Stocks have ralled this week on the prospect of a budget deal, but don’t expect them to get very far. With a modest surge in the broad averages, investors appear to have upped their bet that Obama and his heartfelt enemies in Congress will agree to do what we have confidently expected them to do all along – i.e., kick the can down the road. No one will be surprised, since kicking the can down the road is what politicians do when they are not in recess, campaigning or buggering their clerks. Unfortunately for us all, the much-kicked can will still be lying there when 2013 begins, fueling worries about what this implies for the U.S. economy in 2013.
The good news, such as it is, is that Obama’s “filthy rich” – mainly small-time entrepreneurs who toil 70 hours a week to net a princely $130,000 after taxes – will get a temporary reprieve from 39% marginal rates. The dollar will be spared too, at least for a while, since Obama will not be given the ruinous power to raise the debt ceiling without consulting Congress. And the military pork-barrel that feeds so many cities and towns will remain alive and well, albeit temporarily, since a $500 billion sequestration of defense funds will not automatically take effect.
What will remain once the can has been kicked yet again is an economy that is probably already in recession, a housing market nearing the end of its dead-cat bounce, and a consumer hangover from the recent binge in, among other things, automobile purchases. (This just in: A hitherto unnoticed provision in Obamacare will charge each and every insured person an extra $63 each to cushion the cost of covering people with pre-existing conditions. This works out to tens of millions of dollars for large companies, but the number for 190 million insured is a much bigger number: $11.97 billion.) And let’s not forget the looming deflationary juggernaut of state and local budget cutbacks, presumably to be accompanied by a wave of municipal bankruptcies that, it is easy to predict, will hit philosophically blue states such as California, Michigan and Ohio hardest.
We Bet on DIA Puts
For the record, Rick’s Picks told subscribers to buy January 128 puts on the Diamonds (a DJIA proxy) on Tuesday for 1.00. Although our original DJIA target at 13259 was exceeded intraday by 47 points, the actual high at 13306 was close enough to an alternative target at 13303 that we have little trepidation about holding onto the position. Subscribers have been advised to exit the puts only if they trade down to 0.70. However, if the Indoos work their way lower as expected, our goal is to spread off risk by shorting puts of a lower strike against those we own. With any luck, we’ll take in more for them than we spent acquiring the January 128 puts, giving us vertical bear spreads that cannot lose. We recently did this in Facebook, incidentally, where subscribers hold two-dozen March 30-33 calls spreads for a net credit of $300. That means the worst they can do is make $300 even if the stock falls to zero. On the other hand, the position will produce an actual gain of $7500 if Facebook is trading above $33 come March 16. If you are skeptical about this claim or want to determine whether our instructions were clear and simple enough for you or anyone else to have followed, click here for free access to the Rick’s Picks archive. “Simple” was our intention, although some of our recommendations are geared toward more experienced traders.
So it’s another lively discussion – liberal this, Reagan that – we ARE all idiots and argue about the fine points which will always exist because we are all different. So, how to live together peacefully and not exert our will on others or have the will of the govt dictate the will of others upon us through govt . . .
Answer: we do the best we can within the confines of a free country.
Anyone read or heard of “THE MIRACLE OF FREEDOM: 7 TIPPING POINTS THAT SAVED THE WORLD”? In it, the authors site this statistic:
“How unusual is it, really, in the history of all known human experience, to enjoy the blessings of living free?”
The answer may surprise you. In The Miracle of Freedom, Chris and Ted Stewart make a strong case that fewer than 5 percent of ALL PEOPLE who have EVER lived on the earth have lived under conditions that we could consider “free.”
We take for granted how free we have been compared to much of this world. How easily we give away our constitutional rights to those who would gladly control and enslave us to their rules if given the chance. Sadly, that is man’s nature – conquest – we may be more civilized today, but that just means man is better at manipulating the masses, especially through the controlled media, schools and large corporate entities.
We have much to solve as a society for the poor, but giving them handouts instead of education and jobs will bankrupt this country. I can only conclude that all our govt ‘leaders’ know that and their end game is to end this country’s great run for their own misguided gain.
I’m sure many of you have read something like this – it’s a good reminder of the big picture while we bicker about the details:
In 1887 Alexander Tyler, a Scottish history professor at the university of Edinburgh, had this to say about the fall of the Athenian Republic some 2,000 years prior: “A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse over loose fiscal policy, (which is) always followed by a Dictatorship.”
“The average age of the world’s greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence:
From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.”
It’s not the economy stupid – it’s liberty, it’s our freedom.