhaul" and the Republicans with their version we can easily agree that regardless with which bil is passed, the fixs is in on both versions... that much we can "bank" on.

My CLWR calls are shoing signs of life and the stock moved approximately 15 percent in price this week. I bought January 12.5s for cheap and watching development with considerable interest.

Last, Domionion Natural Resources has time and time again been the turtle in the turtle v. the hare race. Still though, it is crossing back into teh 40s range. My hope is that this is not a "channeling stock" and that it is able to hold. Word on the street is that D will use cash reserves to up its stock repurchase program.

Who Can You Trust?
I can most assuredly tell you that you cannot trust an American-Muslim in Yemen. With Al-Quaida links this leovely was caught via a security sweep. While in captivity, he talked one of his jailers into removing his handcuffs for ritual prayers. Once the jailer turned his back, the American-Muslim lifted his jailer's gun and sent him to meet Allah earlier than he had anticipated.

It All Comes Out in the Wash...

It all comes out in the wash... at least that is how it is supposed to be. We put it all in the machine, allow water to scald the fabrics, specially designed detergents to penetrate the dirt and stains on our fabrics, grinding and twisting of machines, and most importantly the rinse cycle to wash away all the filthy water...

I believe that our economy is stuck somewhere in the wash cycle, and has yet to rinse itself clean. Several troubling reports seem to reitterate this issue: 

For instance the New York Times ran a story (on the Eve of over 1.1 million Americans losing their unemployment benefits) and slowly ebbing from middle class to wokring class poor. In this story, anecdotal evidence was provided about those who have lost jobs, exhausted savings, and are behind in their mortgages. Compounding this dilema was the duration of this recession, and general lack of belief in relief.

As President Obama rolled out his latest version of a mortgage relief plan, it seemed to concentrate the bulk of its efforts on states that have seen a 20% or more decline in property values. Of course, Florida, Texas, California, Nevada, and Arizona headed the list for relief. However, it is safe to say that this plan, at the very least is short-sighted in that it only addresses states which seemed to have benefitted from the largest run-up in property values, while neglecting states in the heartland like Pennsylvania, Ohio, and Ilinois which are suffering from an abnormaly high rate of foreclosures. Citing that negative equity is the greatest drag on our economy, CNN reported most homeowners are not at risf of bankruptcy if they are 1.  Not planning on selling their house.  2.  Can currently afford their bills. 

Couple these stories with some of the latest revelations on a Goldman Sachs' Greek Toga Party, AIG counter-party bailouts for banks, and Tim Geithner's thinning smoke screen that is rising to show a new degree of ugliness, and it makes Robert Prechter of Elliott Wave International appear to be a prophet.

To readers, Pretcher alludes to a simple remedy... a Federal Reserve that prints so much money that inflation sets in... or a prolonged time period where the Federal Reserve will work feverishly to repair its balance sheet, and tighten monetary policy. Prechter makes the case that the U.S. dollar will strengthen in value, at the expense of credit... metal stocks, and the economy. And if Prechter's threory on a rinse cycle comes to fruition, then it is time to batten down the hatches.  Let me know what you think!  

 

"Greece" your Surfboard?

Greece appears to be on the brink of receiving another bailout for a failed financial system. Socialism failed Greece... plain and simple. Sure Greece calls itself a democracy, but in reality socialism dominates their poiltical and economic landscape. Maybe an over-reliance on government help... maybe an under-reliance on self-sufficieny. Whatever it is, the Greeks are going hat-in-hand to the European Central Bank for bailout funds. Greece, while a minor player in total economic output (approximately 2-3% of entire EU), there is a reason to quell rising fears of political and social unrest.

This familiar theme will soon echo through California. According to a Nouriel Roubini interview this morning, there is little to no doubt that Treasury and Federal Reserve will come to their aid. Make no doubt about it, when Arnold Schwarzenager comes to D.C. looking for help, he will get whatever he needs. After all, unlike Greece's anemic contribution to the EU, California represents 15% of U.S. GDP. And that figure is nothing to sneeze at!!! This brings us back to a familiar theme. The U.S. government has benefitted from being a reserve currency. It can print money at will, and will more than likely print its way out of this situation as well. Bernanke, Geithner, and friends will assure everyone that everything is o.k..

According to R Seetharaman of Doha Bank, a more sinister force is at work. He believes the massive amount of de-leveraging that has taken place, specifically in various debt vehicles has done nothing more that transfer wealth from Main Street to Wall Street. Toxic assets infected everyone throughout the world. Mr. Seetharaman suggested that the only way to fix this mess is to build an economic system where everyone plays by the same rules. He believes the crisis is much more that a economic crisis, it is a crisis in human nature. Seetharaman believes the United Nations must be empowered to solve the crisis. Interestingly enough, he also believes in the massive power of the United States as a world leader underscoring its $13 trillion dollar economy!

Click Here for the Link

Taxpayer Taken... Ode on a Grecian...

Taxpayer Taken for $2.3 Billion...
The U.S. Treasury (funded by U.S. taxpayers) was on the receving end of worthless warrants as CIT failed to meet"contingent rights" listed in its reorganization plan. There is little to no coincidence that former Merrill Lynch CEO John Thain's appointment riled up moralists who remember shadowy deals that went down on the eve before Bank of America took them over. But hey, if you have a funding source like TARP available, it is much easier to forgive and forget... Afterall, who is going fess up for TARP? I wonder if these loan deals would have been so easily forgiven if the mafia was breaking bones over late payments?

Ode on a Grecian Urn
English poet John Keats did recognize the timeless beauty of a Grecian Urn. But, it was a universal truth of that Grecian Urn that brought it's true beauty. The European Union's Central Bank is facing a truth that is not beautiful. Iceland, Irealnd, Spain, Portugal, and now Greece are bankrupt. Just when it appeared that European markets were on the mend, Greece's soverign debt became the latest story on a continent that continues to deteriorate. One analyst commented along the lines that this debt is now confined to Lower Europe. However, it is becoming more apparant that soverign debt problems are actually spreading. The question is how much longer can the ECB continue to bailout countires that are unable to service runaway spending and debt? This too should serve as a stinging reminder to the liberals who often confuse liabilities with assets. Programs that do not generate wealth will in the end, destroy good economies along with the bad one. That is one reason the Europeans should re-evaluate those nations who are part of the EU.

'Beauty is truth, truth beauty,—that is all
Ye know on earth, and all ye need to know.' John Keats

Stock Watch
Last year, this investor parked a lion's share of one retirement account in Treasury Bills. Sure, I missed the "big rally" from March 09 lows to January 2010 highs. But, I have learned that Vangaurd's Precious Metals and Mining would have actually lost me money had I ventured to re-enter that VGPMX position. As for now, I will keep those monies parked in Treasury Bills.

D or Dominion Natural Resources has been an interesting story. I hold a strong position and have played the dividend game here. Oil and gas interests, while out of favor with the current administration, will remain a significant part of the energy for years to come. There has even been talk that the "over-drilling" which took place during the last oil boom has in-fact created significant natural gas supplies and cheap prices. This will be a simple relation of expediency as opposed to desire.

NEOP still remains on the move. Reviews at a NYC Investors Conference gave NEOP high ratings, particularly on Lymphoseek and Rigs. Either one of these breakouts could push this little dandy into the ozone layer.

I do like SLV at some time int he future... I will look to re-enter this position in the 14.00 range.

And Mr. Barofsky says...

My wife and I are selling our house. We have actually picked an agent, and will be signing papers tomorrow. According to our agent this is the "right" time to make a move. After all, there is a current $6,500 tax credit available to all home buyers. (This applies to those who have lived in their home for five years or more and are moving up). Even though I am aware of the next wave of ARMS to reset... an unemployment rate that exceeds 10% nationally, and a rash of bank failures, we have made a decision to place our home on the market.

Chances are, we will not get anything close to what we "think" our home is worth... However, we will definitely sell it for more than we bought our home for. According to the demographics of our little town, the burg is still a desirable place to raise a family. As a result, home prices have not fallen as hard as other locations... at least not yet. However, we have taken a slight sip of reality and acknowledged that our home is not worth the original asking price that our old agent cooked up this summer. So we will settle.

Yet things are not so bad, after all we will be "buying up" in a depressed housing market. Rates are still low... (I was quoted 4.75% for 30 years the other day), and I believe the best days of our community are still ahead of it. Even as Chrysler prepares to shudder its doors.

Interesting enough, Mr. Barofsky has a more critical view of the housing market. Barofsky suggests that a home buyer tax credit actually artifically inflatea housing prices. That, a re-inflation of housing at this point in the game only causes a another bubble to start. Barofsky also believes that Federal officials are putting pressure on institutions to make loans just when the banks are trying to recovery from the last batch of bad loans.

As for my wife and I, we are going ahead with the house sale and purchase... At the end of the day, we have to remember that life is for living, not fretting over the what-ifs all the time.

Stock Watch
I exited my position in SLV a bit late. Still holing on to over 35% profits, I had a lock on numbers well over 55%. Supposedly the sell-off was due to a reduction in stimulus from China's government. Since silver also serves industiral applications it took a beating, although not as much as some of the basic metals miners life CLF.

I am anxiously watching NEOP continue to move as my original investment is nearing the 200% return mark. I entered a second position which is up an additional 20%. The greedy side of me sees another run that could make this one a real homerun. Still though, I am reminded of the stellar performatnce of 2008 followed by the over-zealous beating I took in 2009... and I stil feel a sense of caution in the air of an all-in type approach. Once bitten twice shy!!!

Points to Ponder

Points to Ponder

#1. While my wife and I have continued to interview realtors, a common theme has come out. Let's price this home to sell while there is a tax credit. My wife and I questioned whether the real estate market was going to get better or worse in the next two years, again the the chorus echoed that things were probably going to get temporarily better... then turn worse.

TC: "So what would make things get worse I asked?"

Realtor "To start with, there is a gigantic wave of ARMS that are coming due this year. Many of these people bought at the top of the bubble, and now are stuck in homes they cannot afford. Secondly, many of these folks belong to the legions of unemployed who have been living off savings and have depleted those savings and 401 K accounts."

TC: "Doesn't this mean that the government will be forced to keep interest rates low, and extend home-buyer programs to sop up all the extra inventor?"

Realtor: "Not necesarily. Congress had a difficult time pusing through the last credit and now it is more than likely that the Federal government will start addressing the national debt."

Okay, I get the point. If only one realtor told me this it is a pressure sales tactic. However, this seemed to be a common theme so now I am likely to believe them all... even if instinct tells me something different.

#2. Maybe it is appropriate to think of a Civil Rights slogan on Martin Luther King Day. "No Justice. No Peace." Congress seems poised to consider place some regualtion on the books that would not allow banks to get too big. (See Glass-Stegall Take Two Yet, don't think Jimmy Dimon and friends who probably have the most effective D.C. lobbying group are going to roll over on this one. According to Dimon, they need big banks that offer many different vehicles which can compete against other big banks. (See Dimon) Afterall, a Wall Street banker would argue that the natural selection did take place, and that the surviving banks should not be made to pay for the sins of banks like Lehaman, Merrill, and Bears Sterns which do not exist any more. If is my belief that lots of talk, and little action will be the end result of this game.

Please note that when the public backlash against bankster pay came up, Dimon just walked away... Even Dimon would turn a little red in embarassment as the Wall Street Journal reported that Wall Street pay is up 18% from last year. Maybe this is why some many firms have tripped over themselves to pay back TARP funds... no obligations to the pbulic means no government regulations right?

#3. The esteemed Professor from Michigan has a few interesting points to ponder regarding Obama, Healtcare, and the Senate race in Massachussetts. A Republican senator from MA...come'on!
Stock Watch

NEOP move to $1.54 doubling my original investment amount. While I am inclined to take profits, I may well hold out on this one to see if the firm is bought out by a competitor. If big business cannot think of a way to build their business, they always have the option of buying someone else's "good ideas."

CLWR I bought 1/12.50s and will look for this to be a winner if technology and global infrastructre continue to be a theme.

SLV lost a little this week, however it appears that this is only a breather... as long as interest rates stay low, and China continues to use silver in industrial applications there will be a part two to this story.

Another Day... Another Dollar... Stock Watch...

Another Day... Another Dollar...

This title seemed to be a logical summary for the market over the past year. Dollars for TARP, Dollars for TALF, Dollars for Healthcare, Dollars to held states meet budget short-falls, and Dollars to the bloated numbers of unemployed Americans. As mentioned in previous blogs the U.S. Dollar's reserve currency status will be challenged over the next five years. Representative Steve LaTourette in a townhall meeting back in August made reference to the weakening dollars suggesting that a day could come where no other countries are interesetd in purchasing U.S. Treasury Bills (see Bank of England's last ditch effort to support the Pound Sterling) and suggested that the same could happen here in the United States. Congressman Ron Paul stated it more plainly suggesting that no government fiat currency ever stands the test of time because there is such an overwhelming urge to always spend more than the government makes, therefore driving the true value of that reserve currency into the dirt. Should this trend hold true, then one could continually make a case for GLD, SLV, and oil as the inflationary hedges.

Still though, he are reminded that Time Magazine Man of the Year Ben Bernanke is an expert on the Great Depression. That part of the reason Time Magazine raised Bernanke to this level was due to his financial engineering and manipulation along with the help of Boy Wonder Tim Geithner. Bernanke's insistence on pumping money into the economy was seen as a way to keep the wheels of U.S. credit mechanisms greased. We are reminded of his promise to sop up extra dollas before the inevitable wave of inflation weakens financial markets further, and send T-bill holders to the exit dors. With another wave of 2010 ARM's to hit, CRE on wobbly legs, and an unemployment rate of near 10.5% you can count rates staying low. This is not to sway financial institution into lending again, actually it is quite the opposite. With easy profits on Free TARP cash, we can only believe that cash positions + TARP repayment does not = an all clear sign for the economy.

I am led to believe that the thinly traded rally that started last March and has continued to the waning days of 2009 might be up. TARP funds are being repaid and banks are holding cash. While some investors are considering a re-entry into the market, to many it would seem almost fool-hardy to do so. Some experts are predicting a pull-back in early 2010. Others seem to think that this train will gain another 25% by year end. As one market strategist put it "If there is inlfation it is a flood of money into the market. All boats rise with the new flood of water."

Stock Watch
What started off to be the third and fourth leg up in my investing portfolio became much more of a roller coaster ride than I had anticipated. Call it tunnel vision if you would like, put I watched much of my hard-earned profits of shorts ebbed away with the rally of 2009. If I would have been the student of history and remembered the Great Depression charts, I would in theory have anticipated that whip back. Instead though, I created a few positions which have become my financial Gibraltir. SLV, D, and NEOP stand as my success stories. Also, I should include a profitable move in PQ which removed a bit of the sting I suffered in other losses. I have, and will continue to evaluate a few companies that will surely find success on this new playing field including Lucent and maybe even look-sees at FNM.