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Thursday, December 1, 2022

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Which Way Wednesday – Republicans and Democrats Both Want to Kill You!

What is happening to this country?  

Robert Reich points out that, in announcing the Republicans’ new budget and tax plan Tuesday, House Budget Committee Chairman Paul Ryan said “We are sharpening the contrast between the path that we’re proposing and the path of debt and decline the president has placed us upon.”  But the plan doesn’t do much to reduce the debt. Even by its own estimate the deficit would drop to $166 billion in 2018 and then begin growing again.

The real contrast is over what the plan does for the rich and what it does to everyone else. It reduces the top individual and corporate tax rates to 25 percent. This would give the wealthiest Americans an average tax cut of at least $150,000 a year.  The money would come out of programs for the elderly, lower-middle families, and the poor.  "So what’s the guiding principle here?" asks Reich.  "Pure social Darwinism. Reward the rich and cut off the help to anyone who needs it.

Most Americans who do have jobs continue to lose ground. New research by professors Emmanual Saez and Thomas Pikkety show that the average adjusted gross income of the bottom 90 percent was $29,840 in 2010 — down $127 from 2009, down $4,842 from 2000, and just slightly more than $29,448 in 1966 (all figures adjusted for inflation).  Ryan says too many Americans rely on government benefits. “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency.”

Well, I have new for Paul Ryan, says Robert Reich:  Almost 23 million able-bodied people still can’t find work. They’re not being lulled into dependency. They and their families need help. Even if the economy continues to generate new jobs at the rate it’s been going the last three months, we wouldn’t see normal rates of unemployment until 2017.  

I wish I could tell you that Ryan's Republicans made the most disturbing statement I've heard from Government officials recently – but they didn't.  That honor goes to Obama's Attorney General, Eric Holder, who gave a lecture at Northwestern University outlining his three-part test for determining when it's "OK" to execute a US citizen without a trial.  Steve Colbert explains it nicely:  

Do you see a theme here?  We are being de-humanized by both parties in our Government.  They already took away your right to Liberty under the Patriot Act and Paul Ryan and his cronies are making the Pursuit of Happiness a game for the top 1% only and now we have Eric Holder saying that the right to Life is not so much a guarantee under the constitution as it is a sort of conditional privilege – as long as you don't piss off anyone in power.  

At the moment, the people in power seem to be on our side so Yay!, I guess.  The NSDAP rose to power in Germany with a popular "war" against Communism in which they too lobbied to change the rules of due process to "expedite" the necessary pursuit of their enemies, who could be anyone – anywhere.  As they morphed into the Nazi Party, they took advantage of those "minor changes" to consolidate their power. 

Soon the definition of who constituted a threat expanded to Gypsies, Jews, Black People, Homosexuals and anyone else who happened to disagree with them – BUT IT WAS ALL LEGAL!  When did "never again" turn back into "maybe later"?

Again, we're not "one of those people" so we have nothing to worry about, right?  Actually, we are right back to where we were in 2007, when I first began warning people that the ever-expanding wealth gap in this nation only served to make the top 10% (those of us who can afford to invest in the markets) THINK that things were going well – even as they were falling apart.  Even now, the infrastructure of this country is coming apart at the seams and Paul Ryan wants to cut 80% of the Government's discretionary budget over 8 years.  It's not even a fantasy – it's a nightmare!

Obama has already cut Government spending more than any President since Bill Clinton and 600,000 Government employees have lost their jobs (making Obama's net job creation numbers seem much worse than they are) but no amount of cutting and gutting will ever satisfy the Republicans until our entire Government is outsourced to Corporate Interests.  

You are probably thinking "Great – which ones so I can buy stock in them" but this is not a recipe for growth – this nothing more than a wealth extraction – draining America dry the same way business people drain the cash out of a near-bankrupt company by refusing to spend money and draining all of the cash flow until it dwindles away to nothing – at which point they default on the debts, lay off all the remaining employees (reneging on their pensions) while the top dogs parachute out and head off for the next fatted calf to slaughter (see SHLD).

15 Greek Billionaires rank among the World's richest men (an outsized number as their economy is 1/50th the size of ours) and they and the poorer 99% of the top 1% drained that country dry over the past few decades but they all get to walk away and leave the other 20M Greek citizens and their children and their grandchildren to clean up the mess they made.  You can see it in Greece because there was no interruption of the program between the Reagan/Thatcher/Kohl revolution of the 80s and today, while the US had 8 years of Clinton pushing some of the wealth back to the middle class – which bought us a little more time but, with a debt to GDP ratio now over 100% and rising fast – we're not very far behind.  

gdpdebt.png

As you can see from the chart above, since the 70's and especially since the early 80's this country has done nothing but go massively into debt – JUST LIKE GREECE – and our wealth is being extracted by the top 1% – JUST LIKE GREECE – and they will throw the bottom 99% to the wolves when the bill comes due while the top 1% skate out of this country and leave it an ungovernable wasteland with no future – JUST LIKE GREECE but, unlike Greece – there will be no EU to bail us out.  

The EU bailout is merely and "extend and pretend" move by the wealth extractors to make the bottom 99% of the nations that haven't been destroyed yet think that business as usual is still OK and, meanwhile, let's borrow more money and lower those pesky taxes and eliminate those annoying regulations because "that will fix everything."  It's like the plot to a dystopian fantasy only we're not only living in it but we're playing the part of the unwitting masses whose lives are being sacrificed on the alter of profits for the puppet-masters.  

I know you don't want to hear this stuff but THIS is why I am concerned about the "rally."  I was right in 2007 but it took an entire year for the market to collapse – I don't think we have as long this time because our second assault on the Middle Class and the poor is akin to kicking them when they are already down.  On the left we have a chart of gas sales in California – the bottom 99% simply don't have anything left to give us and if people like Paul Ryan are going to insist on bleeding them until they die (or revolt) – he's likely to get that wish a lot sooner than we all think.  

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Gold Standard
The gold standard is a ridiculous  policy failure. It was proven during the great depression that the countries that left the gold standard first, were the first ones to recover. The countries that were the last to leave the gold standard  U.S., Germany, and France experienced longer and more severe depressions. When a country is presented with an economic shock like an oil shortage, financial collapse, weather related catastrophe or war. They must have the power to increase their money supply or they will be beaten down into a recession or depression. Must we never learn from what history has taught us

Big selling into the close, me likey

That's a ugly closing.

What a bot race right to the close and the sell bots win!

Decent volume sell off into the close in /ES…have a great evening.

Well, they definitely hate us and I wont justify what that maniac from my home state of WA did but most troops here dont like them either. It's just a bad situation.
Depending on what you factor in we are responsible for 30-50% of Afghanistan's GDP.  Right now we are working on economic strategies to mitigate the effects of us pulling out so they feel a minor recession instead of going into a great depression. This whole country is jacked though. At least in Iraq we were dealing with EDUCATED people, in Afghanistan we are lucky if the person we are talking to has a 3rd grade level education. 

I LIKE the "political" discussion. Very few places you can read about the relationships between the market movement, the world macro, U.S. government policies, all in one place.

Stjeanluc, i am referring to the horizontal volume bars on price levels.  That is really good information – i am just not sure how to do that in Stockcharts.  Any guidance would be appreciated. 

Volume bars / Robert – Here are some instructions:

1. Draw a SharpChart for whatever symbol you want. It's the standard chart in StockCharts.

2. In the Overlays section below the chart, pick Volume by Price in one of the drop-down list. There are no parameters to specify.

3. Update the chart

For more clarity I removed the other Overlays. By default Stockcharts displays moving averages but the clutter the chart in this specific case. But it's up to you.

Let me know if you have any other questions.

Another example of the volume by price chart:

It's interesting that there is no volume at all around the $560 area, looks like an air pocket. Might guess is that we could go through that in a correction but the $540/$520 level looks stronger. I think it's just another piece of information in the toolbox!

Phil:  I accept your price vs. wage inflation answer as a reasonable rejoinder.  Do not fall into the trap of believing that because someone raises a question, that you can infer their opinion.  I am not bullish.  Even if I were, the run-up has been so linear that I would be stupid to infer that always-paranoid investors — and if they're not paranoid, they don't read much — won't be stampeded into selling at the first serious blip downward, and I have no intention of getting run over by their panic.  Actually, I reduced my long-term fund positions [which I cannot do by pushing buttons, only by persuading others] very substantially in mid-Feb., giving considerable weight to your opinion, and reallocated others from Asia to Latam.  
 
Having said that, at what point will we see wage inflation, would you think?  Not much incentive to give raises at current levels of unemployment.  Government at various levels are still laying off people.  It looks more like a "wage deflationary" spiral – less income, less consumption, less hiring.  Unless they bring back the WPA [which I would support, given the condition of U.S. infrastructure and the hardships of the unemployed], it's hard to see how the currently modest increase in job growth can gain much traction.  Even hard-bitten 1% oligarchs are not so torpid as not to notice that an impoverished consumer cannot be in their long-term interest.  Nor should you blindly assume that they love the case of Chateau D'Yquem in their wine cellar more than they love their country.  That is caricature – "a portrait that exaggerates or distorts the essence of a person, animal or object" – and, if mistaken for truth, will lead to error.  
 
I don't even demonize politicians, although I'd like to.  I've argued on PSW for almost a year now that it is the large, faceless, nation-less multinational corporations, who are neither patriotic nor are their managers paid to be so, that have been converted into "citizens" for purposes of influencing politicians and elections and are the true political scourge we face. I will flip bullish when I see movement to change that, and I don't see a hint of it at this time.

Oil
Obama to visit Cushing Thursday
 
http://www.msnbc.msn.com/id/46813466
 
"With his Republican opponents hammering away at the president over high gasoline prices, Obama will visit Cushing, Oklahoma on Thursday to promote his energy policies, which include support for the southern leg of the pipeline."
 
-MSNBC News Site

Just thought this was one of the most awe-inspiring/horrifying things I have ever seen.


Behold! The AAPL Quarterly Chart!

STJ, thanks i got it now.  The detailed instructions were spot on.

DMND – Crazy crazy moves. stock was halted, opened -4.5% at 17:15 and now is -1% and heading back to the closing price.  Zerohedge didnt like the forbearance news

I read a Ben Stein comment, that I cannot find, to the effect that the same guys that buried Enron and caused the California energy crisis are now running the Oil futures. Evidently, Ben met these guys and said they were laughing their asses off about all the money they were making.

Expedia / Phil – Since when do stock prices relate to fundamentals… It's so 70's!

Holy Smoley Batman.  I didn't even think to do the Expedia comparison.  That is just unreal!  SG&A is a lot higher at Expedia, but man, that is just too much. 
 

Wow diamond…. along with the Patriot Act, GPS being used by law inforcment without consent, and on and on…..just peachy.

EXPE-PCLN/Phil: Wow, great heads up play!  Also interesting to note the big difference in Price/Free-Cash-Flow between PCLN and EXPE of 27 to 6.
 
Also a huge difference in stock based compensation between the two companies.  PCLN has $800 mil of stock-based compensation as opposed to $12.9 mil for EXPE.

Put this way, it does make sense:
http://www.washingtonmonthly.com/political-animal-a/2012_03/moral_fiber036199.php
 

Taken together, Ryan would cut spending…by $5.3 trillion, much of which currently goes to the have-nots. He would then give that money to America’s haves: some $4.3 trillion in tax cuts, compared with current policies, according to Citizens for Tax Justice.
Ryan’s justification was straight out of Dickens. He wants to improve the moral fiber of the poor. There is, he told the audience at the conservative American Enterprise Institute later Tuesday, an “insidious moral tipping point, and I think the president is accelerating this.” Too many Americans, he said, are receiving more from the government than they pay in taxes.
After recalling his family’s immigration from Ireland generations ago, and his belief in the virtue of people who “pull themselves up by the bootstraps,” Ryan warned that a generous safety net “lulls able-bodied people into lives of complacency and dependency, which drains them of their very will and incentive to make the most of their lives. It’s demeaning.”
How very kind: To protect poor Americans from being demeaned, Ryan is cutting their anti-poverty programs and using the proceeds to give the wealthiest Americans a six-figure tax cut.

And Ed's conclusion:
 

Yeah, Ryan’s tough love for the poor is pretty impressive. The “complacency” of the unwashed and unemployed has been especially evident of late. Fat and happy, they whistle on April 15 while hard-working job-creators at the top of the wealth ladder have to trudge to their accountants’ offices and sign over an unconscionable percentage of the assets that both God and nature—operating together, as they do of course, through markets—have assigned to them.
I know that some conservatives with the best will in the world have concluded that smaller government, lower and more regressive taxation, and in general a world where private forces exert more power produce a better society for everybody. I don’t agree, but I can respect their position. But when they befoul it with this sanctimonious claptrap about concern for the “moral fiber” of lesser breeds, it makes me crazy. When the housing market and the financial system collapsed and jobs disappeared—in 2008 or 2009, or for that matter in 1929—did millions of people suddenly lose their “moral fiber?” Does the ability via public assistance of one sort of another to feed their children or provide them with medical care when they are sick truly darken their souls and destroy their motivation to better themselves?
You know, much as I dislike the viral adolescent-intoxicating legacy of Ayn Rand—you know, the author of Atlas Shrugged, the book Paul Ryan used to (or for all I know, still does) require his staff to read—at least she had the honesty to disclaim any pity for the poor. Indeed, she called altruism the one great moral abomination, as bad as “looting.” I’d have a lot more respect for Paul Ryan if he loudly and proudly embraced the “virtue of selfishness” himself, and didn’t pretend he wanted to cut food stamps in order to improve the lives of the working poor through some character-building hunger.

Expedia-PCLN / Phil – One factor that has to play in the valuation is that Expedia grew revenues 13% and income 12% as opposed to PCLN who grew revenues by 61% and income by 100%. I am not saying that they will repeat this performance year after year but over these 3 years, growth has been much greater at PCLN. Another reason why I also like the PEG ratio over the P/E ratio as it does take into account growth.

EXPE has a PEG ratio of 1.31
PCLN has a PEG ratio of 1.09

The lower number, the better – Using this figure, PCLN is actually cheaper than EXPE.

EXPE  has a Price/Sales ratio of  1.2
PCLN has a Price/Sales ratio of 7.96

The lower number, the better – In this case, EXPE is a better value. Looking at the industry average of 2.4, EXPE is clearly undervalued there which might cover up some issues as a low price/sales can sometimes be a value trap!

In essence, the disparity in market cap is probably not justified based on sales and other factors but looking at past growth and potential (a big if of course) it might also not as bad as it looks. In addition PCLN is just riding a momentum wave that is regenerating itself as major price point are passed. In any case, I would stay far away from either of these 2 companies!

Ryan's excess

I have no particular position on food stamps, but you would think politicians would research how other large countries address the problem of feeding the indigent. Maybe there is a better way, or maybe not. One  thing is for sure, that a lot of businesses do profit from food stamps.

Austerity has never worked and probably never will…

http://www.bloomberg.com/news/2012-03-20/u-k-conservatives-come-up-short-in-austerity-experiment.html

Since 2010 Britain has been a laboratory for an important experiment in economic policy. The question: When economies slump and public borrowing soars, can fiscal restraint speed the recovery? Preliminary findings: No, and whatever made you think it could? […]

 

 

In opposition, the Conservatives called this reckless. When they came to power in 2010, they announced a sharp break. To help restore financial confidence, the government would tighten fiscal policy at once. The idea was that austerity, done correctly, would promote growth. It would remove the threat of fiscal collapse. With public borrowing in check and confidence improved, the private sector would take up the slack.

It didn’t happen. Britain’s households aren’t spending, and its businesses, despite running big financial surpluses, aren’t investing. For the past 18 months output has been essentially flat, still well below its level when the recession began. Official forecasters think output won’t regain its 2008 level until 2014 — a slower pace of recovery than Britain experienced after the Great Depression.

In one way, the figures flatter the Tories’ fiscal experiment, because the Bank of England has been more forceful than the Federal Reserve in supporting the economy with quantitative easing (where the central bank buys debt to increase the money supply). The Bank of England persisted in this approach despite high inflation, which peaked at more than 5 percent last year, against the Bank’s official target of 2 percent. Without such aggressive loosening of monetary policy, the economy would be in even worse trouble.

EXPE/stjean:  EXPE is actually has decent Free Cash Flows.  Ran a quick DCF analysis assuming a modest 6% growth (I've actually got a median Cash Return of Invested Capital of 9.6% for them) over ten years at current interest rates, I am getting a fair value of around $100 per share
 
Unless my calculations are completely wack (very possible), they might actually be a value stock :O
 
Of course, this does not take into account any qualitative business analysis, but then again, not much of a moat in this business…

China PMI 48.1

Just to offset that bad China news, here is some good Japan news:

Looks like Yentervention doing its job!
Japan posts surprise trade surplus of $328 million – first time in 5 months.
 
Not surprisingly, this is helping out there economy:
Japan govt: economic recovery looks more certain

 
Heres a cool bit of news:
Japanese Auto Makers Raid the Vaults (subscriber only)

 
"Japanese auto makers are reaching back—way back—to add a patina of past glory to some of their newest products, reviving long-dormant names to tap nostalgia and hold down marketing costs.
Take Nissan Motor Co. When Japan's No. 2 auto producer on Tuesday announced a new line of vehicles targeting fast-growing emerging markets, it didn't tout a neologism born of an army of consultants, focus groups and intellectual-property lawyers. Instead, Nissan reached into its corporate history and resuscitated the Datsun brand, which had been mothballed in the early 1980s."
 
Bring back the old Nissan Z!

EXPE / Kinki – Man, you did your research on them! It is quite possible that there is some value there, but what jumped at me was the growth rate as there is such a disparity. I would never pay the same for a company growing income by 13% than for a company growing it at 100%.

Like you say though, not much of a moat there. Looks like Google could be getting in the action and there goes your predicted growth rate!

PCLN-EXPE/stjean:  Yeah, my baby fell asleep early tonight so I had some free time to fool around with the old spreadsheets. 
 
I agree — on paper PCLN looks amazing.  Great balance sheet, revenue growth, rapidly expanding cash hoard — all this happening while Europe is going through financial turmoil, the China engine slowing down, and a U.S. still suffering through the worst economic downturn in almost a century — It almost looks too good to be true.  Its not like they invented the iPad or anything. 
 
Other than Shatner, I don't know what gives them such a huge competitive advantage over anyone else.  Their site looks and works the same as any other travel site and I don't always necessarily get the best deals on PCLN.  They decided to kill off the Shatner "Negotiator" character and move away from the "Name Your Own Price" model (which set them apart) and go toward a standard fixed price model, so obviously its not satisfactory to them.    I don't understand what is giving them this utter dominance in a moat-less industry. Its just… fishy…  what the heck do I know.
 
Anyway, wouldn't be a bad pair trade to go LONG EXPE and SHORT PCLN as a market-neutral strategy.

Phil- we do pay the Taliban and supposed Taliban now through the afghanistan peace and reintegration program (aprp) and the afghan reintegration program (arp). We make sure they are properly vetted and then we give them jobs and pay them 100-150 a month. The problem with just hiring all afghan contract guards is corruption and a lack of general education. Further, many of these suicide bombers come from Pakistan so hiring afghans won’t really stop anything. America’s purpose here now is to continue to disrupt terrorist activities (and make sure the violence happens here instead of america) and to hurry up and get Afghanistan on its feet so the govt doesn’t immediately crumble when we leave. We are succeeding in the first, I don’t know if the second is attenable.

http://www.nytimes.com/2012/03/21/business/global/china-quietly-relaxes-controls-on-foreign-capital.html?_r=1&pagewanted=2

Nasty Nasty Nasty. China going to take a dump at the end of the month. I just am not sure which month. Could an exedus of foreign capital from China be good for US stocks?

I really have to stay in these Short Oil trades longer.  I was short at 107.40ish but had to close out since I couldn't watch the computer.  I should just set my stops and walk away….  Missed that $1 drop about 20times now……

Mondelez?
 
O-kay. Monde is French for "world",but what does "lez"mean?

MDLZ/jmm:  Holy mother of crap you should've seen the ones they rejected:  "Tfark" and "Snax".   Tfark?!
 
Apparently the new name was coined by a corporate lawyer.  Did he also have pointy-hair?

This would be awesome!
The Fusion in your Future
http://www.madhedgefundtrader.com/the-fusion-in-your-future/

jmm – delez = Delicious.  "Mondelez International is a mix of suggestions from two employees — one in Europe and one in North America." Sounds like a line out of an Onion article to me!
http://www.businessweek.com/ap/2012-03/D9TKV5AO0

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