Thursday, August 27, 2009

Hedge Your Bets...or Dollars


Here is a great article with some sound wisdom (about which I will go into greater detail in my next post). It really gets some macroeconomic points out there correctly--which is sadly unusual these days. Pay particular attention to his points about the Fed and Treasury Dept.; it represents sound economic thinking.


I'm not a registered investment advisor, so I must disclose the onus is on you to do your research, etc. but it offers some practical ways to shore up against inflation (which I fully expect to be a rip-roaring problem within the next 12-18 months). I also really like gold and/or precious metals ETFs to hedge inflation. Check it out...




Factiva Dow Jones
OutFront
Inflation's Coming, Hide Here
690 words
7 September 2009
Forbes
FB
102
Volume 184 Issue 4
English
(c) 2009 Forbes Inc.

The rally has investors giddy with excitement. Frankly, I'm a bit baffled by it all. Everywhere I look I see ominous signs. Despite the slight downward tick in the unemployment rate in July, the employment ratio (full-time jobs as a fraction of the working age population) is 59%, lower than it has been since 1984. Real GDP in the second quarter was off 3.9% from a year earlier. Our financial system is still badly crippled. Commercial and residential real estate prices are off as much as 50% from their highs. It's ugly out there. That said, as a contrarian at heart I see great opportunities in this tough environment.

We are likely to run into a period of wild inflation, at least as bad as what we had from 1979 to 1981. At its worst, the Consumer Price Index was climbing at a 13% annual rate and long Treasurys yielded as much as 15%.

Why the dire outlook? Simply because our Treasury and its counterparts in other countries are printing money around the clock. They are also printing bonds, and with the same objective: reviving stagnant economies. The Keynesian belief that large fiscal stimulus is crucial to ending an economic downturn is prevalent among policymakers worldwide. No democratic government could stay in power these days if it didn't undertake countermeasures against unemployment, the possibility of deflation and the worst financial crisis since the 1930s. It is inevitable that all this stimulus will be followed at some point by a period of rapidly rising prices.

Central banks, including our not-so-omniscient Federal Reserve, will again fail to take the punch bowl away from the party soon enough, keeping stimulative polices going far past the point when unemployment has turned a corner and the financial debacle is behind us. Treasury Secretary Geithner and Fed boss Bernanke are trapped by politics and events. They make pronouncements downplaying the inflation threat, but inflation will hit like a tsunami within three years, maybe sooner.

What do you do to defend yourself? Buy stocks, buy real estate and sell bonds.

In the past stocks have provided a defense against not only inflation, but even hyperinflation. Reposition your portfolio with heavier weightings in oil, natural resources and cyclical stocks, while cutting back on utilities and consumer staples. Also, sell your long bonds and keep your fixed-income maturities short. Bond market crashes (like the one we had in the 1970s) can be as bad as stock market crashes.

If inflation hits hard, the chief culprit of the bear market--real estate--is likely to be one of the best investments in the years ahead. Buy a home if you don't already have one or a second home if you can afford one. Here are three stocks I like:

Apache (APA, 85) explores for oil and gas in the U.S. as well as in Argentina, Australia, Canada and Egypt. The stock has bounced back from a low of 51 in March but is still priced at not much above half its 2008 high. With the business cycle near a bottom and oil and gas exploration depressed for the past 18 months, Apache is on track for significant upside as demand increases again. Apache is priced at 8.5 times last 12 months' earnings and at 12.1 times the next 12 months' earnings.

Eaton Corp. (ETN, 54) makes highly engineered products for industrial, commercial, aerospace and automobile markets. Earnings are likely to be off sharply this year but should rebound as the economy improves. Eaton will cost you 20 times trailing earnings and yields 3.7%.

Wells Fargo (WFC, 26) is, with $1.3 trillion in assets, the nation's fourth-largest bank holding company. Earnings should move up sharply as it works through the large losses it inherited when it took over Wachovia. The stock trades at 16 times projected 2010 results.

David Dreman is chairman of Dreman Value Management of Jersey City, N.J. His latest book is Contrarian Investment Strategies: The Next Generation. Visit his homepage at www.forbes.com/dreman [http://www.forbes.com/dreman].

Document FB00000020090824e5970000q



© 2009 Factiva, Inc. All rights reserved.






Monday, August 17, 2009

Our non-issues this Sunday...

For all the excitement packed into Meet the Press's "Our issues this Sunday..." voiceover, what a letdown to find out that the issue last Sunday was not "issues" but "tone."

David Gregory: All right. But let’s talk about the tone of the
[healthcare] debate. There have been death threats against members of
Congress, there are Nazi references to members of Congress and to the president.
Here are some of the images. The president being called a Nazi, his reform
effort being called Nazi-like, referring to Nazi Germany, members of Congress
being called the same. And then there was this image this week outside of
Portsmouth, New Hampshire, a town hall event that the president had, this man
with a gun strapped to his leg held that sign, “It is time to water the tree of
liberty.” It was a reference to that famous Thomas Jefferson quote, “The tree of
liberty must be refreshed from time to time with the blood of patriots and
tyrants.” That has become a motto for violence against the government. Timothy
McVeigh, the Oklahoma City bomber, had that very quote on his shirt the day of
the bombing of the Murrah building when 168 people were killed.
Perhaps Gregory would do away with the global warming apostles' "get pollution down to zero" motto too. Because if carbon is a pollutant, then this has become a motto for violence against everyone. At least that's how Charles Manson saw it: "Why don’t you tell them what’s really going on? Why don’t you tell them the water’s so bad the fish can’t live in it? Why don’t you tell them that the polar caps are melting because they created so much heat with this machine? The truth is, simply, the planet earth is dying."

It has been startling for some to see the Commander-in-Chief painted like Heath Ledger's demented Joker in posters in Los Angeles. Others view the President's depiction as Hitler or as the Joker with perspective: same old hyperbolic politics as usual. This debate is new to Gregory, but some of us took it on a couple years ago.

Protest exhibit fails question: Is this art?
Pat Knapp, November 1, 2007
Try as they might with their rigid rubrics, the No Child Left Behind technocrats have yet to devise a plan to test young artistic talent. If government officials cannot agree on what the meaning of the word "is" is, surely they cannot judge the value of art. Judging what art is not is easier. Last week's vandal spray-paint exhibit on an Evansdale school - a "KKK" and a "go home" in 2-foot letters - was not art. It was "hate mongering," Waterloo Human Rights Commission Director David Meeks told the Waterloo Courier.

Perhaps if the Evansdale punks had painted a giant swastika made up of little George W. Bush faces, Meeks would have eagerly called this unlawfully hateful too. What a world of difference a consenting forum like Luther College makes. Preus Library, a building funded by Luther students' tuition, currently lends 36 square feet of wall space to such a swastika. This is part of a 27-piece agglomeration of conspiracy vim that the college calls an art exhibit.

Each piece of the traveling "We Protest: Iowa Speaks Out" exhibit, according to participating "artist" Pam Echeverria, protests the war in Iraq. "Not all art is pretty or neutral," said Gallery Coordinator David Kamm. "Much of it grapples with the most fundamental issues of life - in this case, what does it mean to live in a democracy with unprecedented political and military power?"Yes, while Michelangelo's pieta may not be neutral and Picasso's Guernica may not be pretty, both are art. But what to make of the "We Protest" piece with captions below Bush faces seething "hates gays," "hates black people," "hates Muslims" and "hates art" (ostensibly this "art")? "It's clever," wrote Rudyard Kipling, "but is it art?"

The National Endowment for the Arts grant for the tersely put "lighght" (that's the whole poem) prodded Americans to ask the same questions decades ago. Just as NEA life-support took the vanguardism out of the avant-garde, politics began taking the life out of art. "There is room only for the intense, changing, crude and immediate, which Alexis de Tocqueville warned us would be the character of democratic art," wrote Allan Bloom 20 years ago. "Hitler's image recurs frequently enough in exciting contexts to give one pause."

Many liberals promote art because its subjectivity breeds creativity. Yet the clear-cut "We Protest" message stifles interpretation. On Iraq, pro-war writers such as Christopher Hitchens sculpt colorfully reasoned arguments, while "We Protest" artists spill black-and-white emotion. One "We-Protest" piece is a mere answering machine labeled "Warrantless Wiretap." Another, "Fruits of War," depicts decapitated heads in place of Caravaggio's fruit. Yet another has President Bush painted like the Joker, carelessly juggling a burning globe. Goethe's Mephistopheles said "life is short and art is long." These short-sighted "artistic" protests aren't making life any longer for Iraqis.

So aside from bludgeoning the essential immortal quality of art, "We Protest" poses a problem for Meeks, who presides over a city containing many of the contributing "artists." As he may well know, a crucifix in a man's urine is NEA-sponsored art, but a Koran in a toilet is a hate crime. The virgin Mary covered in cow excrement ran in the New York Times, but the Danish Muhammad cartoons were too offensive. And now hate language a fraction of the size of the swastika decorating Preus has landed a few teens in more dung than the Times' Mary. Meeks might spare the we-protesters, but the test of time won't.

Thursday, August 6, 2009

Family matters


There can’t be many Americans that still gaze with disbelief at gay pride parades and gay couples holding hands: embrace it or not, most would agree that "it's a free country." Incest, however, still rouses a reaction similar to the Butler in the movie "Clue" when the Cop concludes the same after inspecting a Billiard Room full of corpses: "I didn't know it was that free," quips the shocked Butler. The disbelief is well-founded, because America is not that free: every state criminalizes incest.

The annual Capital Pride parade on Pennsylvania Avenue last June attracted a couple hundred thousand enthusiasts. One sponsor was Southwest Airlines. “Thanks for being a great travel partner as we take exceptional pride in partnering with you!” says its “gay travel” website in a homoerotic pun. Another was the federally funded DC Metro Transit Authority, which would have been wiser to devote its resources that weekend to updating a rail system with glitches that would kill nine the following weekend. Whole Foods, Verizon, Bank of America, and Yuengling were also among the sponsors, because these days one must be red and orange and purple, as well as “green,” to turn a profit.

It is not yet profitable to sponsor Incest Pride parades, however. For men that wish to marry their mothers or their sisters, the taboos and bigotry that once plagued gays are all too – what’s the word? – familiar. Not content with the U.S. Supreme Court declaring sodomy a fundamental right, the Massachusetts Supreme Court declared gay marriage a fundamental right. But if you fool around with your consenting adult sister, Massachusetts will put you in prison for up to 20 years.

Incestuophobia (as I’ll coin it since I am pioneering a realm that gay activists don’t care to forge) has its defenses. Incest is unnatural and disgusting, the incestuophobes say. Promoting consensual adult incest would be a green light to nonconsensual incest with minors. And even if it wasn’t, incest is a danger to society since it breeds genetic disorders.

The gay movement never accepted the sick-and-unnatural line as credible. Arbitrary taboos, gay activists said, suppressed natural and beautiful urgings. “[G]ay people, fearful of harassment, violence and arrest, were often forced into the shadows,” Frank Rich wrote in The New York Times last June about 60s-era homosexuals. “If a homosexual character appeared in a movie, his life ended with either murder or suicide.” But now gays have Brokeback Mountain, while the incestuous are still stuck with the vague innuendoes of a 17 century suicide tale:

Hamlet: Come and sit down; you shall not budge; You go not till I set you up a glass Where you may see the inmost part of you.
Hamlet’s Mother: What wilt thou do? Thou wilt not murder me? Help, help, Ho! [the incest activists cling to the sexual suggestions of “Ho!”].

As for the “green light” critique, that sounds like a right-wing argument against homosexuality: it’s a slippery slope to five year-old boys eloping. And regarding genetic disorders, they may be a setback for society, but what about AIDS? That anal sex is especially conducive to transmitting the virus is a fact that gay activists sidestep. If fighting AIDS required our cooperation rather than condemnation, why not cooperate on fighting inbreeding defects?

What should classical liberals make of this, aside from the hypocrisy of gay activists? They should maintain their sense of proportion. Perhaps adult siblings should be able to do as they please in the privacy of their homes, but they shouldn’t expect affirmation (government-sanctioned “public affirmation” was part of the Iowa Supreme Court’s pathetic justifications for fundementalizing gay marriage). Likewise, homosexual acts should be legal, but no need to join the parade. Homosexuality, like consensual incest, should not concern the Transportation Department.

Sexual freedom? Of course, this is America! Government praise for your “life style” choices? Of course not, this is America!