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This is from an old (sometime in the 1980’s) Dave Barry column, but I ran across it today and I still find it funny.  It’s about the difference between Democrats and Republicans.  Unfortunately for our country, it’s pretty close to the truth….

“The Democrats seem to be basically nicer people, but they have demonstrated time and again that they have the management skills of celery. They’re the kind of people who’d stop to help you change a flat, but would somehow manage to set your car on fire. I would be reluctant to entrust them with a Cuisinart, let alone the economy. The Republicans, on the other hand, would know how to fix your tire, but they wouldn’t bother to stop because they’d want to be on time for Ugly Pants Night at the country club.”

Republicans spend too much on defense, bailouts of inept corporations, and in new programs designed to show people that they’re really good guys, like the prescription drug bill.  Democrats spend too much on everything.  Neither is willing to raise taxes enough to pay for their spending.  The only time in the last 50 years that spending has been kept somewhat in check is when we had a Republican congress and a Democrat as president.

For 6 years – from January 1995 through January 2001 – Republicans controlled congress and Clinton was president.  Spending was kept in check and we almost had a balanced budget.  I know Clinton claimed surpluses, but he lied.  The “surplus” came from Social Security payments and the total federal debt increased each and every year, so there wasn’t actually a surplus – but it was as close as we’re ever likely to see from here on.

Obama is making Bush’s budget busting spending look like child’s play.  This year alone, we’re spending twice as much as we’re collecting in taxes.  We’re effectively borrowing money from the Chinese to make interest payments to the Chinese.  It’s the same as using your Visa card to make minimum payments on your MasterCard.  How long do the idiots on Capital Hill think they can continue this Ponzi scheme?

gk

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The S&P 500, DJIA, and NASDAQ are all up about 40% from their lows on March 9th.  Why?  Has the economy (and earnings) rebounded that sharply?  Or were the March lows an aberration?  It’s been a while since I talked about the stock market or the larger economic picture, so it’s time to revisit those themes.

First, the economy.  From the data to date, it appears that the broad US economy is shrinking less rapidly than it was just a few months ago – but it’s still shrinking.  The GDP shrank at a 6.3% rate in the 4th quarter of 2008, and it shrank at a 6.1% rate in the 1st quarter of 2009.  These are the revised (as of May 29th) numbers straight from the BEA here.

Passenger: “The GDP is better than it was before Captain – can we start the party?”

Captain: “Ummm, let me think….  The ship is still sinking….  But it’s sinking at a slightly slower rate.  Re-arrange the deck chairs again, maybe that will help.  Party on dude!”

Ok, so the economy isn’t growing – what’s behind the 40% rise in stocks?  Could it be earnings?  Maybe companies have laid off enough workers, and streamlined operations enough so that their profits are 40% higher than last quarter?  Let’s look at the numbers….

With 99.43% of the Q1 2009 earnings reported, the total earnings of the S&P 500 adds up to $7.61.  That’s certainly a lot better than the negative $23.25 the S&P 500 earned during Q4 2008!  Keep in mind that Q4 was the first time ever for “negative earnings” for the S&P 500.   And another word for “negative earnings” is “losses”.  Or “deficit”.  As in “the US Government has $1.85 trillion in negative earnings for fiscal year 2009.”

Anyway, $7.61 in earnings must be a good thing if that has caused the stock market to surge about 40% in the past 3 months right?  According to Standard and Poors latest spreadsheet, no.   Except for last quarter’s losses, As Reported earnings haven’t been this low since Q4 of 2002.  And the Operating Earnings (currently $10.15) haven’t been this low since Q4 of 2001.

Ok, so actual earnings aren’t driving the market higher – what if the earnings are low, but beating the estimated earnings?  In other words, what if company earnings suck, but they suck less than investors expected them to suck?  Sorry Charlie, according to Howard Silverblatt, S&P Senior Index Analyst, “actuals are -24.3% off estimates, and -43.5% behind last year”.

Of course, Howard goes on to say that the “Operating vs As Reported (top down vs bottom up) varriance enormus; out of the woods or the Island has moved.”  I’m not sure what it means when the Senior Index Analyst at Standard and Poors can’t spell “variance” or “enormous”, but it can’t be A Good Thing.

In the same note, Howard also says “189 issues beat est, but only 87 beat last years earnings; 290 missed with 72 beating last years EPS” which translates (seriously) to “189 out of the 500 companies in the S&P 500 beat their earnings estimates.”  189 out of 500 is about 38% – that means that 62% of the S&P 500 MISSED their earnings estimates.  And yet the stock market is 40% higher.

Ok, so maybe the forward PE ratio is finally coming down to reasonable levels?  It was at a record 60 to 1 at the end of Q4, it must be better now….  Or at least when we look at the estimates for the rest of the year….  Right?

Wrong.  The current PE ratio for the S&P 500 is 114.77, another record high.  And it gets even worse when you look ahead.  Here are the current estimated PE ratios for the S&P 500 for the rest of 2009.

• Q1 – 132.22
• Q2 – 3513.31 !
• Q3 – Negative 301.52 (first negative annual PE in history)
• Q4 – 33.46

To sum it up, I see no reason for the current level of stocks.  Zero.  The S&P 500 index (currently at 944.74) is too high relative to earnings – and in the long run, stock prices are based on earnings.  This minibull may continue for awhile, but prices WILL eventually adjust to the low earnings.  And from where I sit, that means stocks will drop back down to at least the March low sometime this year.

The only possible way I can see stocks continue to rise is inflation.  Specifically, inflation caused by the enormous amount of money the Fed is printing out of thin air and injecting into the money supply.  In that case, stocks can – and will – go higher.  But the actual price increase will be close to zero when adjusted for inflation.  And if you want to maintain your purchasing power, gold and silver (in your physical possession, not an ETF!) are, in my humble opinion, much better inflation hedges than stocks.

I could go on and on about how Geithner, Helicopter Ben Bernanke, a willing Congress anxious to be seen as “doing something”, and Obama are making the mess worse – just as Greenspan, Bernanke, Bush, and a willing Congress created the problem – but that’s another story for another day.

gk

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It looks like Bush’s paranoia is finally going away.   Access to the crown on the Statue of Liberty is finally being allowed again after Bush pretty much shut everything down after 9/11/2001.  Here’s a NY Times story about it.

Bush used 9/11 as an excuse for anything and everything, from torture, to invading Iraq – which had absolutely nothing to do with 9/11 – to illegal wiretaps, to creating a vast new bloated bureaucracy to “protect” Americans called Homeland Security, to borrowing as much money as all the previous Presidents combined.   Bush is an idiot who did more to harm this country than any other President in history.

Obama isn’t looking too good either, as he’s ringing up even higher deficits than Bush and pushing for nationalized health care, but he’ll really have to work hard to be as incompetent as Bush.

gk

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Evidently, Rush Limbaugh is back on the drugs.  He made a speech today at the Conservative Political Action Conference, where (according to CNN) he said:

“We love and revere our founding documents, the Constitution and the Declaration of Independent. We believe that the preamble of the Constitution contains an inarguable truth, that we are all endowed by our creator with certain inalienable rights, among them life, liberty, freedom. And the pursuit of happiness,” he said, pausing several times for enthusiastic applause.”

I don’t doubt that the “Declaration if Independent” is a typo, but to say “the preamble of the Constitution contains an inarguable truth, that we are all endowed by our creator with certain inalienable rights, among them life, liberty, freedom.” is simply wrong.

It’s wrong in a couple of ways.  Number 1 is that the Declarartion of Independence is where the statement about “inalienable rights” is made, not the Constitution. Number 2 is that “freedom” isn’t in that phrase either.

Limbaugh goes on to berate Obama for inspiring fear.  Limbaugh says  “He wants people in fear, angst and crisis, fearing the worst each and every day because that clears the decks for President Obama and his pals to come in with the answers which are abject failures, historically shown and demonstrated. Doesn’t matter. They’ll have control of it when it’s all over. And that’s what they want.”

Excuse me?  I may agree that Obama is scaring people so that he can advance his agenda, but for Limbaugh to act like that’s something new is simply nuts.

Bush was the master of fear mongering.   After 9/11, Bush quickly learned that by using fear, he could get almost anything he wanted.  And Limbaugh never said a word about it.

I agree with Rush on many things, such as fiscal and personal responsibility, and welfare state programs, but I disagree with his “moral” stands, where he (and the “conservative Republicans”) want to tell everyone how to live their lives.  (Some liberals also try this – I don’t agree with them either.)

Rush Limbaugh turned a blind eye to 8 years of fear mongering by Bush, so he should shut the hell up and drop the holier than thou attitude regarding Obama.  Obama isn’t doing so well in my opinion either (see my earlier posts on the budget and bailouts) but he has a long way to go to be worse than Bush.

gk

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Saw this article and had to get a link to it here.  It says – much better than I could – what I’ve been trying to say about President Obama’s spending.

Here’s a snip to give you the flavor of the article.

With all due respect Mr. President, Tim Geithner and Ben Bernanke are offering the same policies as President Bush and Secretary Paulson. Those policies are to bail out banks regardless of cost to taxpayers. Mr. President, it’s hard enough to overlook Geithner’s tax indiscretions. Mr. President, it is harder still. if not impossible, to ignore the fact that neither Geithner nor Bernanke saw this coming. Yet amazingly they are both cock sure of the solution. Even more amazing is the fact that solution changes every day.

With all due respect Mr. President, it is impossible to spend one’s way out of a problem, when the problem is reckless spending.

I haven’t previous read anything from Mike “Mish” Shedlock, but I’ll have to check out more of his site later.  If the rest of it is anything like this post, it would be a great addition to my blogroll.  Good stuff!

gk

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Spending “only” $3.55 trillion is considered to be fiscally responsible?

President Obama inherited a more than $1 trillion deficit from the idiot George Bush, but he’s tacked on more than his fair share already.  The current estimate of the deficit is now up to $1.75 trillion for fiscal year 2009, which started on Oct 1st, 2008.

Here’s a story from the NY Times about the budget.

His administration will attempt to close the large fiscal gap even while starting a major health-care initiative intended to substantially extend coverage; to do so, it foresees increasing taxes on the wealthiest Americans and using revenue from a new program: selling carbon credits to manufacturers as part of a cap-and-trade plan meant to slow climate change.

The forecasts are also founded on optimistic assumptions that the recession will end by next year and quickly produce stronger growth than was seen in the last decade. After the economy shrinks this year, the Obama team assumes that the gross domestic product, adjusted for inflation, will increase by 3.2 percent next year and then 4 percent or more the following three years, a rate nearly twice the average of the Bush years.

I wrote a post a few minutes ago where I talked about people saying that this is the bottom in various markets.  But Obama is basing his presidency on this year being the bottom.  I’m afraid he’s mistaken.

But here’s one bit of good news – Mr. Obama promised to include the full costs of the wars in all his budgets, saying that because of “dishonest accounting” past budgets have “not told the whole truth about how precious tax dollars are spent. Large sums have been left off the books, including the true cost of fighting in Iraq and Afghanistan.”

It’s about time that these costs were included in the budget.  We still have to pay them, but Bush somehow made the cost of these wars disappear. They didn’t actually disappear (look at the debt clock at the top of this page!) but they didn’t appear in his budgets – or the official deficits.

The State Department gets the biggest increase, rising from $36.7 billion this year to $51.7 billion next year, although Mr. Obama will not be able to keep his promise to double foreign aid.

There are literally hundreds of things I could say about the bloated, pork laden, unconstitutional (read it!) budget proposal.  None of it is new, and I complained about the exact same things when Bush proposed the massive budgets.  But I promise to get into a lot of the details when the official budget is released with actual line items that I can talk about.

But if you thought Bush’s budgets were mind boggling, the first one from Obama promises to be even worse.  My bet is that he’ll break Bush’s record $1 trillion plus deficit his first year.

gk

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Here are the current top three stories in the NY Times Business Section as of 9:30pm ET, July 28th:

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Ok, so the headline is fake.  Sue me.  But I guarantee that there is nothing that would make King George happier. 

Unfortunately, after 5 years and 4000 American lives lost in Iraq, we can’t even find any spoiled camel piss.   Hillary is bitching that she was suckered into voting for the war, while refusing to admit that she made a mistake.  Cheney basically says “tough shit – they volunteered.”

Meanwhile, Bin Laden (anyone remember him?) is still out walking around, dragging a dialysis machine behind him while sending messages saying that we suck.  He’s never even been to Iraq, but that doesn’t seem to matter.  GW had to settle a family feud with Saddam, so we invaded Iraq.

Just think about how far along – and how much public support Bush would have today – we’d be in Afghanistan if Bush wouldn’t have lied about Iraq.  Think about how many freedoms we’ve lost because of Bush’s paranoia.  Anyone remember when you could fly somewhere faster than driving?  Ahh, the good old days….

Those were the days when you could go through security without undressing - when you had more than one security agent actually working at a time while 6 others stood around and did absolutely nothing like the average hour long security line today.

I don’t really have a point here, reading Cheney’s interview just me ticked off and I needed to vent.  I really need to take the time to revisit just how bad a job Bush has done, but it won’t be tonight.

gk

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Looks like Bush is looking for new ways to spend your money.  He’s already turned record surpluses into record deficits, he’s wasted billions on the “war against terror” on Iraq, and he’s stood by and done nothing while watching the biggest bubble in recent history grow to the bursting point.  Now this from:
http://money.cnn.com/2008/01/25/news/economy/preview_sotu/index.htm?postversion=2008012618

“Look for a pitch for tax-related provisions, such as opening the door for states to use tax-free bonds to help homeowners refinance out of unaffordable subprime [adjustable-rate mortgages],” said Jaret Seiberg, senior vice president at the Stanford Group, a Washington policy research firm.

So now Bush wants everyone to pay for the bad decisions of the idiots who bought more house than they could afford.  I guess he figures that if he can spend other people’s money (that he doesn’t have) why can’t everyone else? 

I’ve said it before, but you can’t borrow your way out of debt.  This plan would shift the existing debt burden to responsible taxpayers, which simply encourages more irresponsible behavior.  I think he’s just trying to postpone the inevitable crash until after he’s gone to protect his “legacy”- which will just make it that much worse.  

The same goes for his “stimulus” rebate package.  The only thing it’ll stimulate is more borrowing.  And I really want to know how it can be called a tax rebate plan if you give a rebate to people who don’t pay taxes….  Come again?

gk

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