Daily Wisdom

August 21, 2010

Bill Whittle on the Ground Zero Mosque

A must-see video...


Summer of Fundraising

Rainbows And Unicorns

The Comeback Starts in 2010

August 20, 2010

Freedom Is Color Blind

Hat-tip to Chairbabe...

August 17, 2010

Barack Obama's Endgame

From Eric Cantor & You Cut.

Those Voices Don't Speak For The Rest Of Us

Hat-tip to Heirborn Ranger...

From ResistNet.com

August 16, 2010

Is a Crash Coming? Ten Reasons to Be Cautious

From Bret Arends at the Wall Street Journal...

Could Wall Street be about to crash again? This week's bone-rattlers may be making you wonder. I don't make predictions. That's a sucker's game. And I'm certainly not doing so now. But way too many people are way too complacent this summer. Here are 10 reasons to watch out.

1. The market is already expensive. Stocks are about 20 times cyclically-adjusted earnings, according to data compiled by Yale University economics professor Robert Shiller. That's well above average, which, historically, has been about 16. This ratio has been a powerful predictor of long-term returns. Valuation is by far the most important issue for investors. If you're getting paid well to take risks, they may make sense. But what if you're not?

2. The Fed is getting nervous. This week it warned that the economy had weakened, and it unveiled its latest weapon in the war against deflation: using the proceeds from the sale of mortgages to buy Treasury bonds. That should drive down long-term interest rates. Great news for mortgage borrowers. But hardly something one wants to hear when the Dow Jones Industrial Average is already north of 10000.

3. Too many people are too bullish. Active money managers are expecting the market to go higher, according to the latest survey by the National Association of Active Investment Managers. So are financial advisers, reports the weekly survey by Investors Intelligence. And that's reason to be cautious. The time to buy is when everyone else is gloomy. The reverse may also be true.

4. Deflation is already here. Consumer prices have fallen for three months in a row. And, most ominously, it's affecting wages too. The Bureau of Labor Statistics reports that, last quarter, workers earned 0.7% less in real terms per hour than they did a year ago. No wonder the Fed is worried. In deflation, wages, company revenues, and the value of your home and your investments may shrink in dollar terms. But your debts stay the same size. That makes deflation a vicious trap, especially if people owe way too much money.

5. People still owe way too much money. Households, corporations, states, local governments and, of course, Uncle Sam. It's the debt, stupid. According to the Federal Reserve, total U.S. debt—even excluding the financial sector—is basically twice what it was 10 years ago: $35 trillion compared to $18 trillion. Households have barely made a dent in their debt burden; it's fallen a mere 3% from last year's all-time peak, leaving it twice the level of a decade ago.

6. The jobs picture is much worse than they're telling you. Forget the "official" unemployment rate of 9.5%. Alternative measures? Try this: Just 61% of the adult population, age 20 or over, has any kind of job right now. That's the lowest since the early 1980s—when many women stayed at home through choice, driving the numbers down. Among men today, it's 66.9%. Back in the '50s, incidentally, that figure was around 85%, though allowances should be made for the higher number of elderly people alive today. And many of those still working right now can only find part-time work, so just 59% of men age 20 or over currently have a full-time job. This is bullish?

(Today's bonus question: If a laid-off contractor with two kids, a mortgage and a car loan is working three night shifts a week at his local gas station, how many iPads can he buy for Christmas?)

7. Housing remains a disaster. Foreclosures rose again last month. Banks took over another 93,000 homes in July, says foreclosure specialist RealtyTrac. That's a rise of 9% from June and just shy of May's record. We're heading for 1 million foreclosures this year, RealtyTrac says. And naturally the ripple effects hurt all those homeowners not in foreclosure, by driving down prices. See deflation (No. 4) above.

8. Labor Day is approaching. Ouch. It always seems to be in September-October when the wheels come off Wall Street. Think 2008. Think 1987. Think 1929. Statistically, there actually is a "September effect." The market, on average, has done worse in that month than any other. No one really knows why. Some have even blamed the psychological effect of shortening days. But it becomes self-reinforcing: People fear it, so they sell.

9. We're looking at gridlock in Washington. Election season has already begun. And the Democrats are expected to lose seats in both houses in November. (Betting at InTrade, a bookmaker in Dublin, Ireland, gives the GOP a 62% chance of taking control of the House.) As our political dialogue seems to have collapsed beyond all possible hope of repair, let's not hope for any "bipartisan" agreements on anything of substance. Do you think this is a good thing? As Davis Rosenberg at investment firm Gluskin Sheff pointed out this week, gridlock is only a good thing for investors "when nothing needs fixing." Today, he notes, we need strong leadership. Not gonna happen.

10. All sorts of other indicators are flashing amber. The Institute for Supply Management's manufacturing index, while still positive, weakened again in July. So did ISM's new-orders indicator. The trade deficit has widened, and second-quarter GDP growth was much lower than first thought. ECRI's Weekly Leading Index has been flashing warning lights for weeks (though the most recent signals have looked somewhat better). Europe's industrial production in June turned out considerably worse than expected. Even China's steamroller economy is slowing down. Tech bellwether Cisco Systems has signaled caution ahead. Individually, each of these might mean little. Collectively, they make me wonder. In this environment, I might be happy to buy shares if they were cheap. But not so much if they're expensive. See No. 1 above.

Add to that Fed Chairman Ben Bernanke's statement that the outlook for the economy is "unusually uncertain" (a real confidence builder there). Then there's the recent flattening of the monthly employment numbers that had been steadily improving. And on top of that, an unusual event occurred last week known as the "Hindenberg Omen"...

The blog Zero Hedge, writing in a vein that seems made for professional boxing or WWE pay-per-view event hype, describes the Hindenburg Omen as "Easily the most feared technical pattern in all of chartism (for the bullishly inclined). Those who know what it is, tend to have an atavistic reaction to its mere mention."

In case you hadn't heard, Thursday's action on the New York Stock Exchange registered a technical anomaly known as the Hindenburg Omen. Read: just like the doomed German airship, the markets are fated to crash and burn. Still worse, Wednesday's trading action almost sparked Hindenburg Omen conditions. It takes two Hindenburg Omen trading days within a 36 day window to trigger the end of life in the markets as we know it...

The Hindenburg Omen occurs when an unusually high number of companies in the New York Stock Exchange reach 52-week highs and lows at the same time. The proportion of NYSE stock highs and lows must both exceed 2.2% of the total listed on the exchange. The Hindenburg Omen last occurred in October 2008, according to UBS data.

Additionally, the Hindenburg Omen is only valid in a rising market -- as measured by the NYSE composite rolling average over the past 10 weeks; the number of stocks at a 52-week high must not be more than twice those stocks at a 52-week low...

--Eric Rosenbaum, Hindenburg Omen: Is a Stock Market Crash Imminent?, 13 August 2010

Watch your wallets and purses my friends.

August 14, 2010

The Broken Window Fallacy

August 12, 2010

November Anthem

Hat-tip to Heirborn Ranger...

From Patriots For America.

August 09, 2010

Olson's Fallacy

If you watched Fox News Sunday with Chris Wallace yesterday, then you probably saw the segment with Ted Olson. Ted Olson is a conservative who has argued (55) cases before the Supreme Court and spoken out against judicial activism. Therefore, it was quite a shock to learn that it was he who successfully argued the case in California to overturn Prop 8's ban on same-sex marriage. A move which most conservatives would consider to be judicial activism or legislating from the bench.

It was a very interesting interview, and Olson made a compelling case. He stated that marriage is a constitutional right as determined by 14 Supreme Court rulings. He contends that if marriage is a right, then it should be applied equally under the law, which also makes sense. According to Olson, same-sex partners deserve the same "happiness" as everyone else.

Apparently it is Olson's opinion that overturning the Prop 8 ban was not an act of judicial activism, because voting on an issue does not automatically make it correct. He then cited cases where people voted to ban inter-racial marriages, and said that the Supreme Court was clearly correct in overturning such laws.

I must admit that Olson was very persuasive, and even found myself questioning whether or not I should reconsider my position on the matter. Apparently Chris Wallace was impressed as well. At the end of the segment, Wallace said that after Olson's appearance there, he couldn't understand how Olson lost any cases before the Supreme Court. If you didn't see it, you can watch the exchange here...


But after further reflection on the subject, it suddenly occurred to me that there is one glaring fallacy in Olson's line of reasoning, that is, that discrimination on the basis of sexual orientation is equivalent to discrimination on the basis of race, ethnicity or gender. Obviously, that is not true.

Characteristics such as race, ethnicity and gender are traits acquired at birth, and over which a person has absolutely no choice. A person has no say about what gender or ethnicity he or she will become. They can only learn about it after they are born. Therefore, discrimination on the basis of race, ethnicity or gender is patently unfair, because the person being discriminated against had absolutely no choice in the matter of their birth. They are being discriminated against for something which is no fault of their own.

Not so for sexual orientation. Sexual orientation is ALL about choice. Sexual orientation is a conscious decision on the part of an individual to participate in one form of sexual behavior in favor of another. No one "forces" gays and lesbians to participate in that type of sexual behavior. Even if they are psychologically "predisposed" to it for some reason, they can still "choose" to refrain from doing so if they wish.

And for those who would suggest that homosexuality is rooted in genetics, that is a completely unsubstantiated claim. No scientist has yet found the "homosexual" gene, and I don't think they ever will. Sexual orientation is a "preference", and as such, it does not qualify for protected status on the same grounds as race, ethnicity or gender. [Trust me, very few African-Americans would consider the gay rights movement to be right up there with the civil rights movement.]

Allow me to go even further with some analogies. The mere existence of thieves who "prefer" to participate in the "behavior" of stealing, and who may derive much "happiness" from it, does not provide a sound legal argument for the legalizing of robbery. The mere existence of sadists who "prefer" to participate in the "behavior" of inflicting pain on others, and who may derive much "happiness" from it, does not provide a sound legal argument for the legalizing of torture. Likewise, the mere existence of gays and lesbians who "prefer" to participate in the "behavior" of homosexuality, and who may derive much "happiness" from it, does not provide a sound legal argument for the legalizing of same-sex marriage.

August 06, 2010

The Angel Flight

Hat-tip to Heirborn Ranger for this one...

Jay Leno On Obama's Birthday

Hat-tip to Upnorthlurkin for this one...

Stimulus Spending And Job Growth: Update 14

Well, it's that time again. Time to update Obama's stimulus-driven job creation results. Let's look at the latest picture. In July, there was a net loss of 131,000 jobs, but this job loss number was due in large part to the layoff of 143,000 temporary census workers. Again, since I did not include the temporary census workers in May's job increases, I cannot then include the losses here. Therefore, in the graph below, I have discounted the census job losses and allowed for a net gain of 12,000 jobs. The unemployment rate remained at 9.5%.

Barack Obama said his stimulus package would create approximately 4 million "new" jobs over two years. In order to create 4 million jobs in 24 months, the Obama administration would have had to create approximately 166,667 jobs per month to reach his target, assuming linear job growth. That scenario is shown as violet in the following graph.

I developed a curve showing what I thought might be a more "Likely" scenario -- plotted as light blue in the following graph. As you can see from the graph, the actual trend of job losses was somewhat worse than I had predicted -- plotted as yellow and red. However, the trend generally followed the trajectory I had originally envisioned until about May of this year (Month 15). Since then, job growth seems to have flat-lined.

I have revised the May and June job figures downwards according to the latest data from the US Dept of Labor. Now, instead of having to create 166,667 new jobs per month to reach his original target of 4 million new jobs, President Obama now needs to create 874,285 jobs per month -- in order to make up for the more than 2 million jobs that were lost since the stimulus bill was signed.

I am sorry to once again report that I was not one of those fortunate 12,000 who found work in July. It is now beginning to appear that not only has Obama's Stimulus Package failed, but that his policies are making things worse. The "Likely" scenario I projected was based on a natural economic recovery which should have occurred regardless of the stimulus. If the job numbers continue on their present slow growth trend (or get worse), then it can only suggest that Obama's policies are to blame.

August 04, 2010

Democrats' Chronic Denial