Washington is back to its old ways

Did you hear about the tax break given to Citigroup by IRS? I find it very interesting that it did not get much more coverage. I also think that this is another example of how US Government is ‘screwing’ its citizens. It is also another example of how uneducated US citizens let its government ‘screw’ them.
Why am I being so strong in my language? Well, everyone is screaming at Wall Street for getting big bonuses and government is doing everything to prevent those bonuses. However, government is giving way this (apparently multi-billion dollar) tax break. Could this money be paid in the form of bonuses at some point? Isn’t it another way to bail out a company without using the Bail Out expression? And apparently there are companies that are still too big to fail, despite what government has been saying lately.
Have a think about this!!!

Is Wall Street really Bad?

I know that many of us right away say: Hell Yeah, Wall Street screwed us.
Well, I think there is another side to this story. America is a CAPITALIST country. Remember that. This means some get rich some get poor. Wall Street provided Americans with a way to become rich either overnight or at some later time by investing in stocks or some other investment vehicles(which in my book is just AIR, because you do not really, really own a piece of company, since you have no say in what that company does)
This Wall Street through its innovation allowed many ordinary citizens get rich, retire in piece, build wealth and pass it down to the next generation. Wall Street Bonuses allowed for many consumer related companies to strive. Wall Street Bonuses were a big part of Government Surplus and now that is no more.
Unfortunately, there is such a thing as GREED. I think that this greed got us in to this mess in the first place. And, that greed came primarily from us, ordinary citizens who thought they can live on a $1 million dollar home on a $50K salary.
Think about it, Is Wall Street really the monster here?

Market's mixed signals

Is it me or financial markets are sending mixed signals? We had a hell of a run since March, but recently we have been stuck in the range.
Gold continues with its historic climb - and higher gold is traditionally a defensive play. Energy is also in the upper levels - and that traditionally is bullish. Financial markets overall are going up - and that of course is bullish. However, small caps and junk bonds are beginning to stall - that traditionally suggests a more defensive feeling out there.
Time to take a step back and revisit your portfolio. Perhaps a good time to take some profits of the table. Something does not seem right with this market.

US Dollar - something might be brewing

At the moment there are more reasons to believe that US dollar will continue to stay low. Interest rates are likely to stay low for a long time. Supply of US dollars in the market is enormous. Many economic areas, such as employment and real estate, are still under pressure. And to top it all of, there has been a lot more talk about replacing US dollar a reserve currency or currency of choice than any other time before. Some

However, I believe United States government understands that having US dollar as currency of choice has been one of the reasons for US being the economic power. America does not really want that power to go to China's of this world, because unfortunately there is not much America can offer these days. I know that this might be considered as one of those conspiracy theories, but here is what I think. As already mentioned America understands that having US dollar as a currency of choice, gives it certain amount of power. The trip to China that President Obama has embarked on, may have some close door discussions about China helping America retain the currency power. I think there will be some sort of you scratch my back and I will scratch your. However, those 'exchanges' would not be made public. Think about it. Who else in the world is powerful enough to help America out of this economic 'funk'? The same country that has helped the US government avoid bankruptcy, China. China has a lot of cash and it has been using it to invest in US government bonds. God forbid they sell, US government may have to go bankrupt and its currency will lose a lot of value. There was an interesting comment from Treasury Timothy Geithner the other day, where he suggested that stronger US dollar is preferable. It did not get a lot of publicity but people, powerful people like Geithner, do not just come out and say things they do not mean. I suspect that there is something brewing in the 'back yard' and once it is ready, it will be made public and US dollar will stabilize and gain a bit of ground back.

It needs to be said that perhaps a very strong US dollar is also not good for the US economy. Many big US companies have been expanding overseas and much of their income comes in the form of a different currencies. So it is kind of a pickle. But once again, I suspect that US dollar is about to change its sliding course.

Republicans win New Jersey and Virginia races

I am not a republican or a democrat, but I have voted for republicans over the past few elections. I know that they are all the same politicians and all they REALLY care about is power and playing the game but at least with Republicans I had a bit more cash in my pocket. hence my choice.
I am not against some of the democratic ideas, in fact I would like to see a more affordable health care for all. However, the way Democrats have been going about it so far has not strike me. In fact Obama's message of Change was a FRAUD! Nothing really changed. That is one of the reasons why I think Republicans got this small victory a few days ago.

However!!! Republicans have a very tough road ahead in my view. There are many reasons but number one in my book is the fact that Obama took over as the President during the very bottom of the economic cycle. Even though things have not gotten much better so far, you bet it will next year (unless they really screw up, which I'd rather they don't as it will obviously affect me and the rest of US citizens).

Therefore, it is my belief that in order for Republicans to get back Senate and/or the House, they really need to concentrate on:
1. Finding a true leader within their own party. So far, as crazy as it sounds, only Cheney has really 'stood up' to Obama's administration.
2. Make sure people understand key differences between republicans and democrats. It seems that even kids are better at it. Google 'Republican Wonder Kid'. Pretty amazing in my view.
3. And of course, coming out with complete, easy to understand, detailed ideas for US prosperity, as opposed to just shutting down democratic ideas. Eventually, people will get turned of by this tactic, plus it is likely to back fire. Change can be good, but it is hard to do. However, once the change is made and there are indeed benefits, those who opposed it without a better alternative will suffer.

Year End forecast review

I know we are not quite at the end of the year, but wanted to share with you that apparently I am not a bad forecaster. At least when it comes to investments.

So far this is what I got right (my initial 'forecast' posted on December 24th of 2008):

Oil hit $50 by April
Oil is $80 right now, I suggested that it would be right about here at year end
Financials and commodities have been one of the best performers this year
GBP seems to be the winner between USD and Euro. Initially I suggest Euro to be the winner, but later changed to GBP. Actually both are going head to head so far.
ECB, came out to be the winner (though this could be argued by many, but I believe Trichet proved that)
Markets are up, with S&P 500 right about 25%, as I suggested

Where is my forecaster of the year award?

Extension of unemployment benefits

The President extended the unemployment benefits for another 14+weeks to help out those unemployed.
This is a good measure, at first glance. I think it is safe to say that this will also end up costing the tax payers, and not only the top earners.
I know this may cause BOOs from many of you, but I have to say that extending unemployment benefits at this point is not a good decision. These checks do not create jobs. They create further national debt, which will eventually lead to higher taxes, and gives an option to many to just give up and get money from the government. We need to create jobs. We need to stimulate employers. We need to stimulate those who are unemployed. Instead of unemployment checks, why not hire those unemployed to clean streets, build play grounds for kids, refurbish their own communities...(while they are also looking for new jobs) This way, there is a benefit to all parties. Personally, I would not mind doing some work for my community, and getting 'paid' for it.

How US can balance its check book

It is Sunday. I woke up and as always turned on my computer to check the news. The first site I got to is msnbc.com. The first article I read is about how US is likely to get stuck in Afghanistan for a decade. The article suggests that financial and other resource commitments given by current US administration to Afghanistan are likely to overshadow those given to Iraq.
A day before, I read that US government is paying millions of dollars to Afghan farmers, who grow poppy seeds (which later turned into drugs), to stop growing it in effort to combat drugs (I assume).
I also just heard on the radio that New York is paying homeless people to leave town. Apparently NYC is spending about $36K per year for each homeless person.

Now, think how many people are on Welfare US wide, who should not be. Those people who decide to have huge families without a high school or college degree and a job, or are drug addicts...are being supported by the government but at the same time they find ways to buy cars and take vacations to Caribbean. By the way government sponsored residential projects do offer a nice amount of space and great views in some instances and those do cost big $$$ to regular folks

Now!!!
If President Obama is to revisit all of the above, I am sure he will find plenty of programs that are actually being abused by many citizens instead of being helpful to those really in need.
Perhaps, instead of trying to tax the rich and the middle class, it would be more useful to give those people who abuse the system a 'kick on the butt'. It will also be useful to stop paying other countries to combat drug wars and instead create jobs in US which will look for ways where drug addicts can actually kick the habit. You take out some waste and perhaps you will have enough money for the health care reform or to pay back tax payers for all the bail outs.

U.S. Government to raise taxes???

Ha Ha Ha Ha

We, American people are getting screwed again. The latest news is that the government would not rule out taxes increases. Remember President Obama on his election trail, promising no tax increases for middle or lower class. I can not believe the people bought it. But this shows that US education is not the best. If we could not do a simple calculation:
growing national debt+bail outs+new health care+'money to study a pig's smell in the village' (that is right, this was in the stimulus plan)+growing government spending = need for more government 'earnings'/Higher Taxes.
I think it is time Americans stand up and ask serious questions and get straight forward answers. Not any of those 30 minute answers that go around the question and end up some where else. It is also time for citizens to take their participation in national issues seriously, through vote and local government officials. Some officials have been working in the government for too long and you know that as regime change, so do their views.

Goldman Sach - Evil???

The last 12 months have been bad for many financial institutions, but not everyone lost the same. Some banks lost money because they had pretty bad bets. Some are loosing reputation - Goldman Sachs.
Goldman Sachs is one of the very few banks which did not need govt bail out (they were forced to take it and officials already came clean on that). The bank did not suffer huge losses as the rest (probably because they do indeed have talented employees) The reason for such a talent is of course the benefits (especially the bonuses). We live in the capitalistic world and compensation is a big PRIORITY for many with good ideas and contacts. However, I must say that media is blowing things out of proportion with Goldman bonuses and unnecessarily puts employees of Goldman Sachs in the negative light. Even tough the company does payout billions in bonuses only few get millions. Most staff (ex traders, investment bankers, partners) have a regular base salary as others on the street. The do get bonuses but those bonuses average $50K+/-. So when media says that employees of Goldman Sachs receive $750K per person, that is absolutely not true and leads to unnecessary hatred.
Perhaps we need to stop bashing Goldman Sachs and take them as an example of the company that is disciplined and takes it business, risk and rewards seriously. (something US government ought to do)

P.S.
By the way I am not an employee of Goldman Sachs, but do have many friends who work there