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Tuesday, April 29, 2008


Back to Reality...and Blogging

Myrtle Beach was a pleasant break, the golf was challenging, cocktails refreshing, but now it's back to the realities of 2008, an election year full of "unpredictables," volatile financial markets, an unsteady economy, and luckily, gainful employment. Myrtle Beach, by the way continues to thrive as a combination golf resort, beach resort and retiree magnet, with a surprising amount of home construction still going on.

In our beach house, we were able to monitor the Pennsylvania primary, a reasonably decisive Hillary win that extends the at times comical dual, perhaps all the way to the convention. Of course, DNC Chairman Dean insists it will be decided no later than June, but we know his track record on presidential politics and helping Dems snatch defeat from the jaws of victory.

Tonight, we have Senator Obama finally renouncing the latest antics of his former pastor Wright, and one might say that the Dems have been fortunate to discover some of Obama's vulnerabilities before committing to him. However, I am not sure that women will return to his cause over the next six months if he is nominated, or if Blacks and youths will find their way to Hillary if she is the nominee. Meanwhile, McCain supporters hide quietly in the weeds, saving their money for the general election.

Will Dems realize in time that neither of their contenders has an easy path to victory in November? We will see. For now, the media and others have the super delegates committed to the winner of the primary "popular" vote, whatever that is. That's a weird concept given that in many states, independents and Republicans can vote in the Dems primary if they want. Of course, nothing really binds the Superdelegates, who appear to hold the balance of power going into the convention. This still makes a brokered convention possible (i.e., a Gore candidacy). That would be extremely bad news for McCain and the GOP.

Meanwhile, the Fed deliberates about its next move to mishandle the economy. My expectation is for the widely expected 25 basis point cut in the Fed Funds rate, accompanied by a statement that the cuts are over for now while the Fed goes on a belated inflation watch. Talk about closing the barn door after all the horses are out. Look for the Fed to start raising rates as soon as we start to get better economic numbers in the third quarter or so.

As John Chapman explained so well in his WSJ op ed column today (http://online.wsj.com/article/SB120943024074251369.html?mod=opinion_main_commentaries), the Fed has been a slave to the Phillips curve, a Keynesian concept, and that has resulted in their overshooting first one way then another. Since Fed operations act with a lag, it is not surprising that this often results in a boom and bust sequence for the economy and inflation. The Fed would do better to use other tools to monitor the money supply and track the price of gold and other commodities to fulfill its mission of maintaining a stable currency. Steve Forbes has been prescribing this approach for decades, as did Professor Milton Friedman before him, who understood inflation as purely a monetary phenomenon.

Another interesting piece in today's Journal op ed section was John Fund's column ostensibly about the Supreme Court decision to uphold the Indiana voter ID law, but really about Senator Obama's long time efforts to support the Illinois Democrat voter fraud machine by opposing voter ID laws. Of course, the deceased have a long history of supporting Democrats in Chicago, going back to the 1960 Presidential election. According to Mr. Fund, inspectors estimated that as many as 10% of Chicago ballots in the 1982 gubernatorial election were fraudulent, including "votes by the dead." In a 2006 Missouri registration drive by the same organization Mr. Obama represented in Illinois, it was found that "over 1000 addresses listed on its registrations didn't exist." Opponents of ID laws bellyache about the potential disenfranchisement of the poor, but expediting fraud fouls the entire election process.


On April 16, I bought 200 shares of Boyd Gaming (BYD) at 17.47, a "zero buy." On April 21, I sold 100 shares of Lindsey Manufacturing (LNN) out of the IRA for
125.00. 50 of those were purchased on 10/12/98 for 12.4375, so it took almost ten years to get the ten timer. This is not a game for the impatient. The other 50 shares were purchased on 3/5/01 for 20. On April 23, I bought 6 more shares of Allegheny at 340, a value buy. Yesterday, I sold 100 shares of Axsys Technologies out of the IRA at 54.50, purchased on 4/17/06 for 16.90. This is why even if you use a discount broker, you can realize value from a relationship with a full service broker. Axsys was recommended to me by mine, and so all my non-qualified shares are in that account. It makes sense to take the gains in the IRA first though, and delay the tax hit.

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