Posted on 06/30/2008 7:10:26 AM PDT by Sub-Driver
New Threat: The 'Obama Market' By DAN DORFMAN June 30, 2008 http://www.nysun.com/business/new-threat-the-obama-market/80913/
As if investors didn't have enough to worry about, a new land mine is lurking: "the Obama market."
That's what I heard over the weekend from a veteran investment adviser, Charles Allmon. "Political ramifications represent a significant added market risk that should not be ignored," he says.
Initial polling suggests that Senator Obama will be the next president, a view Mr. Allmon shares. An Obama presidency is certain to mean a big tax increase, he says. He also points to the likelihood that the senator will seek to raise the marginal tax rate to 52% from 39.6% and hike the capital gains tax rate to at least 25% from 15%.
"He'll cause more damage to the stock market and even make Jimmy Carter look good," Mr. Allmon says. "Senator Obama is leading a children's brigade, but the problem is children shouldn't be leading this country."
Wall Street, they say, is a young man's game. Try telling that to our 87-year-old worrywart, who has been doggedly tracking the stock market for more than half a century and who offers a compelling argument that money managers in their golden years still have the brain power and analytical savvy to strike gold.
Mr. Allmon, who manages about $200 million of assets — individual, pension, and profit-sharing money — is outperforming this year's crummy market, with a modest gain, he says, of between 1% and 2%. He attributes this showing to a conservative investment strategy, notably huge cash reserves (currently at 80%).
"You have to be crazy not to be conservative in this kind of market unless you're willing to take a bath," he says.
(Excerpt) Read more at nysun.com ...
that is scarry. almost anyone who has a 401K should be worried about this one.
I'm sick! Please do not sit home and allow this turd into the White House.
“He’ll cause more damage to the stock market and even make Jimmy Carter look good,” Mr. Allmon says.
“Senator Obama is leading a children’s brigade, but the problem is children shouldn’t be leading this country.”
Extremely well said. Memorize it and repeat it to your adult Obamabuffoons.
You could shift your 401K into a money market fund assuming there’s one in the family of funds available to you.
Just a thought. Will the democrats, after Obama wins, and they sweep congress, “see the light’ and have an epiphany on energy, and start pushing drilling and Nukes? After all, isn’t more important that they remain in power than to allow anything like ideals take precedents?
There are Short and UltraShort funds that will profit from a market decline. Open an IRA at an online broker of your choice, transfer some of your 401k there and self manage, buy some short exposure. I sure do.
Folks, I feel completely helpless. This situation is like Fredericksburg, with Burnside crying in his tent the night before ordering the hopeless, futile attack that he knows will fail.
Sort of too late now with an 18% Dow drop from its high.
The point is, it really won’t matter-—and I don’t say that because I think McCain=Obama. Clearly there are big differences. But McCain is not enough of an “anti-Obama” to make any difference. IF there were powerful conservatives in the Senate and House and bureaucracy and courts, it might not matter. Unfortunately, I see us getting screwed along very different paths no matter which of these guys runs the country. It’s like the Union Army under Hooker vs. the Union Army under Burnside. Same result, different battlefield.
I’ve been 90% cash for about 6 months. I probably missed some runup but I’m pretty happy with that decision now.
Not likely since the increase in energy prices is exactly what the Democrats have been wanting for years. Remember they think we should tax ourselves so that gas prices are as high as the European Socialists that they admire so much?
Once they increase energy taxes on the middle and upper class, they will rebate some of the $ back to their voters, the poor and unemployed, to pay for higher energy costs so they will continue to vote for them. The rest of us can suck it up and keep paying since we won't have voted or be voting for them anyway. After they amnesty the illegals and get them voting, they won't even need "the kiddies" who will be having trouble finding a job that will pay enough to cover their energy and living costs and may sour on them in the very near future once reality sets in.
Barclays warns of disaster as Fed loses all credibility
Submitted by cpowell on Fri, 2008-06-27 02:02. Section: Daily Dispatches
By Ambrose Evans-Pritchard
The Telegraph, London
Friday, June 27, 2008
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/cnbarc...
Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall “below zero.”
“We’re in a nasty environment,” said Tim Bond, the bank’s chief equity strategist. “There is an inflation shock under way. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth.”
Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. “This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility,” said Mr Bond.
The grim verdict on Ben Bernanke’s Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank’s dovish policy statement on Wednesday. Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of “anti-dollar” and as a market reproach to Washington’s easy-money policies.
The Fed’s stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2 to 5pc over the last year. Mr Bond said the emerging world is now on the cusp of a serious crisis. “Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s,” he said.
“They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box.”
Barclays Capital recommends outright “short” positions on Asian bonds, warning that yields could jump 200 to 300 basis points. The currencies of trade-deficit states like India should be sold. The US yield curve is likely to “steepen” with a vengeance, causing a bloodbath for bondholders.
David Woo, the bank’s currency chief, said the Fed’s policy of benign neglect toward the dollar had been stymied by oil, which is now eating deep into the country’s standard of living. “The world has changed all of a sudden. The market is going to push the Fed into a tightening stance,” he said.
The bank said the full damage from the global banking crisis would take another year to unfold. Rob McAdie, Barclays’ credit strategist, said: “The core issues have not been addressed. We’re still in a very large deleveraging cycle and we’re seeing losses continue to mount. We think smaller banks will struggle to raise capital. We’re very bearish — in the long-term — on high-yield debt. The default rate will reach 8 to 9pc next year.”
He said investors had taken their eye off the slow-motion disaster engulfing the US bond insurers or “monolines.” Together these firms guarantee $170 billion of structured credit and $1,000 billion of US municipal bonds.
The two leaders — MBIA and Ambac — have already been downgraded as the rating agencies belatedly turn stringent. The risk is further downgrades could set off a fresh wave of bank troubles. “The creditworthiness of many US financial institutions will decline in coming months,” he said.
The bank warned that engineering and auto firms we’re likely to face a crunch as steel and oil costs surge. “Their business models will have to be substantially altered if they are going to survive,” said Mr McAdie.
A small chorus of City bankers dissent from the view that inflation is the chief danger in the US and other rich OECD countries. The teams at Societe Generale, Dresdner Kleinwort, and Banque AIG all warn that deflation may loom as housing markets crumble under record levels of household debt.
Bernard Connolly, global startegist at Banque AIG, said inflation targeting by central banks had become a “totemism that threatens to crush the world economy.”
He said it would be madness to throw millions out of work by deflating part of the economy to offset a rise in imported fuel and food prices. Real wages are being squeezed by oil, come what may. It may be healthier for society to let it happen gently.
Also received this in an email for English friends.
Fortis Bank predicts US Financial market meltdown within weeks...
Fortis is a large bank and insurer in the Netherlands and Belgium. It took over ABN Amro last year, together with RBS and another bank. Last Thursday, its share lost 17% because Fortis attracted foreign capital.
I was shocked when I read the following, which was brought out 4hours ago:
American ‘meltdown’ reason for money injection Fortis.
28th of June, 9:10
BRUSSELS/AMSTERDAM - Fortis expects a complete collapse of the US financial markets within a few days to weeks. That explains, according to Fortis, the series of interventions of last Thursday to retrieve € 8 billion. “We have been saved just in time. The situation in the US is much worse than we thought”, says Fortis chairman Maurice Lippens. Fortis expects bankruptcies amongst 6000 American banks which have a small coverage currently. But also Citigroup, General Motors, there is starting a complete meltdown in the US”
This fits in the picture, with the other press releases last week, like the short advise of Goldman Sachs and some other of the same messages last week.
Although gold has rallied a lot lost week: first thing monday morning: short Dow, long Gold?
Or will there be a rate cut, which undermines (delays) everything?
We will not “sit home”.
Tack on the very real likelihood that Israel will HAVE to act on Iran soon because neither Obama nor McCain will, and you can add another 25% to oil prices.
Politicians see only as far as the next election and that is hurting us.
I agree, hey, I’m all in favor of nukes, more drilling, opening up virtually EVERYTHING to energy development. But that won’t stop the crapstorm that is headed our way in the next year.
But that is why the 2nd amendment exists. (Can you say pitchforks and torches???)
So I asked, “Do any of you morons know what will happen if the government slows down its spending? Chaos! The government is so huge, and so many people now depend upon it for everything, that the government cannot stop spending! And so the Fed cannot stop creating excess money and credit, because there is nowhere else from which the government can get that much money! Inflation will turn to rioting in the streets!”
Well, they all thought that I was crazy, and that raising taxes on the rich and adding a few more government programs would solve everything.
With a weary sigh of resignation, I showed them an interesting article in Archeology magazine that refers to the Roman writer Seneca describing the feasting excesses of Rome, who asks, “We have all heard about the decadence of the ancient Romans, but how much of this is true?”
It turns out that researchers “are confirming the classical author’s accounts of the Roman taste for luxury. Banquets were extravagant feasts where patrons competed to outdo and outspend each other”.
So, intrigued about the possibility of this kind of thing becoming a fad again (Oh, boy! Oh, boy!) and maybe somebody we know will host one of these Bacchanalian excesses involving un-dreamt of depravity and gluttony and invite us, we naturally want to know, “How much would one of these Roman feasts cost today?”
The answer is “$10,000 for a party of 15 revelers.”
I know what you are thinking. You are thinking, “Is that all? At a lousy $667 per reveler? It almost costs that much to fill the gas tank on my damned car! Hahahaha!”
Well, that’s not exactly true, I admit, but $667 per day times 365 days a year is $243,455 a year, which used to be a lot, but these days, thanks to the rampant inflation of the last few decades, it is not all that much anymore, and half of all government workers probably make that much when you add in the full value of their overly-generous benefit packages!
And even half of that, or $334 a day, is $121,727 a year, which, if taxed as income, would yield net-of-tax about what the full Social Security, Medicare, Medicaid and welfare packages now deliver per recipient! Free food, free medical care, free housing, and literally given cash to spend!
But this is not about how little it costs to stage a Roman feast, but about what happens when people are used to getting free gluttony, and then suddenly they are not. Perhaps a clue can be found when the Roman author Seneca “wrote that his friend, the food writer Apicius, drank poison and committed suicide rather than give up the gluttonous lifestyle he could no longer afford.”
The bad news is that today’s feasters, gorging themselves at the government trough, are not going to commit suicide. They are going to riot, and elect politicians to continue the feast, regardless of the cost. Regardless of the cost! Hahaha! We’re freaking doomed!
Until next time,
The Mogambo Guru
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