Budget Deficit Up Up and Away
Investment Research for Online Traders

by John Dalt

01/26/09

The U.S. budget deficit for 2009 is now projected at $1.1 trillion, more than 8% of GDP! Since our countries founding, only during WW I and WW II did we run a higher annual budget deficit. If OH! BAMA’s ‘stimulus’ plan passes along with more ‘rescue’ plans our budget deficit as a percentage of GDP will be over 15% and could reach 30%!  The highest ever. Total debt is already over $10 trillion after 232 years, OH! BAMA! and congress are poised to increase it 20% or more in one year. South Korea is one of the largest holders of U.S. Treasury bonds. Last week, Kim Heeseok, head of investments for their government pension service told Bloomberg “It’s time to sell U.S. Treasuries”. It is not a mystery why Gold, Silver and interest rates are going up. They will not go straight up, there will be pullbacks, but you should use these trends to your advantage. Oil will be the next commodity to spiral higher. Deficit spending will destroy the dollar, and our standard of living. Our financial future is beginning to look like a third world banana republic. What used to be the engine of productivity is turning into the home of overspending and debt so large that inflating the money supply is the only option.

The messiah and his minions are making mistakes. Tim Giethner told the Senate finance committee “President Obama, backed by the conclusions of a broad range of economists-believes that China is manipulating its currency”. China holds $681.9 billion in U.S. Treasuries.  What happens if they begin selling treasuries? Did they sell Thursday and Friday? I do not know, but interest rates spiked on treasuries and gold spiked higher. What if they quit buying like the Koreans? We have one congressman that voices his concerns for our countries future, a lone voice in the wilderness.

 It’s lonely.

Our government and the willing major news media outlets are doing their best to talk our economy into the tank. I am suspicious. I do have to admit, I thought the coverage would change as soon as OH! Bama was inaugurated. It has not, but then again they can still blame President Bush, for now. I suspect it will change once they get the next stimulus plan passed. Then the underlying story line will be how hard the President is working to rescue the economy. We are right in the middle of earnings reports and everyday it seems some company disappoints. Earnings season will slow and congress will wrangle a trillion dollars out of thin air shortly. The market seems poised to rally; it just needs some good news as a lever to launch.  We are bouncing along above 8000 on the Dow and 800 on the SP500. These have triggered support, now we are waiting for some piece of news to kick buyers off the fence.

The market trading at this level has the feel of an approaching execution. My lawyer expects the governor to commute my sentence and save my life, but I do not want to jinx my chances by ordering lunch for tomorrow! It is the same with stocks, I know they are poised to rise, but I am afraid to buy more.  I am reminded of Nathan Rothschild’s quote in 1815, “Buy when there is blood in the streets…even if it is your own.”

On the humorous side, a safe investment may be condoms.  Nancy Pelosi defends putting money for safe sex in the stimulus plan.  Y ou might want to invest in Church and Dwight Co. (CHD) makers of Trojan brand condoms, and other household, personal care, and specialty products.  Their stock has been rising recently.

A great quote for today:

It is inaccurate to say that I hate everything.  I am strongly in favor of common sense, common honesty, and common decency. This makes me forever ineligible for public office.

H.L. Mencken

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

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