Obama: A One-and –Done President?
By the Editors of The Casey Report, Casey Research
President Obama promised to turn around the floundering economy that he inherited from his predecessor. He promised jobs. He promised transparency. Not only did he not deliver on those campaign promises, he has led the nation further into the abyss on all counts. Today we are less prosperous, deeper in debt, and enjoy fewer liberties than when Obama first stepped into the Oval Office. His own party is losing faith in the messiah.
You can see that loss of faith in the steady downward trajectory of Obama’s approval ratings. While Democrats can take heart from the fact that no truly viable candidate has emerged from the GOP, it’s clear that “Hope and Change” will not be sufficient to rally the electoral troops for Obama again in 2012. Voters are hurting, and Obama’s claims that the blame lies with George W. Bush no longer provide any solace.
Not only is the president’s own reelection in jeopardy, his sagging polls are dragging down other Democrat candidates as well. Republican Bob Turner handily took Anthony Weiner’s seat in New York’s 9th Congressional District, a district that had been a Democrat stronghold since 1923. New York’s 9th District has previously been represented by such Democrat stalwarts as Chuck Schumer and Geraldine Ferraro. During the special election for Weiner’s seat, Obama had only 31 percent approval in that district, although he won there with 55 percent of the vote in the 2008 presidential election.
A Democrat pollster attributed Turner’s win to “the incredible unpopularity of Barack Obama dragging his party down in the district.” Similarly, Republican Scott Brown took the Massachusetts seat that had been held by Ted Kennedy for almost 46 years. Brown’s win was attributed in large part to widespread discontent over Obama’s policies, particularly Obamacare. Continue reading
Doug Casey: Is a US-Iran War Inevitable?
Interviewed by Louis James, Casey Research
US-Iranian saber-rattling or impending shoot-out? In his usual, candid manner, contrarian investor Doug Casey talks about why he believes it’s serious this time… why the US is the greatest threat to peace today… why Iran might move towards a gold standard… and what smart investors should do.
L: Doug-sama, I’ve heard you say you think the US is setting Iran up to be the next fall guy in the wag-the-dog show – do you think it could really come to open warfare?
Doug: Yes, I do. It could just be saber rattling during an election year, but Western powers have been provoking Iran for years now – two decades, really. I just saw another report proclaiming that Iran is likely to attack the US, which is about as absurd as the allegations Bush made about Iraq bombing the US, when he fomented that invasion. It’s starting to look rather serious at this point, so I do think the odds favor actual fighting in the not-too-distant future.
L: Could they really be so stupid?
Doug: You know the answer to that one. We’re dealing with criminal personalities on both sides, and criminals are basically very stupid – meaning they have an unwitting tendency to self-destruction. One thing to remember is that most of those in power in the West still believe the old economic fallacy that war is good for the economy.
L: The old broken-window fallacy. Paraphrasing Arlo Guthrie, it’s hard to believe anyone could get away with making a mistake that dumb for that long. Continue reading
Want to Know Who’s Going to Be President? Ask the Stock Market
A recently-published, landmark research paper shows the link between stock market performance and presidential election winners.
What’s the biggest influence on the outcome of presidential elections?
Many observers would identify the role of campaign spending by super PACs, a candidate’s debate performance, and, of course, the health of the economy (“stupid”).
Yet if you want an answer backed by a large body of evidence, you’ll find one in the recently-published, landmark research paper by Robert Prechter, Deepak Goel, Wayne Parker and Matthew Lampert, titled “Social Mood, Stock Market Performance and US Presidential Elections.”
A lot of time, data analysis, and copious statistical evidence led them to this straightforward result: “Social mood as reflected by the stock market is a more powerful regulator of re-election outcomes than economic variables such as GDP, inflation and unemployment…”
In other words: If you want a good predictor for the result of an incumbent president’s re-election, look to the stock market.
Large amounts of earlier research have focused on stock performance after a presidential election. But very few scholars have reversed that order, to investigate a possible link between elections and preceding stock market performance. So reverse that order is what the authors did. What’s more, they’re the only ones to study the issue from a socionomic perspective — the premise that waves of social mood simultaneously drive the valuations of stocks and sitting presidents.
The group published their research on January 17, and it’s already getting attention. A Washington Post columnist read the paper and got its practical usefulness, by noting that Obama should benefit from a stock market that’s been mostly higher since 2008, while a Republican challenger “should hope the Dow crashes.”
You can read the entire research paper yourself by following this link >>
Trying to Eliminate Subsidies is a Losing Battle
There is an old story about a rich gentleman who was walking down the street one day when he comes upon a homeless man. The rich man felt pity for the man and decided to help him. He asked the homeless man how much he collected in a good day. The homeless man replied $50. The rich man told the homeless man that since he walked that way to work every day, if the homeless man were there on that street corner at 8:00 AM he would give him $50. And so that is what happened. Naturally the homeless man was happy to get the money. He no longer had to stand on the corner all day to get his $50. This went on for quite a while, every day the rich man would give the homeless man $50. But one day the rich man became ill and could not go to work and the homeless man did not have his $50 for the day. The next day when he arrived the homeless man demanded $100. since he hadn’t received his $50 from the day before. After all he was there at the appointed time it wasn’t his fault the rich man was sick. The rich man refused saying, he hadn’t been able to work so he didn’t earn any money the day before either…
The homeless man became angry and hit the rich man and took $100 from him.
The rich man called the homeless man ungrateful and decided walked to work a different way from then on.
History tells us that once a subsidy is instituted there will be riots if you try to remove them. Once people become used to getting something they feel entitled to it. If you try to stop the “entitlements” people become angry and riots ensue. We saw this in Greece and more recently in Nigeria. And it may become more widespread as governments try to cut back on expenses. In the following article our friends at Casey Research shed some additional light on the subject.
Tim McMahon~ editor
The Telling Tale of Nigeria’s Fuel-Subsidy Riots
The series of events that just transpired in Nigeria makes for a familiar tale – and a telling lesson. The tale tells of a poor, developing nation endowed with oil riches that, on the advice of international economists, tries to eliminate gas subsidies. The lesson is that the populations of oil-producing nations will inevitably erupt in rage against any such notions.
Nigeria is the biggest oil producer in Africa, pumping out 2.2 million barrels of crude oil a day to sit 10th in the global crude-production standings. But the average Nigerian gets little benefit from his country’s oil riches. There is an enormous gap between rich and poor in Nigeria, mostly because 80% of the economic benefits from producing all that oil flow to just 1% of the population. Politicians in the country’s infamously corrupt government have pocketed billions in oil profits, while three-fourths of Nigeria’s 160 million people live on about a dollar a day. Continue reading
The European Debt Crisis and Your Investments
A look back on 18 months of analysis and reports on the European Credit Crisis
In 1999, 11 European countries surrendered their currencies for the euro and a shared monetary authority. Barely a decade later, the once-celebrated EU is in the midst of a credit crisis and its currency is facing collapse.
Elliott Wave International’s analysts have been anticipating and tracking the credit contagion across the European nations for the past two years. EWI subscribers were first alerted to the still-developing European debt crisis back in December 2009.
The following is excerpted from a December 2010 report from The European Debt Crisis, a new report from EWI. This free report provides important analysis from February 2010 through today that helps you understand what the European economic crisis can mean for your investments. Plus, you’ll get a unique perspective on what’s ahead. Find out how to access this free report below.
The Credit Crisis Spreads — December 2010
The credit crisis is escalating as expected. Back in January 2010, when ratings agency Moody’s bestowed “investment grade” status on a widely followed index of sovereign bonds, The European Financial Forecast argued that a renewed Primary-degree decline would in fact aim the credit crisis directly at this critical new realm. Our case for the looming sovereign debt debacle rested primarily on two pieces of evidence: (1) Primary wave 3 (circled) had begun in Europe’s peripheral markets, and (2) premiums for credit-default swaps on European sovereigns (think of an insurance policy against a national default) were already signaling the next phase of the crisis by surpassing their 2008-09 price extremes. The February 2010 issue of EFF published a chart showing rising Greek, Spanish and Italian swaps and offered this description of how Europe’s credit crunch would escalate: “The theme during Primary wave 1 (circled) was default at the individual, corporate and quasi-government level. The theme for Primary wave 3 (circled) will be default at the sovereign level.”
Today, the credit crunch is clearly angling itself away from mere corporations and toward whole countries. On November 15, Bloomberg announced the escalation with this headline: Continue reading
Doug Casey Addresses Getting Out of Dodge
(Interviewed by Louis James, Editor, International Speculator)
L: Doug, a lot of readers have been asking for guidance on how to know when it’s time to exit center stage and hunker down in some safe place. Few people want to hide from the world in a cabin in the woods while life goes on in the mainstream, but nobody wants to get caught once the gates clang shut on the police state the US is becoming. How do you know when it’s time to go?
Doug: Well, the first thing to keep in mind is that it’s better to be a year too early than a minute too late. David Galland recently read They Thought They Were Free: The Germans, 1933-45, by Milton Mayer. He quoted a passage in his column of last Friday. It goes a long way in explaining why Americans appear to be such whipped dogs today. They’re no different from the Germans of recent memory. For those who missed it, let me quote it: Continue reading
The Light Bulb Moment for the Eurozone
EWI’s free EU debt report sheds some light on what’s in store
How many European bankers does it take to change a light bulb? That’s a joke in search of an answer, but EWI’s European analyst Brian Whitmer explained five months ago that the “light bulb moment” was coming — that’s the time when most people would clearly recognize the severity of the European debt crisis. He offered this spot-on analysis back in July 2011, before the larger world came to know recently how bad things really are in the eurozone.
This chart shows how markets in Greece, Ireland and Portugal have behaved over the past five years, including the bailouts. Whitmer says that the turmoil in Greece is due mostly to both social mood and Greek markets having plummeted for more than a year and a half, while the larger EU stock markets have levitated. Once they turn down, he forecasts that what you saw in Greece will be replayed in the eurozone. Continue reading
The Best Presidential Candidate No One’s Heard Of
Gary Johnson, 2012 Presidential Candidate
Gary Johnson is running for the Republican nomination for president. If you didn’t know that, you’re not alone. Precious few people do. He is the longest of long shots, with little money, a bare-bones grassroots organization and parsimonious media coverage, to say the least. He has had to fight through the indignity of being uninvited to most of the candidates’ debates. When polls are taken about voters’ choices, his name is often simply omitted from the list, lending him little chance to develop support momentum.
That he’s being ignored is not surprising, given his shoestring budget in a campaign where others are already spending countless millions. And it doesn’t help that the mainstream Republican establishment can’t stand him. It might seem like he’d be embraced as a very popular, two-term GOP governor of New Mexico, a state with a 2-1 Democratic voter registration. (He’s the only governor running who maintains a better than 50% approval rating in his home state.) Obviously, he attracts the Independents and crossover Democrats that Republicans covet. He would probably beat Obama handily.
The problem is, in addition to his lack of cash and flash, that he’s honest. This is a guy who presided over job growth in his state that exceeds that of any of the other governors now running. Yet – with all the others shouting about all the jobs they’re going to create if elected – he says simply (and truthfully), “I didn’t create a single job.” In fact, he cut jobs – government jobs. The New Mexico state government was smaller after eight years of Johnson than when he started. All he takes credit for is creating a low-tax, low-regulation environment in which businesses could create jobs. That’s what he thinks the federal government should do too. As the only candidate who has an actual track record of cutting the size of government, he scares the establishment. Continue reading
The Problem with Seeing Government as God
By David Galland, The Casey Report
While I haven’t made a scientific study of the topic, I suspect the leading genre for popular entertainment – and for popular delusions of crowds, for that matter – revolves around magical worlds. As illustration, the Harry Potter series will serve.
The problem is that there is no such thing as magic, at least not in the mystical sense (versus sleight-of-hand variety). Rather, the physical world, and even the metaphysical world constructed by humans in their ancient and long-running quest for protection from the physical world, operates within the boundaries of certain irrefutable truths.
In the first instance, the laws of physics are only rarely found wanting; in the second, basic principles of economies are inviolate, or should be if you actually want an economy to succeed for any length of time. Continue reading
Foreigners Losing Confidence in Holding US Treasury and Agency Debt
By Bud Conrad, Casey Research
Foreign central banks buy US Treasury and Agency debt through accounts at the Federal Reserve, where it is held in custody. Without these central banks buying our debt, the US federal government would have to find a new source of funds or the result could be higher interest rates. Looking at the data on a monthly basis (and then multiplied by 12 to give the annual rate), here is the dramatic picture of how foreign central-bank purchases of our debt have shifted, from buying $500 billion to selling off $1 trillion. At this rate of selling over several months, interest rates would go higher – if other things were equal. Of course, things are not equal because the Fed has been forcing rates lower with its massive QE2 and other programs. QE2 was $600 billion over nine months, or an annualized rate of $800 billion per year. Since foreigners are selling off our government debt, Fed purchases of government debt are even more necessary. Continue reading
