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Thursday, February 14, 2013


The State of the Union is... Precarious

The left wing agenda continued rolling out at the State of the Union address, with the President even reviving oldies but goodies like the minimum wage (a proven job loser).  Expanding educational opportunities for four year olds really amounts to little more than throwing more money we don't have at Head Start, a program that "feels good" but provides little statistical evidence to justify the spending.  As for immigration reform and gun control, the right proposals will attract bipartisan support, so you can be sure that Obama will push the envelope to whatever the point is where it would embarrass Republicans, which seems to be his only preoccupation lately.  I heard the speech in Washington, whle having an after dinner wine at Johnnie's Half Shell, and an older couple (yes, I think even older than me) was clucking at proposal after proposal, saying "how could anyone be against that?"  They would say this immediately before or after I would say, "well Republicans are not going for that," so it was pretty funny.  On the pre-school proposal, I finally had enough and turned to the couple and said, "how are we going to pay for that?"  They replied, reflexively, "tax the rich."  When I pointed out that if the rich paid a 100% tax rate on income, it still could not fund the Obama programs, they had nothing to say. 

Then, of course, there was the comic part of the show, wherein Obama took credit for our higher oil and gas revenues, while his Administration has opposed those industries' efforts every step of the way.  And still not a word about the Keystone Pipeline, even though environmental objections have now been satisfied by its rerouting.

The Dems' strategy, now that they got their Clinton tax rate on the top 1%, is to paint a grossly exaggerated picture of the impact that sequester will have on the military, Washington employment, and the social safety net.  Considering that the impact of this year's sequester will be $85 billion, or less than 10% of the annual DEFICIT, we know how false these characterizations are.  The House should parse through the Obama proposals, and reject any of them that are not truly paid for (which is just about all of them).  And they should refuse to budge on the sequester in the absence of serious efforts to start dealing with entitlements.  Which means we will likely to be in sequester all year.

On my way into the restaurant, I saw Karl Rove go out to make a cell phone call.  It was celebrity night in an otherwise locked down city.   But the weather was quite pleasant, and I walked from my hotel on Mass and 20th to dinner on North Capital.  If you don't know D.C., that's close to a two mile hike, and helped work up an appetite.  Washington is a good walking city, like New York, Chicago and Seattle. 

In April, I am headed for a lengthy stay in Houston, and I hope to enjoy it as much as the last time.  It's earthier than Austin, but there is lots of music in Houston too, and plenty of good spots at meal time.
This blog often commended Hillary Clinton during the last four years for providing the only discernible adult voice in the Administration.  It's also true that State has long been unmanageable, no matter how capable its leader.  The career bureaucrats in State have their own agenda and they follow that, often to the Secretary's frustration.  The chances that the Secretary of State, whether his/her last name is Baker, Powell, Clinton or Kerry, will be co-opted by the bureaucrats are much greater than any possibility that they will truly set the path for the Department.  It is no accident that Congressional conservatives have long had a hate / hate relationship with Foggy Bottom.

Yet, I was disappointed that Hillary ended her tenure on such a low note.  Effectively, she took the low road of the smooth departure from her follow rival, the President, instead of pointing out how badly her own Department and the Administration had sandbagged her on Benghazi.  Her feigned righteous indignation before the Congressional panel criticizing State's "performance" in that episode fooled no one.   The media is only too happy to cover up all these Administration follies, but the second and the final drafts of history will tell a more honest tale of the bungling that allowed an Al Queda attack on US property to proceed virtually unopposed, resulting in the death of our Ambassador and three others.

On 1/28, we bought 15 shares in the Gold ETF (GLD) at 160.23.  On 2/1, we bought 200 shares of  Peoples United (PBCT) for the IRA at 12.38.  We also bought 100 shares of Raven Industries (RAVN) at 26.95, a zero buy.  Then on 2/4, we bought 50 shares of Cincinatti Bell preferred (CBB.PR.B) at 47.50.  2/4 was also the day that Wells Fargo redeemed our 700 shares of its preferred at the pegged price of 25.  That gave us an immaterial capital gain in the IRA, but we enjoyed many years of healthy dividends, as we do from all of our preferred issues.  This provided more cash to work with above our 20% cash allocation target.  On 2/5, we bought 100 shares of Gulf Island Fabrication (GIFI), one of our Tulane portfolio of companies, at 22.95, a value buy.  On 2/7, we bought 9,000 shares of Onco Sec Medical (ONCS), a brand new name, for 0.228.  This purchase violated our rule about buying stocks below a dollar, and we won't be adding shares any time soon because of that rule, but I just can't resist a really promising cancer story.  Then on 2/11, we bought 100 shares of the SunTrust preferred (STI.PR.A) for the IRA at 24.37.  I won't pay more than the par price for these preferreds, assuming some day they will all be redeemed at par, as in the Wells Fargo case. Today we bought 200 shares of Safeguard Scientifics (SFE) at 15.28.

Our numbers are all in for 2012.  The total return for the musings portfolio was 13.2%, a solid year, since that figure includes commissions, dividends, everything.  The yield is impacted by the near zero return on the 20% I keep in cash, and the low return on the 4% of the portfolio in a tax free municipal bond fund.  So overall performance was pretty good on a risk adjusted basis - not easily attainable except in bull markets.  Maybe I should give the Obama Administration a little more credit.  Maybe they really are in favor of capitalism and good for private markets.  Maybe the Obama policies, given a chance to really have an impact, could jump start our economy and keep the bull market going....Naaah!

Disclaimer time:  Neither redwavemusings, nor its author, are investment advisors, and the transactions and securities reported here are not recommendations, and may not be suitable for any investor.

Yes, there is a great deal that is wrong with the Obama administration starting from its inexperience at, and seeming disinterest in, leading others towards real solutions. He does seem to prefer antagonizing the right, as oppose to working towards bargained solutions. An example of this that sticks in my mind was his holding back on providing a comprehensive fiscal solution of his own and then seizing the opportunity to publicly ridicule the Republicans Eric Cantor and others when they at least came forward with a plan to avoid fiscal disaster. An executive would know not to publicly embarrass someone they were going to need to negotiate with.
Still Obama thrives not only because of the biased “media”, but because of the numerous self-inflicted wounds by the Republicans: Sarah Palin, Transvaginal Ultrasounds, Romney’s 5-Point Plan (details not available), Open Hostility to Hispanics, Focusing on being heroes for the rich instead of trumpeting that they want to defend our children and grandchildren from massive debt and worthless dollars, Apologizing to BP executives, “legitimate rape” . . . etc. On and on and on they, the Republicans, paint themselves as out-of-touch jerks (cleaned-up, in case this is a family blog), living in a bygone era, when affluent white men could afford to be out-of-touch jerks. Speaking of by-gone-days, how I long for the days when great men such as William F. Buckley and Eisenhower gave leadership to this once great party.
Yes, there are important reasons to criticize Obama, Reid and others, but maybe your intelligence and energy are needed even more by your own party.
Don’t bother pointing out that Palin is old news or trying to claim that affluent white men could never have been out-of-touch jerks. Palin was a clear recent symptom of a dysfunctional party leadership and there is just no denying that rich whites enjoyed a more dominate position, in politics, in the past than they do now, or are likely to ever again.

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