Economics and Scrambled Eggs

Sitting outside on the night before the Fourth of July, the air is strangely muted. In years past, the sounds of a whistling Saturn Rocket Launcher or the hissing and pop of a bottle-rocket, or the brilliance and thunder of a mortar would almost continually reverberate through one’s ears.

Perhaps it is a sign of the economic times that people can ill afford the luxury of spending precious wealth on paper and gunpowder. The bust has literally taken the boom out of the season.

But something else is missing. Armed with a deep understanding of what this historic date defines, I have in recent years met the Fourth with great excitement and profound reflection. It also marks the day that my inner child jubilantly escapes with firecrackers, rockets, and aerial bombs in hand.

Lost in the town parades, festivals, and a backyard cookout is the document from which our celebrations were born. This special day is about me, the individual, and not a community, state, or national government. The Declaration of Independence states:

“that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

Furthermore, the next sentence declares that the sole purpose of government is to secure my natural rights. Our national summer party totally misses the emphasis of the celebration, which is liberty and superiority of the individual over the state.

Tonight the fires of freedom that were lit over two hundred and thirty years ago are no more than a smoldering ember.  This evening I do not have the right to travel freely by air without first showing my papers and allowing my person and effects to be searched without a warrant. My money cannot be shifted in manners that I deem necessary without government suspicion and warnings. The lights in my house and the water used to flush my toilet are now or will soon be a matter of government preference. In the coming years, my choice to seek medical help to perhaps save my life or another’s will not exist. I can’t even blow up little pieces of paper and gunpowder without fear of the police.

My certain unalienable rights of life, liberty, and the pursuit of happiness have vanquished. The Fourth of July has become a showcase for government.  Under the guise of freedom, hometown parades are a pageantry of blaring police cars, honking emergency equipment, and military regiments. In larger gathering the air overhead may be filled with the flying might of the state. As night falls, the darkened sky lights up and crackles with government fireworks while the individual can be criminalized for the same act.

As in previous years, my wife dressed the front of the house in red, white and blue bunting along with the American flag waving from its pole extending from the porch. Considering the path our country has taken, the sight sickens me. Though the flag has always represented the state, today it clearly stands for tyranny.  

For the first time on the Fourth of July, I can find no reason to celebrate.

Admittedly trading has been rather difficult the last few weeks. With a couple of exceptions, most days in one form or another have acted like a gap and crap with little volatility after the opening half hour. Making money seems to be precluded on carrying an overnight position premised on predicting the next morning’s action. Fortunately, it appears that some intraday gyrations are showing signs of returning. One day trader that I converse with said most of the brethren took the last part of June off.

Markets tumbled rather sharply on Thursday. Apparently the green shoots spotted by market watchers and economists are upon closer inspection looking like they have thorns. The unemployment report showed a continue free fall in job losses with even government employees getting the axe.

The big news of the week was the declared insolvency of California, which now must resort to issuing IOUs for its bills.  The Golden State is not alone in its fiscal nightmare as numerous states face a similar situation.  In Illinois, which has an $11 billion hole, a friend in the state told me that state worker’s wages may not be paid this month; finally their pay is matching the true value of what they produce.

CNBC contributor Charlie Gasparino reported Thursday that California is attempting to market its debt to China. They say that the most populace state in the country is a microcosm of the nation. If China declines to buy their junk, then how much longer will the US Treasury be able to hawk the worthless paper it is now issuing weekly (another $63 billion this coming week).

The blissful hiatus taken by Governor Mark Sanford of South Carolina produced one the most telling hysterics about the state of the American intellect. One comment I heard on the news concerning the governor’s irresponsibility to the people of South Carolina was; what would have happened if an emergency existed like a hurricane while he was absent?

Have we reached the point of idiocy in this country that we need a bureaucrat to tell us to get out of the rain?

I am afraid the answer is “yes”.

One of the great historical questions asked while I was growing up was “how could an intelligent people like the Germans have taken such a destructive path toward fascism and World War II?”  I believe it to be an error to classify the thought processes that led to National Socialism as intellectual. For a collective to choose this path they must either be ignorant or plain idiotic.

No doubt, generations in the future will be asking similar questions about the American people. Continuing a death spiral that began long ago, but has accelerated with the election of Obama and the democratic majority, the House of Representatives narrowly passed climate change legislation.

The global warming mythology has been well documented. Even without a degree in climatology, the inability of the alarmists to explain phenomena like the Medieval Warm Period should be enough for an intellectual people to take notice. If the facts are indisputable and debate unnecessary, then why did a NASA scientist sympathetic to the global warming agenda have to manipulate data that erroneously showed a recent fall season to be the hottest on record? Or why did Al Gore resort to reversing the correlation between temperature and CO2 levels, which in fact shows the latter following the former.

http://groups.google.com/group/alt.conspiracy/browse_thread/thread/8bf1679120c94dc8/5537b70fb3160ca6?lnk=raot The World Has Serious Doubts

Unable to make the scientific case for carbon reduction, the President rolled out an economic myth to extol the virtues of his green legislation. He claimed that the effects of the bill would create 1.5 million new jobs in “green technology”. Of course as Bastiat illustrated with his “Fallacy of the Broken Window”, what Obama did not tell you are how many jobs and businesses will be destroyed.

Currently, over 250,000 people work in the domestic coal industry. This country’s oil and gas companies employ another 2.5 million individuals. The legislation will not only have a dramatic effect on the profitability of these two industries, but a host of others including agriculture, which is why many farm state democrats voted against the bill. So how many will join the unemployed ranks on the way to creating 1.5 million jobs; 250,000, 2.5 million, or 5 million?

Watching Europe slide into WWI, British statesman Sir Edward Grey commented, “The lights are going out all over Europe and I doubt will see them go on again in our lifetime.”

Unfortunately, his observation holds true for this country and what once was a brilliant torch for the human experience of liberty.

Note: This should have been posted on Wednesday, but computer problems kept that from happening.

As if they expected a shocking surprise, traders froze in place for several hours before the Federal Open Market Committee released its decision on interest rates. Little doubt existed that the Federal Reserve would continue running the printing presses at high RPMs.  Besides leaving the target rate for Federal Funds at zero, the nation’s leading counterfeiters said they will purchase hundreds of billions of agency bonds and over two hundred billion of US Treasuries by this fall.

I wonder if Ben Bernanke still feels that he isn’t monetizing the debt.

The big news concerning the Federal Reserve came in the form of an accusation from Congressman Issa that the members of the central bank covered up the true nature of Merrill Lynch’s balance sheet while arranging a takeover by Bank America. Also, internal documents point to the possibility that the Federal Reserve and the Treasury Department resorted to threats against Ken Lewis, the CEO of Bank of America, and other financial institutions.

It is past time to open the central bank’s books.

After the market closed, I went to the golf course to practice for a few hours. Upon completion of a successful session, I sat in the bar for a few cold pops. Somehow the discussion with the bartender turned to the subject of economics and he started to mutter something about bailing out car companies. The young man then said he probably wasn’t smart enough to give an informed opinion. I urged him to continue his thought and that his common sense was probably better than most Nobel Prize winners.  

He stated it quite simply. How can anyone think that just printing money will lead to a better economy? If that is the case, then why not give everyone the plates to print their own money?

I think Ben Bernanke needs to get a drink and talk it over with his bartender.

Trading over the last few days has been horrible either because of my mental state or market action. Today’s “gap and crap” was the absolute worst I have seen. My setups issued one trading signal that resulted in a $15 loss.

Fortunately a good part of the trading day was occupied by watching the completion of the US Open.

If you ever want to witness the mindset of government up close and personal, then your local school board meetings will provide a microcosm of the logic that seems to permeate every brain of a bureaucrat. For years I have been involved in local school politics and have heard the liberal screams of being anti-education.

The present budget dilemma facing our local school district has caused the board and administration to call for a two year wage freeze. The reason for the financial handcuffs is due to the stall in district growth.

The irony of the last board meeting is beyond belief.  First it was held in a new school that was built to accommodate a tsunami of growth, which a hired demographer predicted, was fast approaching. Along with a new school comes the need for additional teachers and staff. 

The teachers in the audience who came to protest the wage freeze had whole heartily supported the referendum for the new school and voted for the members of the school board.

For several years, those of us labeled by the other side as anti-education and teacher haters had argued that the over crowding problem was a mirage. We viewed the apparent growth in the area as a symptom of the speculative boom in construction, and therefore would soon come to a crashing end. The so-called classroom population could easily be solved by increasing class sizes by a few students and ridding class room space of fluff curriculum.

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So now we have a school board meeting being held in a school built for predicted growth that did not come. We have teachers squawking about a wage freeze brought on by a budget strained with a new school and additional staff that they supported.  

The additional irony of all this is that the teachers would have been a lot better off if they would have supported in school board elections those that they labeled anti-education.

Not deterred by their inability to predict, the superintendent was in the latest edition of the local paper trumpeting the district’s 2025 vision even though the board and administration could not see the present problems two years ago when the new school was being built.  

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During a press conference (what else is new) to roll out his financial regulation ideas on the socialist conveyor belt, Obama stated that he wanted the free markets to reward responsibility and not greed or recklessness.

I continue to be shocked daily at the absolute ignorance and audacity of Obama to spew utter nonsense. The free market left alone, otherwise it wouldn’t be free, does exactly what all socialists believe it doesn’t.

The greedy that takes shortcuts with their customers or takes advantage of their employees will discover in the end they have little of either (my apologies to Benjamin Franklin). In a free market dissatisfied customers can without hindrance do business at another establishment.

An employer that offers less than desirable compensation or working conditions runs the risk of employees leaving for better arrangements or having former workers becoming competitors.

Over the last eighteen months the markets (hard to call them free) gave its opinion of Citi, General Motors, Chrysler, and AIG. It is only because of government intervention that these companies still exist today. The only rewards being handed out to the greedy and reckless, they are one in the same, are coming from the government with Obama at the helm.   

“The most effectual engines for [pacifying a nation] are the public papers… [A despotic] government always [keeps] a kind of standing army of newswriters who, without any regard to truth or to what should be like truth, [invent] and put into the papers whatever might serve the ministers. This suffices with the mass of the people who have no means of distinguishing the false from the true paragraphs of a newspaper.” –Thomas Jefferson to G. K. van Hogendorp, Oct. 13, 1785. (*) ME 5:181, Papers 8:632

I have used this quote from Thomas Jefferson on several occasions to point to the dangers of believing the information handed out by the press. I do not read newspapers, listen to the radio, or watch CNN, MSNBC and network television news. Because of my trading activities, I intermittently glance at CNBC. If I happen to be home around four in the afternoon, then I switch the television to Fox and watch Glen Beck. Before bedtime I may tune in O’Reilly, but his opinions on economics often take on a boorish tone, particular on the subject matter of economics.

Alarmingly, CNN, NBC, CNBC, MSNBC and the New York Times are presently engaged in what can only be seen as a coordinated attack on free speech.  When a Kansas doctor who specialized in late-term abortions was murdered two weeks ago, the aforementioned news outlets blamed the vocal opponents of abortion, including Bill O’Reilly for the incident.

The shooting at the Holocaust Museum a few days ago was used by same press to make similar accusations. Over the weekend, CNN devoted an entire program to hate speech that highlighted the incited opinions of Glen Beck and Rush Limbaugh. In an opinion piece, the phony economist Paul Krugman chimed in about hate speech. In a back-handed manner he took a swipe at Ron Paul and his call to end the Federal Reserve because the museum shooter had once planned to kidnap Federal Reserve officials.

The message is clear. If you voice an opinion that runs contrary to the present occupant of the White House or his puppets, then you are guilty of hate speech. Speaking negatively of Obama’s policies or calling him a socialist will label you as a racist.

http://www.nytimes.com/2009/06/12/opinion/12krugman.html Krugman

Many who opposed the direction of the local school district got a taste of what is now happening nationally. We were called anti-education or teacher haters for simply having a different philosophical viewpoint.

It must be remembered that NBC, MSNBC, and CNBC are owned by General Electric, which because of financial rescue arrangements is now on the government leash. It is often difficult to tell whether CNBC is a financial news network or a spin-off of C-SPAN. Everyday their reporters cuddle up to a regular line up of bureaucrats and politicians that include former Goldman Sachs chairman and US Senator and now governor of New Jersey, Jon Corzine. Today after the market closed they held a one on one with Barack Obama in which he was given free reign to attack Fox News.

 ABC announced it will be broadcasting the evening news from the White House.  With the exception of Fox News, government control of the mainstream media is almost complete.

http://www.drudgereport.com/flashaot.htm Governmnet Evening News

I know a number of people that have turned off the television and left the newspaper folded. Like me they travel through the internet seeking news and information from an almost endless array of sources around the world.

Now, what do you think is the real purpose of the Cybersecurity Act?

http://www.dailypaul.com/node/96247

After a feeble morning rally, stocks continued the decline that began yesterday. The S&P index finished the day close to its 200 day moving-average, which over the last two months has provided a line of support for market retreats.

One of the hardest of the hardest urges to resist when you have spent the last two days scratching for pizza money is to not to cut short your profits. A couple good trades today on the short side captured a tidy profit. Getting anxious to show progress, however, I left some bucks on the table.

During the dull moments of the trading day, I flipped to the Golf Channel and its coverage of the US Open that begins on Thursday. Chatting with a few fellow traders it seems everyone was watching the same thing. I switched back to CNBC from time to time and surprise, who was talking….Obama. 

Later in the afternoon, the network televised a one on one with Obama and the station’s Washington reporter. As often as CNBC cuddles up to politicians and government bureaucrats, you get confused whether you are watching C-SPAN or a program that poses as financial news.

Trading today was a typical Monday “gap and crap” with the market heading south at the opening bell and then trading in a rather narrow range the rest of the day. I made only one trade all day, which was marginally profitable. As I have stated before, these types of days test your patience and discipline.

The S&P 500 is definitely having trouble cracking above 950. I never bother much with people’s speculation as to why markets rise or fall on any given day, but apparently participants gasped at the thought of heavy regulation on the financial markets, which Obama will unveil on Wednesday. His idea hinges on giving the Federal Reserve even more power, and you still think the Fed is independent of the government. In addition a new layer of bereaucracy will be created.

If that wasn’t bad enough, Obama droned on for several hours today pushing socialized healthcare. I only caught tid-bits, but basically he stated that healthcare costs caused the demise of the auto companies and the entire country faces a similar fate if we don’t turn our medical care over to the same  mentality that runs the DMV, Postal Service, AMTRAK and every other government function.

He also blathered about how age was not the only cause of rising healthcare costs. His statement is actually correct. Prices charged for medical care like any transaction is governned by economic law that affects supply and demand. A point that Obama had no intention of making.

The greatest demand for healthcare services in a person’s life comes within the last six months of life; the timing of which is not known. I will have more on this thought later in the week.

For some time several Austrian commentators such as Peter Schiff, Marc Faber, Jim Rogers and Gerald Celente have warned about the coming commercial real estate that will make the recent crash in residential properties pale in comparison.

Over the weekend Six Flags filed for bankruptcy despite more than 25 million visitors to their parks last year. The problem was $2 billion in debt on the balance sheets that financed the company’s expansion and property acquisition. Apparently, the theme parks will continue to operate through the remainder of the year. What happens in 2010 depends on the banks that now own the properties.

In another bankruptcy, Extended Stay Hotel chain also filed papers over the weekends.

The tremors of the big quake are just beginning to be felt.