Bloodbath

Wasn’t a crisis supposed to be averted with the stroke of President Obama’s pen merely a week ago? We were certainly told so. Democrats and Republicans were touting the genius of their two-tiered $2.5 trillion spending reductions. Republicans, wanting additional spending cuts, won a “moral victory” by changing the dialog in Washington. Democrats, not happy there were no tax increases, won a “moral victory” because no meaningful entitlement reforms took place. Investors (many of which are US taxpayers) are now down $2 trillion in personal wealth in merely three days.

As touted during the debate by many of us using simple math this deal was inadequate. It kicked the can down the road. Our core problems were not addressed. Most of the dialog in the media was short-sighted and bent through the prism of class envy without a shred of honest math put forward. Many on the Right, ignoring why they were elected in 2010, ran scared by an artificial deadline and presidential scare tactics. They feared Americans were going to blame them for asking their government to stop the runaway spending.

Here are some simple insights on the topic as you discuss with your friends America’s first debt downgrade in ninety seven years.

• No amount of taxation is going to fix this. Our Gross Domestic Product (GDP), or sum of America’s total output, is $14 trillion dollars. This is not total PROFIT but total output. Total PROFITS are much less than total output. Our national debt is $14+ trillion dollars. It would take a 100% tax on everybody’s output to eradicate the debt. Of course then we would all be bankrupt and living in tent cities as none of us would have any money.

• Revenue is not the problem. Revenues have more than tripled since 1965. Adjusted for inflation, in 2010 we collected around $1.9 trillion. The highest dollars ever received were just four years ago at $2.4 trillion. To believe revenue shortfalls drive our debt problem ignores common sense and is often bandied about by those who want more of a say in how other people’s money is spent.

• Spending IS the problem. We borrow 40 cents of every dollar spent. Congress has not passed a budget in three years. Spending is up 27% in two years. AFTER the recent debt ceiling agreement, our debt is expected to be just $22 trillion instead of $25 trillion. In the next ten years our economy would have to increase by 57% just to keep pace with the debt. We are on an exponential spending spree already.

• Reduce spending by 1% a year from 2010 levels for six years and your deficit is balanced. This hardly tells grandma to drop dead.

America is the Earth’s last great hope for freedom. We remain a beacon of light in a very troubled world. While our reputation has been sullied our spirit does not have to. There is time to recover if we face our problems honestly. We need politicians who will do the same.

A Big Reason For the Market Decline

The stock market continues to plummet almost daily. Five percent drops, almost unthinkable a month ago, now occur two or three times a week. Weren't these drops the main reason Congress crammed through a bailout bill of $700 billion? Wasn’t this going to stop the sky from falling and Armageddon from happening? Isn't this the same reason the Federal Reserve lowered interest rates by 1/2 a point the other day? How come this hasn't stemmed the tide? The S&P 500 is down almost 20% in the LAST TEN DAYS. People have lost a combined $2.5 trillion dollars in wealth.

There are many reasons behind a market's rise or fall. It is much too big a phenomenon to explain by simply one thing. Fear and greed always swing the pendulum too far in one direction or the other. I suspect this major drop is long overdue but shouldn't be quite as deep or have occurred quite as fast as it has.

The market is a forward looking indicator. The "people in the know" about future profits (institutional investors) take positions in the market for a profession. Their livelihood is looking at companies all day long. Their success depends on being right about the direction of the market more times than not. These investors talk to professionals all day long. So, despite the bailout and global interest rate cuts, why is the market still tanking? I believe there is one big reason right now. Investors are discounting a Barack Obama presidency. It is becoming ever clearer Mr. Obama is going to win the election. Our economy is struggling right now and the market sees Barack’s ideas as a death blow to corporations’ ability to make money and create jobs. One need only look at a few top line bullet points from his speeches to figure out why people are beginning to hide money in their mattresses.

*Barack’s sidekick believes taxes are “patriotic.” To an investor patriotic taxpayers cause very upset stomachs. I actually believe this comment was the precipice for the decline. Since Sept. 19th when he said it, the S&P 500 is down more than 30%. In only three weeks.

*Universal health care for all including the 12-20 million illegal aliens here. Why do I say this? You say “it can’t be Mr. Conservative in Ohio.” Well, Barack continually cites the 47 million uninsured he is going to take care of. Illegals are included in this number, so either he is going to insure them, or his rhetoric is a bit off. Either way, assuming he is lying about the number and subtracting them out, free health care for another 30-35 million folks has got to be paid for somewhere. This somewhere is all the rest of us.

*He is going to substantially increase taxes on “the rich.” While this sounds nice, they are the ones creating jobs. Would you invest in companies soon closing up shop rather than giving half their earnings over to the government? How about investing in companies moving offshore to avoid the excessive taxation? Or companies laying off workers because they had to raise their prices to cover the increased taxes?

*Mr. Obama has this very nice sounding rhetoric about our “shared responsibility” as a nation. This just seems so nice and fuzzy, but when you pick it apart, it really means those at the top of anything in society need to care about others through the use of government force. Forced caring is socialism and is what has put Europe on the back burner for a very long time (at least economically).

*An additional $1 trillion dollar government spending spree is the cure for what ails us according to Dr. Obama. Granted, Republicans have been no better for the last ten years on this issue, but digging the ditch deeper to, in essence, buy votes is sickening.

I have no proof that my theory is correct. Maybe the sky is falling? Maybe the market isn’t sure who is going to win the election or what their real policies will be?

All I know is the market looks ahead, and with 27 days until the vote, this issue is front and center in the minds of everyone. It sure seems like more than a coincidence to me. If you care about the next four years, please discuss this issue with everyone you know. It is too important to ignore.

A Republic Straying From God

When citizens of a nation no longer understand their rights come from God, it will eventually decline. It is always said we are a government of the people, by the people, for the people. But what happens when the people are corrupt? What happens when selfishness and greed are more of a priority than the common good? Sadly, we remain largely drunk on our selfish ambition. We remain on the road to ruin. A road filled with folks gorged on the good life and worried about looking out for themselves. When we wake up and realize that God comes first and our rights second, then we will have reason to hope things will turn around. Just take a quick look at where we are.

How do you feel about your finances today? A 9% drop in the market today shed one TRILLION dollars of wealth in the span of six ½ hours. Huge institutions like Bear Stearns, AIG, Wachovia, Washington Mutual, Fannie Mae, Freddie Mac, and Lehman Brothers all gone in the blink of an eye. Crooked CEO’s of failed companies getting paid ridiculous buyouts for FAILING. Loans granted to individuals who clearly couldn’t pay by people hoping to cash out before the scam was discovered. People who were lying on mortgage applications to obtain some of those loans.

How do you feel about your government? Leaders from both parties involved in adultery and scandal. Democratic leaders clearly hoping our military fails for political gain. Crooked politicians wasting billions of dollars a year in tax revenue for earmarks to buy their re-elections. Vicious rhetoric from the Speaker of the House who went on a five minute tirade today about the Bush administration’s policies being the reason for people’s failed mortgages minutes before putting a bill up to steady our financial course. Joe Biden saying FDR spoke on television in 1929 when FDR wasn’t president and television wasn’t invented yet. Hillary Clinton saying she dodged bullets on an overseas trip when nobody was shooting at her. Barack Obama continuing to say the surge in Iraq hasn’t been successful. The news media not questioning any of these people about the lies they just spoke.

How do you feel about our culture? The public seems to increasingly accept the gay lifestyle. Our dialog is littered with obscenities. Our rhetoric, often times, filled with hatred and malice towards others. Pornography continues to be on the rise. Child molesters are popping up everywhere. Marriages are failing in record numbers. Our prisons are jammed. Our public schools continue to fail even with record spending. Our elections tainted by voter fraud allegations. Dishonest business practices are becoming increasingly the norm.

We don’t deserve God’s mercy but I hope he grants it. Otherwise, we all could be in serious trouble.