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Sunday, January 27, 2013


2nd Term Hubris

Second terms are notorious for scandal, drift, and the diminishment of power ( the lame duck syndrome).  Obama, in his inaugural, and by his actions since election day, seems to feel that the way to preempt these tendencies is to double down on a socialist/leftist agenda, thereby solidifying his left wing base but also setting himself up for an inability to achieve much of anything without recourse to questionable, even extra-constitutional, tactics.  He also confirms  the opposition's criticism of him as a far left, even socialist, advocate, when in fact he largely disarmed those critics by governing as something closer to a centrist in the first term.

Lest this analysis sounds a little too harsh, too extreme, Iask you to listen more closely not only to the President's own words, but more particularly to those of his supporters.  Take Donna Brasile, who appears on the panel every Sunday on ABC's This Week.  It's one thing to engage in idol worship, but another to be a commentator who simply ignores the very large budgetary issues, the issues of separation of powers, etc. in her advocacy while pumping for redistribution of income and wealth as an end justifying any means.  Unfortunately, she is all too typical of the President's popular majority. 

The inaugural speech, perhaps the worst I have ever heard, was virtually the Obama campaign stump speech, atypical for any re-elected President.  Rather than give Republicans any reason to work with the Administration, it drew the battle lines in the starkest of terms, and used repeatedly the President's (and Dems) favorite rhetorical device - the building of a straw man by misrepresenting the opposition position, and then proceeding to tear that down.  Mr. Obama has no one to blame but his own Administration if House Republicans choose to frustrate his policy goals. 

And still, only the likes of Budget Committee Chairman Ryan speak seriously and determinedly about the need to do something about the nation's fiscal disaster.  Let's hope Republicans develop a little backbone and tell Dems to pound sand on the sequester.  We want the across the board cuts - Defense is going to be cut anyway in this Administration - so lets have at it.  As for revenues, the real money is in the middle class and the underground economy, and Dems have said they will not go after that.  The only revenue increase I would support now would be the ridiculous treatment of "carried interest" as a capital gain, but you've heard from me enough times on that already.   Otherwise, it's time to go after entitlements.  If you can't remember why that is, go back a few years in the archives to our series on entitlement spending for a refresher about why we can't afford what Congress has promised, and why we are bankrupting our children.

Maybe the Administration's second term woes have already begun, given the decision by a Federal Appeals Court invalidating the Administration's recess (non-recess) appointments that resulted in populating the National Labor Relations Board and the Consumer Financial Protection Board.  That means that every decision made by the NLRB's recess appointees are likely invalidated.  Incidentally, the Court determined that recess appointments made for over a hundred years have been unconstitutional if the Senate wasn't actually in recess between sessions (as opposed to any old time they went home on vacation). 

This Administration flagrantly violated the Constitution when it claimed it could determine by itself when the Senate was in session, in violation of the separation of powers.  In recent years, Republicans had copied a Democratic parliamentary trick adopted in 2007 to frustrate Bush 43 to gavel in and gavel out during session instead of formally declaring a recess.  Bush chose to observe the Constitution and did not make recess appointments during such breaks.  Obama did not, even making such appointments on January 4 to maximize the amount of time his recess appointees would stay in position.  Now his Justice Department will no doubt appeal this latest decision to the Supreme Court.

Pending that Court's decision, Republicans should continue to oppose the renewed nomination of Richard Cordray as CFPB head until Dems agree to put that Agency's budget under Congressional control.  Right now, the Dodd Frank Act says CFPB gets to determine its own budget - can you imagine? -  and it's time that flagrant misstep was corrected.

By the way, on that note, if you have kids, especially those at or near voting age, it's high time you sat them down and explained the financial facts of life.  They may be voting for Dems because they favor abortion, gay rights, student loans, immigration amnesty, etc. etc., but they need to realize that the world they and their children will inherit will be a far less comfortable place if we keep spending ourselves into oblivion.  They may talk tough about social security not being there for them, but are they doing any appreciable saving to make up the difference?  They may say they can live with a single (government) payor health system, but they should at least understand that choices now open to us won't be open to them when they get to a certain age and all the fast food they have eaten causes them to develop the maladies of middle age.  

So I think it's awful that we baby boomers are leaving this hopeless debt to our children and grandchildren, but they are now voting so they share responsibility too.  You get the government you deserve, the old saying goes, and with it comes the economy you deserve too.

So why is it necessary for Phil Mickelson to apologize for saying what any high earner must be thinking, which is that he needs to move to a low (or no) income tax state, and maybe even retire or otherwise cut down on income since he is mainly working for the government?  For Phil, who made $47 million in 2011 (according to Forbes) to question why he should live in California with its 13% state income tax, when none of it will be deductible because of the AMT, is perfectly legit.  In fact, while Phil was making his apology for making his thoughts public, Tiger Woods was acknowledging that he relocated to Florida in 1996 because it had no income tax!  Phil runs off at the mouth quite a bit, but he is a fan favorite in large part because he is open and honest.  No apology necessary, Phil.

As for Redwave, regarding questions about whether I am contemplating similar moves, the answer is I don't make Phil money. Not even 1% of Phil money, assuming the Forbes estimate is accurate.  Though I live in a high tax state, and think those tax levels are too high, it is not in California's class.  There will be tweaks in our investment formula though, the first being that we'll be buying shares in the gold ETF (GLD) for our taxable account instead of for the IRA.  More on those tweaks as the year goes by.

So I get in the car at the airport after returning from Orlando, and tune the car radio to the country music station I can get from Connecticut and find that there has been a format change to "all religious music programming."  Resigned to another interminable period in the countryless abyss that has been New York radio, I went back to my typical dial hopping among the jazz and classic rock stations.  Then lo and behold, the WSJ reported last week that FM 94.7 in New York City changed its format (ironically from all religion) to country.  So now we've got a real good country station in NYC for the first time in 19 years (since the lamented WHN gave up the ghost) , and with much better reception than we could get from across the Sound.

The greatness of Stan Musial's talent on the baseball field is probably not sufficiently understood by today's fans, especially if they never saw him play.  Most of his career was played in the modern era, meaning night baseball, integrated (and therefore talent laden) rosters, power pitching starters, etc.  Yet, Like Ted Williams, Musial was a throwback to an earlier era, and the term '300 hitter" is simply an inadequate description of his stats.  In fact, Musial's lifetime average was 331, and he hit 330 over a full season after he was 40 years old! He also hit 475 homers, 2nd on the all time National League list when he retired, and he is still in the top ten all time for major league hits.  Yet he struck out less than 700 times!  Unlike Williams, he was an aggressive base runner, though not necessarily the fastest.  He was just as good on the road as at home, earning grudging admiration from enemy fans despite leading his beloved Cardinals to several championships.  Brooklyn Dodger fans were especially of two minds about Musial who loved to hit at Ebbets Field, even though Dodger starters were usually the best in the league. 

One great story that illustrates the mixed feelings of Brooklyn fans - Musial smashed a liner off the wall in right field in Ebbets Field  and never hesitating, stretched it into a triple.  One leather-lunged fan was heard to shout "Hey Music Box, how comes you hit so good and runs so fast, ya bum ya!"                  


And while we're at it, Earl Weaver led the Orioles in their salad days.  Like most managers, he won when he had the horses, lost when he didn't, but unlike a lot of teams, top players loved playing for the Birds when Earl led them, even if they sometimes had run-ins with him.  Instinctively, Earl knew the odds when it came to managerial strategy long before Money Ball's creators worked the numbers.  You never saw the Orioles bunting and even though they had some speed, they didn't steal many bases either.  Earl 's theory was you won games by hitting three run homers, and with boppers like Boog Powell and Frank Robinson around, it made no sense to risk baserunners.

This summer's Hall of Fame gathering in Cooperstown just won't be the same without Musial and Weaver, two of baseball's immortals from the era when the game was really the National Pastime.
We have a lot of investing activity to report.  On 12/31, we bought 20 shares of the TIPS ETF (TIP) for the IRA at 121.95.  We also sold the remaining 866 shares of Presidential Life (PLFE) as its takeover was completed.  We got 14 per share.  We paid 14.75 for 266 shares in 2000 and paid 7.41 for 600 in 2002.  On 1/3, we bought 200 shares of Knight Transportation (KNX) for 15.16.  On 1/7, we bought 100 shares of Diebold (DBD), a zero buy at 31.09.  You may have seen the stock has since taken a bit of a dive on a long overdue management shake-up.  On 1/8, we bought 100 shares of Suntrust Preferred (STI.PR.A) for the IRA at 24.24.  On 1/9, we bought 300 shares of Gencor (GENC) at 7.60, a value buy.  On 1/11, we sold 100 shares of Shaw Group (SHAW) at 46.89.  We paid 22.57 on 9/2/11.  On 1/14, we bought 50 shares of ITW at 62.57.  Then on 1/18, we sold 700 shares of Sirius (SIRI) at 3.18.  We paid 3.19 for 300 on 7/24/07 and 1.34 for 400 on 9/2/08.  On 1/22, we sold 100 shares of Belden (BDC) for 46.96.  We paid 31.39 on 9/17/08.  Then on 1/23, we sold the rest of our 500 shares in Shaw, which is being taken over, for 47.20.  We paid 16.90 for 200 on 12/27/04, 16.14 for 200 on 8/29/05, and 26.10 for 100 on 7/15/11.  On 1/24, we bought 100 shares of Newmont Gold (NEM) for 44.65.  Finally, on 1/25, we bought 1800 shares of Frozen Food Express (FFEX) for 1.18.

The market rally is largely the effect of pricing in the inevitable future asset inflation caused by the Fed's expansionist monetary policy and the Administration's hopeless fiscal policy.  Even as the value of our accounts goes up, we are maintaining our high (20%) cash balances, knowing that there will be a day of reckoning for the market when this bubble bursts.


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