Desperately needed emission reduction levels more from Washington than Detroit

A much more important environmental protection is needed today out of Washington than what the administration is seeking to impose on Detroit and one that has more immediate and significant impact to all of us than the controversial and much disputed effects of “global warming”.

What we need today is not more of the hot air and media designed hype (smells like methane gas or worse to me) from the Obama administration rather, meaningful and properly directed policies on taxes and the economic situation that the Nation faces.

I don’t want to get into all the environmental issues in this blog, they are not relevant and I only used them since the administration used it today for a headline event.

The economy continues to languish despite all the rhetoric going on about “green shoots”, “signals of a bottom”, “signs of recovery on the horizon” and every other form of diversion both the administration and their string controlled media are using to stave off the truth---

That sad and unmistakable truth is, so far, they have done nothing to improve the economy and in fact are letting the situation drift into more dangerous waters while at the same time advancing an agenda that is inherently sinister and dangerous to the American capitalist and social system that we have known to this point in time.

There is something irresponsible about an administration advancing the kinds of policies that will without a doubt be the cause of increasing economic costs and pressuring corporate and individual budgets with new regulations and taxes at a time when we are in a deep hole and the worst economic environment of the modern age.

Policies like Cap and trade, new emission standards that will lead to even more cost to the automobile industry, veiled new taxes on every aspect of our daily corporate and individual lives and policies that will erode any remaining competitive advantage the US may have left.

Continuing governmental intrusion into the fabric of corporate decisions from who the executives should be, what they can and cannot be paid, who should be on the board of directors, what banks can or cannot charge in interest rates to their credit card holders and soon, what medical services you and I will be permitted to have, how wealthy we are permitted to become before facing punitive taxation on levels of earnings or wealth arbitrarily determined by government officials.

I take it very seriously and so should any American when the president takes specific aim at and vilifies American fund managers exercising a legal right within our financial system to not accept a restructuring of debt they hold from Chrysler that the government was attempting to force down their throats and then we see the IRS being used as a threatening and punishing instrument against them and then shortly after a comment (not at all highlighted by the media who, had it been George Bush or any other Republican president would have had 40 pt. bold headlines on the front page of their newspapers or “breaking news” sections of their television pulpits) by this same president that “maybe I should get the IRS after them” , when referring to wealthy individuals who are not supportive and are vocal about their objections to his administration’s policies and programs.

A speaker of the House of Representatives boldly and falsely leveling a claim that the CIA lied to her, the Congress and exposing for all enemies to see, aspects of our National Security complex that has without doubt prevented further similar or worse 9/11 style attacks on the soil of America and getting away with it with virtually no press or outrage is life threatening in my view.

If all this is not enough to get your hackles up, consider the following that should get your hair turning grey or greyer.

The “new normal” under a “new America” in terms of economic results and returns is beginning to take root and it is not anywhere close to the normal many are trying deperately to believe the Country is going to return to. Indeed, lower earnings and lower value multipliers on those earnings will doom most listed companies to rollercoaster style ups and downs to their share values, producing similar instability throughout most of the investment models and retirement plans of institutions and individuals alike.

America is just at the beginning phase of a massive deleveraging across the boards (save for the government) the results of which produced the collapse we are living in at the moment.

It is troublesome to me, an "older hand" to see a lot of the people of my generation going to the media day after day and spewing what I believe to be "false hope" (hate to believe it is just false information) that things are getting better and that they can see some signs of improvement to the economy!! There is no fundamentals to support what they are "seeing".

The current market move has nothing to do with belief in fundamental improvements in the economy. It is first and foremost just a trading market and secondly one that has moved on lack of volume and lack of selling.

First the economy in general and the whole clouded view that things are getting better.

They are not!! It is not getting better when all that can be said is "they are getting less bad"!!.

There is a major difference and it does not take a subtle well heeled investment manager to figure that out.

The country is still in crisis and not at all recovered from the initial wound of the financial meltdown of the banking system and we are rapidly coming up to the point where the next shoe to drop actually drops.

I have hinted at this with my “shoe untied” metaphor in previous blogs.

It is now ready to drop. Here are the stats on this shoe (which is unfortunately not the last one. Remember I have also used a centipede metaphor on what the US is dealing with):

Beginning in June and continuing into 2010, over 9 million homeowners will be facing resets on their ARMs (adjustable rate mortgages) and most of them are going to encounter significant declines in the value of the houses on which those mortgages were set, making it very difficult for many to refinance. It is also important to take into account that many of these borrowers will have likely suffered the loss of either the primary income earner on the mortgage or the second income earner related to that mortgage, making it even more difficult to refinance. Estimates put the total exposure of this segment coming due at over $370 billion but the “stress test” of the government only had $87 billion included.

There are in excess of another $300 billion of credit card balances that will as of June 1 be at least 60 + days late in receiving any payments (even the minimums due). The “stress test” only accounted for less than $60 billion.

Between 2010 and 2013 over $ 1 trillion dollars of commercial real estate loans will be coming due. They will either have to be refinanced or paid off or, put into foreclosure and liquidated. Not one penny of this cloud was included in the “stress test”.

In the last two Treasury auctions (the process the US uses to refinance itself) had it not been for the Treasury offering higher rates than what they started with and without the shadow support offered by the repurchase of much of those issues by the Federal Reserve the day after the auction, they would have had to be classified at least “troubled” if not an outright failed auction process. This at a minimum means higher interest rates are already upon the market and worse, many of the traditional and expected purchasers of the past are not that confident in the US balance sheet as before and are not going to keep financing the US deficits. In effect, a global vote of no confidence in this administration and its policies.

China is going to (not thinking about it, going to do it) distance itself from the dollar. If anyone needs any evidence of that, other than what I have already provided in an earlier blog this month, look at the alignment done today between China and Brazil. In certain transactions between these two countries, settlement will be based on their two currencies-not the US dollar.

This is just the start, believe me when I say it. There will be many more agreements like this in the future paving the way for other countries to do the same or to require the same of trading partners and import clients.

California is a “failed State” and representative of what many other States are facing and at the end of the day will itself become another “too big to fail” institution that the Federal balance sheet will have to absorb.

The consumer base upon which the US economy was built over the past 20 years is no longer a viable nor recoverable base for the US economic model and is being rapidly replaced by the exporting countries like India and China, who depended upon the US consumer to fuel their economic growth up to now but who can now replace the US consumer with their own internal consumer demographic. Many US companies that produce in those countries will find it better to focus on those new and growing consumer basis rather than continue to be dependent upon the US consumer and with the levels of taxation they will face here in the US could reasonably consider (not tomorrow or even in two or three years, but, within 5 years) moving permanently offshore to these countries or others and receive better tax and regulatory treatment than what is shaping up as the “new normal” of America.

Even if all of the above (and what I have chosen for brevity sake not to include now) turns out to be “Chicken Little” concerns on my part, one thing that all agree with:

The “new normal” of America is going to be less of what it was prior to this collapse and that will also create “new normals” for every company and individual in the US.

We are not in a period of recovery nor have the markets seen their bottoms and this is not the beginnings of another major bull market. It is a trap for anyone who believes that the only place to invest is into American companies. It is not and the future is not investing in American companies. More of your portfolio should be invested into commodities like gold and into ETF's of countries like China, India, Brazil. Buy the BKF rather than Bank of America, if you are not going to retire in the next three years your gain will be much larger on the BKF than on BOA.

We are in the most dangerous period the US economic and capitalist system has faced and it is not correct to compare today to the Great Depression and derive any comfort. The math has changed to a point where the comparison is almost disingenuous. We are almost at the same number of unemployed Americans as the Great Depression (11.3 million was the number for those of you counting).

The unwinding of the strings on the ball of America is just beginning and is going to accelerate due to these steps being taken by the administration.

Volatility is just beginning and it is going to be of a type and nature that even the eldest among us have not witnessed before, even if there are some survivors from the Great Depression.

Can it be stopped?

That answer, like all answers can only be based on the facts available from which one can judge.
Given the fact of the current administration and the plans and programs being planned and implemented, a sad "no" is the only response I can give.

At this time and with these undeniable conditions facing the Nation the administration should be cutting taxes, implementing incentives for both individuals and corporations to invest, reducing spending and defending the dollar and they are doing exactly the opposite and unless they stop and rethink and begin upon a new route they are headed to a cataclysmic drop off the edge of the cliff and a breaking apart of the American model on the rocks below and the pieces will be unrecognizable.

Someone had to say it. I just did!