Socialized Heathcare… Do we want this?

Posted on July 22, 2009 by TheGauntlett

First Step: Watch this video on Canadian Healthcare

Did you watch the video? I would embed it so you can watch it here, but it seems that due to technological limitations (or decisions) that isn’t going to happen. And no I’ve decided against figuring out how to circumvent such actions. So, click the link already. It is only 20 minutes out of your life to watch a humorous yet somewhat painful video on the realization of socialized health care. Don’t believe me then click the link.

Obama Plan: How do we pay for it?

You may be wondering what my take on the Obama plan is. Well, firstly I want to know how we are going to pay for it. Really, Social Security is going in the red, and so is Medicare. Last I check in the red means that it isn’t profitable, and also means that there is no money to fund it. Tax reciepts are down significantly, not to mention State Tax receipts.

So, the “income” that the Federal Governement receives is down. Remember that the government doesn’t actually make or produce anything and is soley funded by us the taxpayer. So, to pay for this we are going to go further in the red. We already have a trillion plus deficit for 2009, which means borrowing or printing substantial sums of money.

While Univeral Health Care sounds wonderful, but again to pay for it we have to get the money from somewhere. That somewhere is from the “rich”. Maybe you feel entitled to health care, maybe not. Essentially what is going to happen is that money will be siphoned from those with high incomes to subsidize the plans. This is a blatant transfer of wealth, which is what the government does.

At what point do high income earners decide that enough is enough and decide to earn less? If I were taxed at say 60%, which means I get to keep 40% of my income my incentive to earn more declines.

Rationing: Supply and Demand

Here is where socialized health care gets interesting. Let’s say there is $100 billion dollars allocated to public health care per year. For the moment don’t worry about the exact sums of money as this is an example.

With that $100b services can be provided up to that point. Once that point is reached or even if we start to near that point where if anything else is spent then the program is in the red. How might the administrators prevent that from happening?

1) You have to wait in line for your turn… these lines could get really long

2) Deny you service… bummer looks like you don’t get that MRI

3) Rationing, where there is a limited number of services available

So, in a perfect world we would all be healthy, and have 100% health care. As much as I’d like that to be a reality we have to be realistic. The only thing we get for free is the air we breath. Anything else requires work, which then can be exchanged for a good or service. I’m not saying our present system is perfect, by no means, but I don’t think this is the way.

Some See China’s Buying Spree on Commodities as Short-Lived – NYTimes.com

Posted on June 10, 2009 by TheGauntlett

Some See China’s Buying Spree on Commodities as Short-Lived – NYTimes.com.

With the advent of Central Banks printing their way out of this mess the probabilities continue to point toward inflation. While the rate of expansion of the money supply has lessened it is no less continuing to rise. Should the Fed decide to sell some of its assets I can only imagine a depression ensuing. As some have said they are threading the needle between inflation and depression, but at some point I think the hole will close and we will be stuck on the side of inflation.

The rebound in commodity prices is staggering. Many factors influence commodities, among them currency valuations, supply and demand, forecasted demands, hedges against currency devaluations, and inflation. China plays a major role in the demand factor. In a recent NY Times article, referenced above, they state that while China is stockpiling commodities production lags.

At least 90 large freighters full of iron ore are idling off Chinese ports, where they face waits of up to two weeks to unload because port storage operations are overflowing, chief executives of shipping companies said in interviews this week. Yet actual steel production from that iron ore is recovering much more slowly in China, and Chinese steel exports remain weak.

“There has been enormous stockpiling of all commodities” by China, and this cannot continue indefinitely, said Tim Huxley, the chief executive of Wah Kwong Maritime Transport Holdings, a big shipping line based here.

China is getting ahead of it future needs, which makes sense, but how long can it continue? I have no doubt in my mind that we will see higher prices for everything, while wages stagnate and job losses continue. The question however is if commodity prices will continue to rise without a correction? If I had a crystal ball I would say yes primarily due to our fiat money system, record low levels of food supplies, and energy stocks being depleted while further exploration and extraction projects are being put on hold. Until we see higher energy prices they won’t be put into full swing, which take years to develop. Nothing goes in a straight line however, so a mild correction would be encouraging for buying on the dip.

Back to the demand situation…

Richard S. Elman, the chief executive of the Noble Group, Asia’s largest diversified commodities trading company, bounced up from the conference table in his office here when asked about freight rates during an interview on Tuesday morning. He walked over to his desk, dominated by three computer screens that partly obscure a perfect view of Hong Kong’s harbor, and quickly punched up on one screen a list of daily charter rates for large bulk carrier freighters.

The list showed ship owners charging $58,000 a day now but just $24,000 a day for charters next year or in 2011 — an indication that there will be more ships than cargoes in the years ahead, particularly with shipyards still finishing vessels ordered during the recent boom.

Pointing to the rates for the next two years, Mr. Elman said, “That’s the real market” for ships.

As demand drops so do shipping rates. There just isn’t as much stuff being moved around the globe. Thanks to our inflated demand for goods we have excess capacity. How many more ships can sit idle while China continues to stockpile? If China slows it stockpiling, and demand for goods continues to drop and the recession continues and joblessness rises then what will be the impetus for prices to rise. Again we have to go back to the fiat money system, and increasing debt to GDP all around the world. How will our debt be paid off? Inflation.

Even with a drop in demand for raw goods and materials if central banks continue on their present path we are headed for higher prices. So, I’d like to see a correction in the price of goods due to a demand drop and then hold on for a wild ride as prices increase.

While I say I’d like to see this for profit potential, unfortunately there is a consequence on the human level. If prices rise, while wages stagnate people will protest in anger. It is a catch-22.

Congressional Budget Outlook :: CBO

Posted on January 7, 2009 by TheGauntlett

Hold your hats folks as here are some of the forecasts for 2009 (link):

GDP falling by 2.2%
Slow recovery in 2010
> 9% unemployment by 2010
Decline in inflation (hmmmm… if monetary policy says anything this will reverse or at least eventually destroy the dollar)
Continued decline in housing prices
Decline in real consumption of more than 1%
Indeterminate on the financial system

And the best of all

$1.2 trillion dollar budget deficit for 2009*

*That doesn’t include the proposed stimulus package
*That amounts to 8.3% of GDP

So, we have an economy in decline, and digging a deeper and deeper hole to climb out of. What I really want to know is how are we going to pay for 1) a 1.2T dollar deficit, and 2) a large fiscal stimulus package of a indeterminate size.

Let’s see our foreign friends have been purchasing our debt, which enabled us to essentially live off of their productive labor. China for example is seeing a marjor reduction in exports, its economy is contracting, and eventually it is going to have to decide if it is worth supporting the American lifestyle at their own expense. Presently, everyone is so intertwined I think there is a fear that if one jumps the house of cards falls down and we all lose. However, is it possible for say China to pull out of the house of cards with minimal damage? Is there a way they can reduce their exposure to US debt, and not have their savings collapse? This is something I’d really like to know.

Seems to me that if they slowly shift some of their dollar reserves into commodities and other currencies SLOWLY, especially when there is increased demand they will be able to lessen their exposure. The US import market is tanking, and has been tanking. With unemployment increasing Bloomberg people are going to have a smaller income and will be forces to save thus hurting exporting countries. This isn’t a US phenomena alone as Europe and frankly the rest of the world is contracting simultaneously, while being fed a mouthful of credit from central banks to re-inflate the bubble. Last I checked it is very difficult to inflate a popped bubble.

Let’s take the latest number from Taiwan Bloomberg. Their exports dropped by a record 41.9%. We all know that Taiwan exports electronics, which have been a major boon ever since the technological revolution, which also saw a major hiccuup in 2000-2003. So, this is confirmation of a major exporting taking a major hit. There will be ramifications for the Taiwanese economy.

I can’t imagine that after the dust settles the world’s economies will look the same. The sea of money will shift to where is sees the most opportunity and in its movement will tear apart the economies of many.

Here are a few more headlines on Bloomberg alone that tell a um telling story:

Fed Revives Discussion of Inflation Target to Counter Risk of Price Slide

ECB Expanded Balance Sheet by 36 Percent Last Year to Revive Bank Lending

Apartment Rents Fall, Vacancies Rise to Four-Year High on U.S. Job Losses

Shopping Center Vacancies in U.S. Approach 10-Year High as Stores Fail

Procter & Gamble Fights to Refinance as U.S. Borrowings Reach $2 Trillion

U.S. Banks Will Need to Raise More Cash in 2009, Meredith Whitney Writes

I’ll leave it at that, but what I’m seeing is RECESSION coupled with the Fed trying to stave it off through any means necessary, which is now including outright purchases of securities on the open markets. Again we have no savings and are either monetizing debt or borrowing it from somewhere. To do this will be disastrous to the dollar and our reputation as a solid financial center of the world. Sure there are plenty of other economies in dire situations, but in the end who will come out with the heads up high and who will come out still in the sand?

History in the Making

Posted on November 20, 2008 by TheGauntlett

This is going to be short and sweet… We’ve broken the lows from 2003. It is very possible that we go much lower from here. We may get a bounce, but there seems to be a major lack of buyers. I wouldn’t be surprised to see a gap down tomorrow as all the people who weren’t watching the market today realize what happened and decide to sell first thing.

Frankly, we are now in uncharted territory. It seems as though we’ve corrected (in the US equity markets) the excesses from 2003 – Present, but that leave the bubble up to 2000 that was never allowed to correct due to the cheap money thrown around.

My fear is that we are only part way there. Remember in the movie Titanic when the ship started sinking. At first everything was calm and orderly. Eventually panic broke out as it started to go down and eventually broke in half. Have you seen panic yet? I sure haven’t. If this isn’t panic then imagine what is.

More soon.

A potential future?

Posted on November 13, 2008 by TheGauntlett

I’ve had this nagging in the back of my head saying something foul might be looming out in the near future. Normally I don’t watch Bush on TV or listen to him on the radio as I can’t stand it. That aside I watched and listened to his speech today. It sounded good… all this talk about suporting the free markets and free trade… mind you we have neither. It felt like a pep talk to make everyone feel warm and fuzzy inside when the exact opposite was going on behind the curtain.

He mentioned revamping the current financial systems and having a organization oversee markets. Without saying it he was essentially saying yeah free markets are great in theory, but this was all caused by free markets. Therefore we are going to create more bureaucracy in the name of the free market to prevent a future failure.

Last time I checked business come and go, the economy goes up and down, and that is okay.

So what is this potential future I speak of? …>

The election is over yet the transfer of power hasn’t occurred. What could happen to delay the transfer? A major crisis of sorts would do just that. Why isn’t Obama going to the G20 meeting? Why is he so reluctant to play a larger role during the transition?

Did anyone notice how Bush was almost smirking when he was talking about the wealth destruction that has occurred in people’s retirement accounts. I had this sinking feeling that he was telling someone that it is time to initiate plan X (whatever that may be). He said GLOBAL MELTDOWN in a very strange way. He said it a couple times with an emphasis and as though it was a joke. It really seemed as though he was telling someone something.

To create the larger oversight organizations on an international scale there will have to be a crisis of much larger magnitude than at present. People will have to be in full panic mode and asking to be saved. Once people are in that frame of mind the government will be able to usurp all the power they want. Best of all they won’t have to take it because the people are freely giving it to them.

What might cause such a ripple….
War: Iran, Russia, Pakistan…
Financial Crisis:
Domestic Riots:
Terrorist Attack:

These are a few and there exist others. Hopefully none of this will transpire, but I find it difficult to believe that our present financial panic is the last in a string of events that began with 911. From this perspective I think it prudent to see it as a real possibility if minimal, but possible. Really no different from preparing for an earthquake, hurricane, or tornado.

Lastly, war is generally considered the acceptable means to get out of a financial crisis.

Citadel in Trouble?

Posted on November 12, 2008 by TheGauntlett

Link

The hedge fund giant, whose flagship fund is down almost 40% this year, denied a Wall Street Journal report that banks were demanding increased collateral as its losses mounted. Gerald Beeson, the firm’s chief operating officer, said Friday that it was meeting its daily collateral requirements with Goldman Sachs, Deutsche Bank, Merrill Lynch and others without being forced to sell its assets to cover the margin calls.

Haven’t we heard this tune before? Wasn’t Bear Stearns reassuring the public that they were financially sound or how about Merrill, with a bit of Wachovia and then a touch of Washington Mutual.

Regardless of the rumors it makes no sense for them to actually come out and say we are in trouble and the ship is sinking get out. Sure they have the interests of their investors to look after, but they will probably goto great lengths to keep plugging holes until there are simply too many.

Similarities to 1929

Posted on October 27, 2008 by TheGauntlett

This is a very pertinant watch if you are interested in the similarities of today to the 1929 crash. I keep looking at the charts and percentage changes from prior to 1929 till today. So, far we have almost retraced on the Dow 100% since the October 2002 low. If we cross that level of support I’m concerned that we won’t see another bottom until we hit about 1000 or 500 on the Dow.

Since about 1982 the Dow has taken off with only three decent corrections in 1987, 2002, and the one playing out today. I realize that we have to look at the Dow adjusted for inflation as that is implicit in the numbers, but all I’m trying to get across is that the bottom might be farther away than any of us can imagine.

Anyways, enough for now… Watch the video if you haven’t already.

Real Estate, Iran, and The Markets

Posted on October 16, 2008 by TheGauntlett

I’ve been busy watching the markets in the short-term. Is day trading for the foolhardy? Perhaps, but I’ll admit that there is a sense of excitement that is fun. Before you go jumping to conclusions have I actually been trading? NO About the most I’ve done is move a few positions around a bit and make sure that I’m covered on the downside. This market is so volatile, and we are in options expiration week, which just amplifies matters much.

Besides learning about charts and indicators real estate and a possible war between Iran and Israel are on my radar. A while back I sent a question to Elliott Wave wondering if they have done a wave count on the Case Schiller index. After patiently waiting I received a response, and here you go…

Elliott Wave count Case Schiller

Yes, you are reading this correctly in that there may be another 20% decline or more before the housing downtrend finally abates. Elliott Wave is based on Fibonacci and social moods. In many instances they have been spot on +- a bit of time. Additionally, if their forecast about the market is correct the downtrend isn’t complete.

As for Iran I’ll do another post about that. However, if war does break out or a tanker is sunk in the Hormuz Straight a whole host of problems are going to hit the world. For one oil will skyrocket, gold will skyrocket, and the dollar will most likely tank. How real of a possibility is this? Hopefully a long shot.

America FOR SALE… Foreclosed?

Posted on October 14, 2008 by TheGauntlett

United States for SALE

The United States’ Commerce Department’s Bureau of Economic Analysis (BEA) will stop publishing a key report tracking foreign direct investments (FDI) into the U.S. Through the discontinuation of the BEA’s “New Investment Series,” the U.S. government and the American public will no longer be able to distinguish between FDI used to acquire existing U.S. assets from FDI used to establish new U.S. businesses.

-Article Link

I really want to be surprised that we will no longer be able to view how many of our assets are being sold off to foreign countries. Before we know it we are going to be owned by everyone else. Imagine… the once wealthiest and powerful nation in the wold was auctioned slowly auctioned off to foreign bidders, and hardly anyone said a thing.

We no longer are able to track the actual amount of currency in circulation via the M3 indicator, and now this. Soon we won’t even have the M1 and M2 figures to look at, which would enable even more credit expansion because nobody could question what the Fed is doing.

This is looking more and more like a systematic power grab by banking institutions. Let’s see who ends up surviving the carnage in the years to come.

Wednesday October 8, 2008

Posted on October 7, 2008 by TheGauntlett

This may very well be an interesting day…. Asia is taking a major hit as we sleep or well we are about to sleep as is my case. Here is the latest Bloomberg headline:

Asian Stocks Plunge on Credit Concern; Indonesia Halts Trading

I’ve been very cautious about the markets continuing on their tumble down and am unfortunately not surprised that this is happening. It seems that the world has reached panic mode and is fleeing paper, which also is another indicator about why gold is so difficult to find.

We just may have reached that point where the markets enter freefall. It is similar to watching a stampede running towards you. You have a few choices:

Get out of the way!
Get run over!
Run like a mad-man and go with the stampede.

I’ll go with #1 or #3 or perhaps a combination of both. When there is panic nothing is rational. Even if things aren’t really necessitating a major sell-off the herd mentality will cause a major sell off. It is self-perpetuating, a feedback loop. Very similar to hyper-inflation. Once the shakeout occurs what is going to happen with all newly created money floating around that nobody wants to lend at the moment, coupled with peak oil, and fiat currencies worth not a whole lot… That’s the trillion dollar question. Not good is all I can say, not good at all.

Imagine losing most of you wealth to the market as did happen similarly in 1929-1932, then due to a massive increase in the money supply prices take off and unemployment rises. Don’t be surprised if the next President resembles Roosevelt and the New Deal. If that ends up being the case I’m even more concerned. He did want to raise taxes to 100% beyond a minimum income. That will halt any growth in an economy because people have no incentive.

On the bright side the amount of panic and fear in the air could be considered a contrarian indicator. Why not…. when there is blood in the streets BUY… oh but wait… HOW MUCH BLOOD??

Trevor Gauntlett

Category Archives: Economy