Proud to be an American, vol. MMXXXVI

Did you know that in Texas you can vote if you show your handgun carry permit, but not your student ID?

It's gettin' ugly out there.

Hell, even North Korea knows you need to at least make sure people have food.

Hungry, unemployed people with guns are something we might consider trying to avoid, ya think?

What the hell are we becoming?

Up or down, that old question.

Investing these days is a nightmare. As I indicate in the previous post, there are just too many investors and too much data, and outcomes depend as much on the decisions of one random finance minister somewhere (will there be QE3? What terms will Greece get from the EMU?). Whether Angela Merkel enjoys her coffee this morning may have powerful effects on your portfolio value.

So where does this leave us little guys?

I think the safest thing we can do is ignore all that stuff and recede back into longer timelines, where things make a little more sense. For example, the population is growing, and developing nations are using more and more energy. Oil is a finite resource, so hold some for the long term. Knowing (but not caring) that over the next year it could tank. Or, the US has been propped up on low interest rates and QE, but both can't continue forever.

While many folks think US bonds will crash when the world "wakes up" and sees what a terrible credit risk the US is, it's only a nominal credit risk (meaning we WILL pay back our obligations, we may just do so in devalued dollars). But I see it a little differently. I think the US bond will tank as soon as there's a clearly much better option. For example, booming global world growth.

But this all, in my opinion, goes back to confidence. People take risk when they're confident. There are innumerable confidence-destroying issues out there right now. Will China implode on a GDP that is far too heavily weighted on the real estate sector? Will the US in its "let's cut everything" mode ever be a viable global consumer again? Will Greece lead to Portugal lead to Spain, bringing down confidence in banks world over?

And the government personnel in charge of driving the outcomes of these issues seem hopeless. Is there anyone out there who wouldn't prefer an 8th grade honors class be running the USA rather than the tragicomic clown show that is the US Congress?

So, long story short, morons are in charge far more than markets right now. This leads to lack of visibility, which leads to lack of confidence, which leads to lack of the desire to take risk.

So yes, Apple will sell to China for decades. Own Apple.

But be wary of the generic concept of "stocks for the long run" in that if you just buy some index ETF you don't have to think about what you're owning. Here's a nice "stocks for the long run" graph for you to ponder.

Japan (the blue curve) is an industrious, developed nation with a high work ethic and a consistent trade surplus. And the US (the red curve) used to be full of hope and promise, but now the US is....um...what, at the moment?

A world that depends on what it can't possibly understand is asking for trouble.

For the longest time, stock and bond markets were fairly simple. Stocks were shares of companies sold to generate capital for that company when it needed to expand. Bonds were promises to pay interest on capital borrowed. Really, most people kept most of their money in savings accounts, that paid - when I grew up - around 5 1/4 percent. Banks lent that money to people who wanted to buy homes for a couple hundred basis points over their borrowing costs. It was a much simpler system, which served to much more directly benefit borrowers and savers.

Now, this system bears no relevance to what’s going on out there in finance. Savers can’t use bank accounts to save. They’re actually losing money if they do, because real interest rates are below zero. So they plow money into “stocks”, whatever that means these days. It could be an ETF, an emerging market Mutual fund, or Apple. Well how do you evaluate Apple? They make some cool stuff, and China’s big and growing. Sure. And that’s about where it ends for most folks. What about China falling? What about the European debt crisis? What about Japan’s demographic problem? What about the US’s inability to do anything right?

Now certainly external effects have always played a part in financial market pricing, but it really does seem like things are getting different-er. Globalism is a huge part of that. There’s too much going on around the globe to be able to understand how various asset prices will be affected. And the lower barriers of entry to investing through basically “web based games” like Charles Schwab, etc bring so much more noise into the markets, and presumably make the herd behavior much worse.

So is this just a zero-sum game, where the level of complication just goes up more, and that benefits either the lucky or the brilliant? Probably mostly.

But I also think there may be an overall confidence effect: how can the average investor know what the hell to do with her money? With market opacity at all-time levels and growing, what do you trust?

The absence of an easy “no brainer” solution like savings account, is in my mind a really, really bad idea. And threatens to wipe out (again) those unsophisticated investors who get caught in risk assets. So what ends up happening is the savings of those folks gets transferred to more sophisticated (or lucky) folks. Making people even more scared and uncertain.

I think this uncertainty is really bad for the global economy. And adds incredible noise, and the possibility for huge blow-ups. To put it simply, we’re just not smart enough to understand the system we’ve created. And this is very dangerous imho. Because those with no savings and no job and no hope become violent. Wars begin. People die. Just look to the Middle East.

So what is my solution? We need to simply the global financial system closer to something our little human brains can understand. Yes, at the expense of liquidity. Yes, at the expense of potentially greater rewards for a few. But as soon as you get dependent on any system you don’t understand, you’re asking for trouble.

Did I really read this in a Wall St. Journal publication?

Wow, the times they ARE a changin'.

http://www.marketwatch.com/story/tax-the-super-rich-now-or-face-a-revolution-2011-03-29?pagenumber=1

Paul B. Farrell

March 29, 2011, 12:01 a.m. EDT

Tax the Super Rich now or face a revolution

Commentary: A ‘Super-Rich Delusion’ is leading us to ruin

View all Paul B. Farrell ›

‹ Previous Column

New Civil War erupts, led by super rich, GOP

By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch, Wall Street Journal Digital Network) — Yes, tax the Super Rich. Tax them now. Before the other 99% rise up, trigger a new American Revolution, a meltdown and the Great Depression 2.

Revolutions build over long periods — to critical mass, a flash point. Then they ignite suddenly, unpredictably. Like Egypt, started on a young Google executive’s Facebook page. Then it goes viral, raging uncontrollably. Can’t be stopped. Here in America the set-up is our nation’s pervasive “Super-Rich Delusion.”

U.K. workers protest turns violent

A splinter group is blamed for smashing windows and attacking police vans as tens of thousands march against government cuts.

We know the Super Rich don’t care. Not about you. Nor the American public. They can’t see. Can’t hear. Stay trapped in their Forbes-400 bubble. An echo chamber that isolates them. They see the public as faceless workers, customers, taxpayers. See GOP power on the ascent. Reaganomics is back. Unions on the run. Clueless masses are easily manipulated.

Even Obama is secretly working with the GOP, will never touch his Super Rich donors. Yes, the Super-Rich Delusion is that powerful, infecting all America.

Here’s how one savvy insider who knows described this Super-Rich Delusion: “The top 1% live privileged lives, aren’t worried about much. Families vacation at the best resorts. Their big concerns are finding the best Pilates teacher, best masseuse, best surgeons, best private schools. They aren’t concerned with the underlying deterioration of America or the world, except in the abstract, because they aren’t directly affected by it. That’s not to say they aren’t sympathetic, aware, or don’t talk about the issues you bring up. They are largely concerned with protecting and enhancing their socio-economic positions, ensuring their families live well. And nothing you write about will change things.”

Warning, in 2011 that attitude is delusional, deadly, yet pervasive in America.

Super Rich replaying “Great Gatsby” age, won’t learn till it’s too late

Our top 1% honestly believe they’re immune, protected from the unintended consequences of beating down average Americans for three decades with the free-market, trickle-down Reaganomics doctrines that made them Super Rich.

They honestly believe those same doctrines will protect them in the next depression. Why? Because they have megabucks stashed away. Provisions for the long haul. Live in gated compounds with mercenaries guarding them.

They believe they’ll continue living just fine in a depression. But you won’t. Nor will your retirement. Neither will the rest of America. And still the Super Rich don’t care, “except in the abstract, because they aren’t directly affected.”

Warning: The Super-Rich Delusion has pushed us to the edge of a great precipice: Remember the Roaring Twenties? The Crash of 1929? Great Depression? Just days before the crash one leading economist, Irving Fisher, predicted that stocks had “reached what looks like a permanently high plateau.”

Yes, he was trapped in the “Great Gatsby Syndrome,” an earlier version of today’s Super-Rich Delusion. It was so blinding in 1929 that the president, Wall Street, all America were sucked in … until the critical mass hit a mysterious flash point, triggering the crash.

Yes, we’re reliving that past — never learn, can’t hear. And oddly it’s not just the GOP’s overreach, the endlessly compromising Obama, too-greedy-to-fail Wall Street banksters, U.S. Chamber of Commerce billionaires and arrogant Forbes 400. America’s entire political, financial and economic psyche is infected, as if our DNA has been rewired.

The Collective American Brain is trapped in this Super-Rich Delusion, replaying the run-up to the ’29 Crash.

Nobody predicted 2011 revolutions in the oil-rich Arab world either

Warning: Mubarak, Gaddafi, Ali, Assad, even the Saudis also lived in the Super-Rich Delusion. Have for a long time. Were vulnerable. Ripe for a revolution. They, too, honestly believed they were divinely protected, chosen for great earthly wealth, enjoyed great armies.

Arsonists screaming about firehoses.

Dudes, how could you possibly have the cojones to write this letter, when YOU are the very people who put us where we are.

http://dyn.politico.com/printstory.cfm?uuid=F4A5C7FC-D560-4FE6-AA34-BC1E44F79CF3

Unsustainable budget threatens U.S. By: 10 ex-chairs of the president's Council of Economic Advisers March 24, 2011 12:33 AM EDT

Repeated battles over the 2011 budget are taking attention from a more dire problem—the long-run budget deficit. Divided government is no excuse for inaction. The bipartisan National Commission on Fiscal Responsibility and Reform, under co-chairmen Erskine Bowles and Alan Simpson, issued a report on the problem in December supported by 11 Democrats and Republicans — a clear majority of the panel’s 18 members. As former chairmen and chairwomen of the Council of Economic Advisers, who have served in Republican and Democratic administrations, we urge that the Bowles-Simpson report, “The Moment of Truth,” be the starting point of an active legislative process that involves intense negotiations between both parties. There are many issues on which we don’t agree. Yet we find ourselves in remarkable unanimity about the long-run federal budget deficit: It is a severe threat that calls for serious and prompt attention. While the actual deficit is likely to shrink over the next few years as the economy continues to recover, the aging of the baby-boom generation and rapidly rising health care costs are likely to create a large and growing gap between spending and revenues. These deficits will take a toll on private investment and economic growth. At some point, bond markets are likely to turn on the United States — leading to a crisis that could dwarf 2008. “The Moment of Truth” documents that “the problem is real, and the solution will be painful.” It is tempting to act as if the long-run budget imbalance could be fixed by just cutting wasteful government spending or raising taxes on the wealthy. But the facts belie such easy answers. The commission has proposed a mix of spending cuts and revenue increases. But even this requires cuts in useful programs and entitlements, as well as tax increases for all but the most vulnerable. The commission’s specific proposals cover a wide range. It recommends cutting discretionary spending substantially, relative to current projections. Everything is on the table, including security spending, which has grown rapidly in the past decade. It also urges significant tax reform. The key principle is to limit tax expenditures—tax breaks designed to encourage certain activities—and so broaden the tax base. It advocates using some of the resulting revenues for deficit reduction and some for lowering marginal tax rates, which can help encourage greater investment and economic growth. The commission’s recommendations for slowing the growth of government health care expenditures — the central cause of our long-run deficits — are incomplete. It proposes setting spending targets and calls for a process to suggest further reforms if the targets aren’t met. But it also lays out a number of concrete steps, like increasing the scope of the new Independent Payment Advisory Board and limiting the tax deductibility of health insurance. To be sure, we don’t all support every proposal here. Each one of us could probably come up with a deficit reduction plan we like better. Some of us already have. Many of us might prefer one of the comprehensive alternative proposals offered in recent months. Yet we all strongly support prompt consideration of the commission’s proposals. The unsustainable long-run budget outlook is a growing threat to our well-being. Further stalemate and inaction would be irresponsible. We know the measures to deal with the long-run deficit are politically difficult. The only way to accomplish them is for members of both parties to accept the political risks together. That is what the Republicans and Democrats on the commission who voted for the bipartisan proposal did. We urge Congress and the president to do the same. Martin N. Baily Martin S. Feldstein R. Glenn Hubbard Edward P. Lazear N. Gregory Mankiw Christina D. Romer Harvey S. Rosen Charles L. Schultze Laura D. Tyson Murray L. Weidenbaum Martin N. Baily, a senior fellow at the Brookings Institution, served as the chairman of the Council of Economic Advisers in the Clinton administration, 1999-2001. Martin S. Feldstein, an economics professor at Harvard University, served as chairman in the Reagan administration, 1982-4. R. Glenn Hubbard, dean of the Columbia University Graduate School of Business, served as chairman in the Bush administration, 2001-3. Edward P. Lazear, economics professor at Stanford University’s Graduate School of Business, served as chairman in the Bush administration, 2006-9. N. Gregory Mankiw, an economics professor at Harvard University and influential blogger, served as chairman in the Bush administration, 2003-5. Christina D. Romer, economics professor at the University of California, Berkeley, served as the chairwoman in the Obama administration, 2009-10. Harvey S. Rosen, an economics professor at Princeton University, served as chairman in the Bush administration, 2005. Charles L. Schultze, a senior fellow emeritus at the Brookings Institution, served as chairman in the Carter administration, 1977-81. Laura D. Tyson, a professor at the Haas School of Business of the University of California, Berkeley, served as chairwoman in the Clinton administration, 1993-95. Murray L. Weidenbaum, honorary chairman of the Murray Weidenbaum Center on the Economy, Government and Public Policy at Washington University in St. Louis, served as chairman in the Reagan administration, 1981-82.

It's not about the budget. It's class warfare. And your class is losing to pay for rich people's extra tenth of a percent