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Tuesday, November 20, 2012


Post Election Blues

We certainly called the election wrong, relying on the Rasmussen poll which in this case, was less accurate than the WSJ/Marist poll, that's for sure.  Rasmussen has outperformed in recent years by correctly gauging turnout.  However, many of the polls, but especially Rasmussen, underestimated the ability of Dems to get their voters out, and that was mainly the difference, along with the GOP's blind spot with Hispanics really coming home to roost.  Quite correctly, GOP leaders are reassessing their prospects for the future, and the image of the party may be in need of a makeover.  It is clear to me that while Republican emphasis on social issues has helped the party dominate in statehouses (including 30 or more incumbent governors), that emphasis is killing the party nationally.  It is making it all but impossible to hold its own with female and young voters.  This is a poor position for the long term.

This all begs the question about what's going to happen to PPACA and the fiscal cliff.  Though Obama's victory was more decisive than expected, especially in terms of the electoral college, it is hardly the stuff of mandates.  The Dems attempt to spin the victory as such is an overreach.  However, Republicans, for the good of both the country and the party, need to approach these issues with responsibility and consideration for their voters and potential voters.

With respect to PPACA, many governors have come to the conclusion that it is too expensive for their states to have a state run exchange and to expand medicaid.  I'm ok with that position, as long as they recognize that PPACA is going to be implemented anyway.  That's the political reality of the Democratic controlled Senate and another Obama term.

On taxes, I would love to see a compromise that does away with the silly tax rate (15%) for hedge fund managers and raises tax rates for those at $1 million of income or more (rather than $250,000).  This would allow the GOP to fulfill its commitment to small business (i.e. subchapter S corporations).  I would like to see the payroll tax stimulus (that stimulated nothing) go by the boards.  That plus the PPACA tax should be enough on the revenue side, pending a revival of the economy, although curtailing certain deductions might be worth looking at.  I would like to see more done on the spending side than on the revenue side.

Another alternative would be to bring back Bowles Simpson for a second look.  Ryan held out for entitlement reductions the first time, and I guess that was a bridge too far for Dems then.  But now everyone except the most bazaar progressives recognizes that entitlements have to be dealt with, so lets implement Bowles Simpson as a first step, then get on with the entitlement fixes later.
However it happens, we have to do something about the fiscal situation before we reach the tipping point, and it's possible it is already too late.  At $16 trillion and counting, the deficit is already at a point where restoration of reasonable interest rates will burden the federal government with interest payments that will be unmanageable, and will force huge budget cuts anyway.  If interest on Treasuries averaged even 3%, we are looking at a half trillion dollar interest burden already.  And make no mistake - this endless period of abnormally low interest rates the Fed has induced is killing all kinds of industries and population blocks: S&L's, insurance companies, pension funds, seniors and others on fixed income, college endowments, the list goes on and on.  If the deficit is allowed to continue to grow by a trillion per year, there will be no way out of the low interest scenario, and we will be in a death spiral, the result of which must be inflation and socialism.  How can people who will not face into this and will not allow meaningful cuts in any of the programs we can't afford be called anything but socialists?  Obama, Geithner, and  Bernanke will go down in history as the stooges who ended the 225 year run of our constitutional republic's prosperity.

But there is no way to hold a civil conversation with these people.  I just read a column in Newsday (Nov. 19) authored by one Bob Keeler called Stop the Reckless Calls for Impeachment.  Aside from the fact that I haven't heard any such calls, the column is just loaded with whoppers fast becoming progressive orthodoxy.  Ostensibly about Bengazi and the hearings at the House Committee on Foreign Affairs, the column lauds retiring (thank God) congressman Gary Ackerman (D-NY) for pulling no punches.  His rant, aimed at GOP leadership: If you want to know who is responsible in this town, buy yourself a mirror."  He claimed that the Administration requested $440 million more than it was authorized for security, and for that, I guess Ackerman feels House leadership was to blame.  But how can that be?  The Senate hasn't passed a budget in years, and the Obama budget failed to get a single vote from either party.  So there has been no budget, and no cuts either.  Do Ackerman and Keeler seriously suggest that out of a trillion dollar deficit, the Administration was unable to devote the $440 million that they are saying would have somehow provided adequate security in Bengazi?

Keeler's also raises the red herring from the campaign, namely "as events in Bengazi unfolded, Mitt Romney jumped in with premature and off-the-point criticism of President Obama adding an element of farce to a national tragedy."  But the farce was that Romney's supposedly irresponsible comments proved to be accurate in their depiction of the events, while the Administration's tortured explanation about offensive films turned out to be completely inaccurate and political.  In retrospect, the handling of the Bengazi and Petraeus affairs, as well as the Iranian attack on our drone, causing all of that to come out AFTER election day, is suspiciously political.  The Dems are excellent at blunting criticism with ad hominem rejoinders, and that's what they did to Romney, rather than actually discuss the issue or why they had it so wrong.  Since the media is quick to pile on and legitimize Dems' attacks, the GOP faces a difficult communications challenge that they have to figure out how to counter.

As for jazz, we are looking forward to December when Phil Woods, Roy Haynes, Freddie Cole, and the Birdland Big Band all bring their shows to Birdland.  Wander in and chances are pretty reasonable you'll find me there.  It's going to be a great month of music so come, and bring your credit cards.  Monday night, I'm off to National Harbor for another long stay with my favorite insurance regulators.  Hopefully, we'll find an Irish Pub or two (maybe Murphy's?) in Old Town Alexandria.  

We didn't post any stock transactions last time, so there are a fair number to catch up on, and per the formula, they are all buys, after collecting some takeover proceeds and then watching the market tank following the poor electoral showing by business friendly candidates.  On 10/24, we bought 50 shares of NVE Corp (NVEC) at 52.30.  On 11/1, we bought 20 TIPS (TIP) at 122.17.  On 11/6, we bought 100 shares of Gulf Island (GIFI), a value buy from the Tulane portfolio, at 22.09.  On 11/6, we paid 5.50 each for 400 shares of struggling Boyd Gaming (BYD), a zero buy.  Then on 11/7, we bought 100 shares of San Diego Power preferred (SDO.PR.A) at 25.  On 11/8, we bought 200 shares of Graham Corp (GHM) for 17.53, a value buy, and 700 shares of slumping USA Trucking (USAK) for 3.05.  Then on 11/9, we bought 100 shares of Suntrust preferred (STI.PR.A) at 23.98.  On 11/12, we bought 300 shares of First Niagara (FNFG) for the IRA and still live in hope.  The price was 7.57.  Yesterday, back from Florida, we bought 50 shares of Dupont (DD) at 42.56 and 15 shares of the Gold ETF (GLD) for 167.74.  No question, we are buying low.  Lets see if we get to sell any of these dogs high.

In case anyone didn't notice, as soon as the President was re-elected, savvy traders sold off, collecting their capital gains while tax rates are still low.  This was predictable, and in fact, as per the formula, we had been selling quite a bit before the slump hit.  Now we see companies issuing large special dividends to squeeze those in before year end.  This is why tax changes, especially when deferred or signaled before they are effective , never result in the collections that are forecast.  Dems, believing in static analysis, for some reason refuse to believe that taxpayers will act rationally in the face of tax changes.  And that's why they will never accept the true realities of supply side solutions and dynamic analysis.   

Tuesday, November 06, 2012


Election Night Musings

The Presidential race is coming in as a statstical tie in the popular vote, and very likely a nailbiter in the electoral vote as well.  If Romney starts with 191, he can get to 285 by winning Colorado, Virginia, North Carolina, Florida, Ohio, and Wisconsin.  A tall order but not impossible, as all 6 are within the magin of error, he would still be over 270 without either Colorado or Wisconsin, or Virginia, but he can't lose two of them.  He does pick up some breathing room if he can pick off New Hampshire (possible, but not likely), Michigan (possible but unlikely), or Pennsylvania (a big lift).  Iowa is also in play.  I would have to consider Nevada in the Obama camp. 

My guess is that we will not know the winner tonight, and might still not know until about Thanksgiving.  This is because there are 1.1 million absentee ballots returned in Ohio already, with 200,000 outstanding that can come in any time up to the 16th.  They won't even be counting those until the 16th.  So the pivotal state is not likely to be conceded tonight by either side.  This is a consequence of the unfortunate trend in the country to early and absentee (without sufficient cause) voting, encouraged by Democrats who are helped by larger turnouts.

Virginia polls close at 7 PM, and those returns will tell you a lot about how the night's going to go.  If Romney is comfortably ahead there, he is on his way to victory.  If he's behind, especially badly, it will be four years of hope without change.  So watch that one closely.

My guess is that Virginia is one of 5 states that will not see a decisive result by night's end.  The others are Wisconsin, Ohio, of course, Florida, and Colorado.  No matter what the score, I don't see the Obama crowd conceding any of these tonight.  They are all pivotal in any Romney victory scenario.

The progressive blogs are expressing confidence today, but I think that's braggadaccio.  They are fairly indiscriminate in evaluating polls.  Believe me, pollsters are not all the same in their rigor.  I rely on Rasmussen, who has a great record, and he is saying that it's too close to call.  Given the GOP has the enthusiasm edge this time (reversing the state of affairs from 2008), I see no reason for Progressives to be so confident in Obama.  But we'll just have to see.

The GOP should keep the house, with a single digit change in either direction possible.  As for the Senate, it was the Dems to lose, but as happened in 2010, the GOP snatched defeat from the jaws of vicory due to idiotic statements by candidates in Missouri and Indiana.  Believe it or not, Akin might still win in Missouri.  I don't know exactly what that would say about voters in that state.  I still hold out hope for Scott Brown (MA), Tommy Thompson (WI), and even Linda McMahon  (CT) and there are a number of other close races.  But it no longer looks like the Red Team can run the table, so I am predicting a pickup of only two seats, leaving Harry Reid Majority Leader by 51-49. 

The GOP may pick up a Governor spot or two to expand an already commanding lead there.

New York has been thrown into a tizzy by Sandy, and it could impact several state senate races.  Chances are the GOP maintains the same majority it had going in.  I hope.  Thank God for reapportionment gerrymandering.

Whatever, I plan to uncork a bottle of bordeaux, turn on the tube and hop around the dial, looking for actual returns, and not just talking heads.  I will stay up as long as their is doubt, or until it is clear that the winner will be decided in recounts or in the courts.  I expect it to be a very long night and a very bleary morning.

We'll do the stocks next time.  Not into money tonight.   

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