Different this Time?
Research for Online Investors

by John Dalt

7/27/09

One of the scariest phrases an investor can hear is “It is different this time.”  It always signals a detachment from reality.  We have all heard the discussion about this being a “jobless recovery.”

A “jobless recovery” predicts companies cut costs and employment, then are slow to rehire until profits and sales increase to build capacity. Employment would then grow after the recovery is underway.

Real world, employment keeps shrinking, 112 of 372 reporting areas in the U.S. are over 10% unemployment. According to the Bureau of Labor Statistics, every reporting area had year over year increases. Fifteen areas had unemployment over 15%, with the highest 26%.

In every recession since 1950, initial jobless claims were a leading, not a lagging sign the economy was recovering. Initial unemployment claims statistics are published weekly, look for a downtrend before you are caught in the “it is different this time” trap.

Doug Casey wrote a great article on wealth, and how it should be treated.  He takes a blast at Warren Buffett, Bill Gates and others going as far back as Andrew Carnegie.  I sympathize with his statements.  Wealth “guilt” has always amazed me.

Entrepreneurs and industrialists seem to feel guilty that they have done well and seek to “give back” to provide freebies to the poor.  Why not continue to work hard to improve people’s lives?  Warren Buffett decries the low taxes he pays compared to his secretary, but tax avoidance is one of his basic tenants of investing.  The government would not refuse any voluntary taxes he felt compelled to make.

Bill Gates wants to use his wealth to help people all over the world, isn’t that what MSFT has done, and made a profit at the same time.  Giving away money has never raised anyone’s standard of living beyond the gift.  Computers have raised everyone’s standard of living around the world.

The real sickness that infects the charitable lobby is the foundations and trustees that fund grants to benefit liberal causes and anti-capitalist organizations. How many wealthy benefactors would approve of the way their hard-earned profits are used after their death to destroy the capitalist system that allowed them to be successful?

Does a company (for profit) have a responsibility to be a ‘good corporate citizen’? My answer ‘NO’. They provide payroll to employees and profits for their shareholders, which can in turn be allocated to any number of charities from churches to social organizations like the Boy Scouts. Why should the company take profits away from shareholders to be a corporate benefactor?

As a shareholder, ‘good corporate citizens’ make me angry.  Why not raise wages for the very best employees, or pay a larger dividend to shareholders?  Let me spend my money, I do not need the CEO deciding what charities to support.

Read Doug Casey's great article on "Charity? Humbug!"

If you have more money burning a hole in your pocket, subscribe to one of our paid services.  That is how we pay for all the free information we provide.  You will actually get something in return, solid investment advice that will help you build more wealth.  Which should it be?  Galt's Long-term Portfolio or SwingTrader, both are guaranteed, unless you feel generous.  We will accept your money without a guarantee, and extoll your virtues to everyone we meet!

The health care sector gave $167 million to congressional campaigns,
and spent $484 million lobbying in 2008.
Some get fatter, but all get fed!

Drug companies have offered $80 billion in savings for seniors over ten years, and major hospital groups agreed to $155 billion reduction in Medicare and Medicaid payments to help subsidize costs of the new legislation.

I am working on another treatise on national health care.  Brace yourself; I have walked around muttering all weekend.

The U.S. Treasury is going to auction $205 billion in bonds this week.  This is the largest treasury auction, ever.  In one week, we are going to auction more than the annual deficit was a few short years ago.  Buy TBT, this etf shorts the 20-year treasury bonds, as interest rates go up so does TBT.

It is always nice to see another stock service come around to our view, after our subscribers profit from our advice.   This weekend our recommendation to own Proctor and Gamble (PG) was validated by Horacio Marquez, of Money Moves Alert trading service.

Subscribers to Galt’s Long-Term Portfolio bought PG on June 15 (up 8%).  Horacio is recommending PG in an article this weekend, noting “It has 20 global brands…each exceeds $1 billion in sales.  …the stock’s 3.2% dividend yield, appears undervalued.”  Welcome to one of our favorite companies.

The market looks more and more like the second leg of a recovering bull.  I always like to see if ‘insiders’ are buying their company’s stock or selling.  It seems that since May 1, insiders have sold $3.9 billion in stock, versus $350 million in purchases.  I guess the insiders are not as optimistic as some would have us believe.  Corporate insiders are not perfect predictors, but a better indication than publicity departments (investor relations).  Some of those same insiders may be buying their stock back now!

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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