What About That Fiscal Cliff?

                                                 "Really Big Deal"

Federal Reserve chairman  Ben Bernanke is given the credit for coining the phrase, "fiscal cliff" during an address to congress.  I felt a need to get out and write something again because it is a "really big deal"!   Okay, if you hear the phrase "really big deal" over and over in the news and in front of congress you can come back to this post on 11/29/2012 and credit me...

Just the fact that everyone is picking up the term and running with it makes it a big deal.  You've heard all the debate so I'm gonna cut through through the spin and tell you what is happening.  The U.S. has been operating on credit for decades.  Now somebody took the time to look at our debt to income ratio and decided that it's time to do something about it.  Normally we would just raise our debt ceiling and go on spending but it's getting harder and harder to pay the interest on all those loans.  Here's the catch.  The Fiscal Cliff debate is an effort to bring this hard fact and it's consequences to congress, the people, and the world...

Many people have been warning us for years that the time would come and it has.  Now I have always said that the U.S. people and it's economy is strong and resilient.  We are always adapting to adversity and coming out stronger.  Our own greed has gotten us here and now we need to pay the piper.  There are just some things that have me concerned.  And that's why I call it a "Really Big Deal"!

Whenever the people with all the money feel like their money is going to disappear "phhht" they have a tendency to pull it out of wherever it is and stuff it under a pillow or buy something that they think will still be around after the fallout.  That is the core of investing.  You try to put your money somewhere that you think it's going to grow.  Well, this will most likely backfire on the U.S.  The rest of the world owns our debt.  If they think they're not gonna get paid back then they're gonna try to get rid of it in a hurry.  This will affect many things in our markets at once!  T-Bills, T-Notes, T-Bonds, Savings bonds in the first wave.  Then whole countries will be unloading our dollars causing it to fall.  Inflation will increase dramatically.  Interest rates will have to increase finally.   And if we manage to come out of it some good things will happen.  Who knows?  Maybe this is what the government wants to happen.

The rest of the world will buy our products because they will be lots cheaper.  Corporations will bring jobs back home because they are more affordable but we will all be paupers for a good long time!  With a cheaper dollar we will be able to pay back our debts more easily.  Let's just hope that it doesn't get so bad that it causes chaos and civil unrest.  That will give the powers that be a reason to force some new thing on us like curfews, martial law, a one-world currency or who knows what they have in mind.  I'm not privy to this information and I don't want to guess.  I just think it's a "Really Big Deal"!

The Irish Elephant Story

This past week there has been a lot of talk about Ireland's financial woes and the Euro.  Did you see how fast they solved the crisis and smoothed it over?   They didn't want to repeat the Greek drama that had just kind of settled down.  Let me see if I can put it in a nutshell.

On January 1, 2002 several European nations started using the Euro as a currency.  When they did this they gave up their right to print their own money.  (BTW I'm sure the Brits are saying, "I told you so")  As you know, there is a lot of national pride  and it was very hard for Ireland to ask for a 100 billion dollar loan, I'm sure.   In a way they gave up their national sovereignty  in order to be part of the Euro currency.  They traded their ability to print their own money for the hope of economic prosperity and stability.   Now they have to be fiscally responsible.  If they could still print their own money they would just pay their own bills, their money would be devalued by the market and life would go on and hopefully balance out.  Their goods would become cheaper to the rest of the world and that would bring more business, yada yada yada.  It's great how a free market works.  But now they will have huge debt and no real way to pay it back except fewer services for higher taxes.  Sound familiar?  Problem solved....

They have painted the elephant the same color as the walls and backed it into a corner hoping nobody will see it.  That elephant in the room is Spain.  Now let's just forget about it and go on with life.  Happy trading!

Greenspan on Today Show

I saw Mr. Greenspan on the Today Show. I just can't vilify him for our present economic woes. Each and every one of us has probably abused credit in different ways and that is why we are where we are. It seems that if the credit is available we will use it. Why not? It's the only way to afford the things we can't afford, right?

The Answer to My Credit Problem

The Fed has inspired me for an answer to my credit problems. I just have to think outside the box. So I called up my past due credit cards and told them I had a plan. I am going to buy all of my debt at 10 cents on the dollar. Now this seemed like a good idea to them since they were thinking they weren't getting anything! But then I told them that I need them to give me another credit card at a much lower interest rate to buy the old debt with. And then in six months or so I was going to need another one to buy that one with. Well, after much explaining how it would work I still didn't have them convinced. Their books would look better and so would my credit report. It's a win win situation, I said! In the long run everybody would be happy! They agreed that it might look better but they didn't have the authority or something like that. Maybe I'm just not talking to the right person.....

I am going to start writing again!

OK! Maybe I haven't seen anything funny about the markets in the last three years! Maybe it's because I'm not that busy with work but I am going to start writing again.

I just want to say this. I believe in the strength and resilience of the American people and also I believe in the efficiency of a free market. I do not want to spread negativity around the internet and that was why I wasn't writing.

Enough said!

You can't stop a train with your super x-ray vision!

The other day I was trading away feeling like superman as usual. Then something happened. The market started going the wrong way! I was stupefied! All of my signals were in line. It was supposed to go my way. I was margined to the hilt because I was so sure of myself. Then the unthinkable happened. It kept going the wrong way. I sat there staring at the screen, trying to will the market to come back. It wasn't working. That's when I started using my super x-ray vision. It still didn't work.


Now I've long thought of the market as a freight train. It's momentum is hard to change. Think of 10,000 tons of steel, grain, cars, coal and all of it coming right at you. It's better to just get on the train and ride it than to try to turn it around. Trains have to plan their stops for miles. It even takes about ten seconds after the engineer has hit the brakes for the brakes in the rear of the train to respond. So what I'm saying is look hard before you bet everything on a reversal and don't get so attached to a position that you can't give it up.

A letter to Mr. Bernanke; sub-prime debacle

Dear Mr. Bernanke,

I have come up with a simple plan to solve the current sub-prime mortgage lender fiasco. I noticed that you pumped 76 billion into the short term market last week and I think I have a solution. Instead of pumping all that money into a market that doesn't really know what to do with it all why don't you just give it to the people who need it. Here's a plan that won't get you into trouble.

According to recent numbers there are 2.1 million people that are at least one month behind on their mortgage payments. These are the people that need the money. Why don't you create a sweepstakes company that sends checks out to the people that need the money. The company name can be a bit surreptitious so as not to reveal the source of the cash. How about Bernanke's Billions, or FedCash Cow, something like that.

Okay, you're going to need to send them a check for approximately six months mortgage payments in order to turn this thing around. Let's say the average mortgage payment is about $1300 a month. That would cover mine at least. That means you will need to make out a lot of checks for $7800. I did the math and this amounts to a mere 2 billion 730 million dollars. Now you and I know that everyone is not going to plunk all this money down on their mortgage so this will amount to an instant shot in the arm for the economy. Necessary items like beer, used cars, WalMart, etc. will experience an immediate boost. Wall street pundits will breathe a sigh of relief and business will go on as usual. Don't worry about the stock market. We are the work dogs that power the national economy and the stock market.

Oh yeah, you're going to have to get started on this right away! I have another mortgage payment due this week.