Checkmate or Draw?
Research for Online Investors

by John Dalt

7/29/11

Second quarter GDP numbers came out this morning.  The U.S. economy grew at a sick 1.3% annualized rate, this after the first quarter’s 0.4%, and fourth quarter’s 2.3%.  Don't think the numbers are improving.  There is a disturbing trend of the Commerce Department reporting better numbers than real, the revising them.  First quarter growth was originally reported at 1.9% and 2010’s fourth quarter was revised down from an original 3.1%  Count on the gang that can’t shoot straight!  We wonder what the second quarter’s real numbers were?

Employment costs took a jump (inflation).  The Chicago Purchasing Managers Index (PMI) took a hit, indicating lower purchasing manager’s expectations for orders in the manufacturing sector.  The Michigan Consumer Sentiment Index numbers were less than expected, and less than last month’s numbers.

And you thought today’s market drop was because of the ongoing debt ceiling negotiations.  I wake up three hours before the market opens to check Asian and European headlines and markets.  It didn’t look pretty this morning.

What looks pretty?  The ongoing drama out of Washington!  Embrace it.  This is two competing visions for America, butting heads.  We don’t know the final score that will be recorded, but the game is worth watching.

What if the republicans are smarter than the TV talking heads would have us believe?  What if John Boehner pulled his plan and cancelled the vote last night to let pressure build on the Senate?  What if there really is not disagreement in the House caucus, they are just counting days.

Harry Reid announced yesterday morning that the “Boehner Plan” would be taken up by the Senate last night, right after approval by the House.  He said it would be defeated.  He evidently does not feel enough pressure yet.

We told you last week that Speaker John Boehner knows how to count days.  In Washington, under certain conditions, that can be more valuable than counting votes.  The Senate does not have a plan to vote on, except the Cut, Cap and Balance bill that was tabled last Friday.

Why haven’t they voted on it yet?  Because Harry Reid doesn’t want his members to have their vote recorded on a Balanced Budget Amendment.  What is his other fear?  It might pass.  Twenty democratic senators have voiced support for a Balanced Budget Amendment since they have been in office.  If all republicans voted in favor that would mean it would pass.  If they don’t vote for it, they could be targeted when up for re-election.

The problem with this there are some republicans that really don’t want to have to balance the budget because that will take power away from Washington.  Who would pay attention to the government when they didn’t have spoils to distribute?

The game of chess continues.  Harry Reid has called a press conference to suggest the republicans should just say yes and sign on to his bill.  The president continues to show his intransigence.  Progressives may honestly believe the republicans are showing inflexibility also.  This is fair, but you can’t say they have not passed bills.  The argument is that the progressives don’t like the bills the house has passed.  The question one has to ask is, “Where are their bills?”

Look at the honest brokers.  The problem is debt.  It must be addressed.  The country’s credit is about to be downgraded, not because of the debt ceiling debate, but because of deficit spending.  Which party, or sub-group of, is the most aggressive in addressing the problem?  If the chess game ends with cuts to the budget and a balanced budget amendment, you will have witnessed historic events.

Our new subscribers to the Long-Term portfolio picked up two positions this morning.  Both pay a nice dividend.  One pays a 6.4% annual dividend, the other 9.6%.  What is your plan?  If you are frozen rather than picking up great stocks, we have a deal for you!

Quote:  Extremism in the defense of liberty is no vice, moderation in the pursuit of justice is no virtue.—Barry Goldwater, 47 years ago at the Republican Convention

The mailbag:
Your politics suck desperately ,,,You Repubs  just seem like Alzheimer 1st stagers.  Your precious GOP got this whole toilet flush started REMEMBER that jillion dollar Iraq war  didn't come for free ...it was for nothing, Nothing, NOTHING.   Of course, tax breaks for those who don't need it, and the corporate welfare state…the tea party idiots seem drugged to continue. Tax gifts to big oil,,, big agro...big anybody...and  anyone with money for some tax lawyer whore that can get out of paying their fair share...which is way TOO SMALL...No wonder I need your expertise in this market to survive!!---Buy, Sell, Hold subscriber J.P.

John’s reply:  I am sure you remember the Congress approved the Iraq and Afghanistan wars  (Reid and Pelosi voted Aye).  The Bush Tax breaks were to get the economy moving again out of the Clinton recession and after 911.  I felt one of Bush’s mistakes was not requiring some sacrifice of the American people when we went to war.  I am not sure higher taxes would have been the proper sacrifice.  Remarkably, the deficit for 2007 was only $163 billion.  Obama creates almost that much debt every month!

The country collects more money when the economy is growing with low tax rates than slow (OBAMA) at higher tax rates.  That is one of the reasons the budget came into balance in the ‘90’s because of NAFTA and the economic activity it created.

I didn't agree with Bush on everything he did.  Since congress voted to authorize Afghanistan and Iraq, it is not Bush's fault alone.  Folly...probably.  As these things turn out, we never go win then come home.  We take lawyers and journalists to war with us, rather than letting our military do its job.  Destroy the enemy.  This is all part of the Powell doctrine.  "You Break it, You Fix it" is dumb.  We ought to break everything and leave with a warning...cause us problems again and we will come back.  That being said, let’s bring our troops home, downsize the military (and State Dept), close foreign bases and cut foreign aid.  We will have a beer sometime and discuss.  In the meantime, let’s just keep making money in the market!

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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