Corporate Tax Loopholes

This past Sunday, 60 Minutes ran a fantastic and mostly factual story on how companies are hoarding money oversees to avoid paying taxes in the U.S.  Every American should watch this video, it is that important!



Emotions run very high on both sides of this issue.  Groups like USUncut recently protested against these companies and feel strongly that the government should close these tax loopholes.  Others feel that corporations are already paying too much in taxes and the rate needs to come down.  Let us provide some perspective on this situation.

Capital flows like water.   What that means is that water will flow downhill and look for the path of least resistance.  There is nothing anyone can do to change this basic phenomenon in nature.  Water will never flow uphill on its own.  Capital will always flow to wherever it can earn the highest perceived return on investment, period.  The key word is "perceived", because the end result is not always the choice that results in the absolute highest return.  However the capital will flow wherever the decision makers "think" it will earn the highest return.   This is how capital SHOULD flow, as it results in the most productivity and value for each dollar invested.  The end result is the world we live in today, where society moves forward with new discoveries, increased productivity, and a higher overall standard of living.  It is hard for anyone to argue against this, unless they feel we would all be better off riding horses, using the Pony Express to communicate, building fires to stay warm, or going without basic pain medicine or anesthetics.  Amazingly, there are some folks that feel this way, but for the rest of us, we like the way things have progressed over the last 200 years.

Obama Cartoons

Tweet

We can't help but laugh at these Obama cartoons! Cartoons have a way of capturing feelings and frustrations in a way that words alone cannot.   Much of the frustration in these cartoons seems to focus on his lack of any real leadership skills when it comes time to make tough decisions.  That certainly is not a label that any president should be happy with, especially one that will face re-election next year.

U.S. Involvement in Libya - Illegal, Immoral, Unaffordable

Tweet

We do our best to focus our commentary on economics and those issues that directly affect the economy and investing.  However, there are times when the seriousness of the issue warrants getting off subject and commenting on the events at hand.  The U.S. involvement in the Libyan crisis is one of those subjects that must be addressed.



First let us stick to the economic side of the story and discuss why, economically speaking, we should not be getting involved in Libya.  We are broke!  We should not be going out and trying to save others when we need to be focusing on saving ourselves.  Thanks to the earthquake in Japan, the Fed will now be purchasing the majority of new U.S. debt that is brought to market!  We are buying the majority of our own debt, which for decades has been the ultimate measure of a failing system.  We are on our last legs, and need to be slashing our federal spending across the board if we are going to avoid a fiscal disaster.  If we faced a real threat to our national security that required a full scale war to defend, we would not be able to afford to fight!  Literally, we could not fund a real war as it stands right now.

Second, we have absolutely no moral authority to get involved in Libya.  Show me what document gives us the power to intervene throughout the world as the single voice for keeping the peace.  Please don't tell me about the United Nations, NATO, or the coalition, because everyone knows the U.S. calls all the shots.  The world knows this and will hold us accountable for whatever comes as a result of our involvement in Libya, we all know that to be certain.  We are brainwashed into the thought process that if people are dying in Libya, and we have the means and power to stop it, then we must act.  We are told that standing by on the sidelines and watching would be wrong and immoral.   Folks, this is hypocrisy!  People are dying all of the world under tyranny and oppression, and we rarely get involved.  Just look at what is happening deep in the heart of Africa for example.  We allow it to happen when we do not have a vested interest in the situation.  However when we do have a stake in the game, we play the "moral obligation" card.

Inside Japan's Nuclear Reactors

POST UPDATE - March 20, 2011

We want to share two additional infographics that deal with how radiation affects the human body, and more details on what is going on inside Japan's Fukushima Power Plant.

___________________________

ORIGINAL POST - March 17, 2011

Well-timed infographic from LiveScience that helps us all understand what is going on inside the nuclear reactor in Fukushima, Japan.   These reactors are such complex and dangerous structures, and it really boggles the mind to consider the magnitude of their power.  Japan's nuclear reactors were built in the 1960's and as we know now, are located almost directly on a fault line.

Tags: Fukushima Reactor, Fukushima Infographic, Nuclear Reactor infographic,

Japan nuclear reactors, nuclear meltdown, japan crisis.

Who Will Buy U.S. Debt?

Simon Black at "Sovereign Man" put an article out yesterday that gives a quick overview of the U.S. debt situations and asks the question, "who will buy U.S. debt when Japan and the Fed stop buying"?  It's hard to say exactly what Japan will do, but that really is not the point.  The U.S. is quickly approaching a time when there will be a lack of buyers for our debt.   No worries, right?  The Fed has already primed the pump and taken steps to make it appear that there is nothing wrong with buying our own debt!  Of course, that was a very smart strategy from a PR standpoint.  Oh, and there are no signs of inflation anywhere, according to Mr. Bernanke, so no need to buy gold, silver, oil, agriculture, or any other commodities.  Just ignore the 10 year bull market in gold, it means nothing???

POSSIBLY THE LAST TIME TO GET OUT OF THE DOLLAR

by SIMON BLACK

March 15, 2011

Dallas, Texas, USA

It’s no secret that the United States government owes a pretty penny to foreigners. Certainly, what America owes to foreigners pales in comparison to what it owes to Ben Bernanke… but still, $4.45 trillion is no small number, even in these crazy times when terms like “kajillion bajillion” are more appropriate to quantify debt and entitlements. 

China is the largest foreign buyer of US Treasuries with around $1.15 trillion in holdings… Japan is the second largest at around $886 billion. Curiously, the trend for China has been down– the Middle Kingdom has been steadily reducing its position since peaking in October 2010. 

Japan, on the other hand, has been steadily increasing its Treasury holdings over the same period. Its government does have a long pattern of currency intervention, and there has been much grumbling in Tokyo about the effects of the strong yen on their exports.

Fast forward to this past weekend. Earthquake. Tsunami. Volcano. Nuclear radiation. Japan clearly has other things on its mind right now than to continue financing the ongoing largess in Washington DC. 

Earthquake Infographic

Sharing this very nice and appropriate infographic that illustrates many of the most notable earthquake hot spots around the globe.  There is no doubt that human beings are risk-takers by nature.  We have an incredible ability to put danger and risk in the back of our minds and focus on the hear and now.  That is probably why we have come so far over such a short period of time, because failure to ignore risk would result in fear and paralysis.  Nevertheless, those living on fault lines are putting themselves in considerable risk, there is no denying that fact.   It is one thing to live near a fault line, quite another to build nuclear power plants on one as well.  One thing is for certain, don't expect a mass exodus for the San Francisco area in the near future.

Tags:  Earthquake Infographic, Japan Infographic, Japan Earthquake

Fault lines, Earthquake Zones, Earthquake predictions, Danger Zones

Japan Earthquake Newspaper Coverage

Please help the victims and donate today at the American Red Cross!

The situation in Japan is deteriorating this morning and another earthquake has hit the country.  We want to take a look at how newspapers are covering this extremely scary and heartbreaking story this morning.  The earthquake today measured 6.0 and was felt as far away as Tokyo.   Although most people now get their news online and via other media, print newspapers still have nostalgic and historical significance and can provide a barometer for sentiment across the world.

Tweet

The 1970's - Starring Barack Obama as Jimmy Carter

Very informative interview with Niall Ferguson on CNBC.  Ferguson discusses western civilization and the historical precidence for how dominant civilizations come to an end.   His premise is that history shows us that large civilizations very often come to an abrupt end rather than enduring a long, slow decline.  He does not make any specific predictions about the decline of the United States, however he does reference the 1970's and goes into some detail about his predictions for democracy in the Middle East.

There is no reason to think at this point that the United States is going anywhere.  However, the problems we face are very real and we appear to be on a path toward more pain and suffering.  We agree with Ferguson's predictions on the future of the Middle East, which are also very bullish for oil and gasoline.  Everyone needs to protect themselves from significantly higher gas prices by purchasing an ETF that tracks either gasoline or oil prices.  Please contact your investment advisor and discuss these options with him.  If gasoline goes to $10 per gallon or higher, the affects will be felt in higher prices for all good and services.  You must be hedged against these risks.




Tags:  Oil prices, gas prices, inflation, Obama, Niall Ferguson,
CNBC, 1970, how to protect against rising oil prices

Michael Moore Calls for "War"

The events surrounding Wisconsin over the last number of weeks have been fascinating to watch.  We have posted many entries on these events and provided our commentary on the situation.  What is important to understand is how all of these events are tied to much larger developments across the world. The fallout from the Great Recession is only beginning to be understood by most Americans.   The truth is that the fallout has only begun.   The events in the Middle East, and now the events in Wisconsin are all a  direct result of political, monetary, and economic policy that came about after the downturn.

The only aspect of what is happening in Wisconsin that has caught us off guard is the speed at which events are unfolding.  We did not expect to see such large protests and words like "war" being used at this stage of the game.  Our best guess was that these events would occur over the next few years.  However, we are moving much more quickly toward our own unrest here in America.

Michael Moore is capitalizing on these events and inciting the people to take action in his interviews and speeches.  He is using very strong words and promoting anger and fear to get this message across.  The people that he is speaking to are very impressionable and most likely do not fully understand the dynamics and fundamentals  that are driving these decisions by those in power.  Whether or not you agree with way leaders in Wisconsin and elsewhere are handling these decisions, you should not be taking advice or forming your opinions on the situation from Michael Moore.  His speeches are filled with grandiose statements, dramatic content and fear.  They are empty of any real evidence and hard facts to support his claims and accusations.   He has an agenda and profits from this anti-business, anti-free market message.  He is trying to start a class war, which will rip this country apart from within.  We are all Americans and are entitled to our opinions, but we are not entitled to try and incite the masses to take action and promote violence against anyone.  That is what Michael Moore is now doing in his interviews.  Take a listen for yourself......

Michael Moore's Speech in Wisconsin

Michael Moore gave a speech in front of a large group of protesters in Madison, Wisconsin on March 5th.  Below is our response to his message.

Speech delivered at Wisconsin Capitol in Madison, March 5, 2011

America is not broke.

LET’S START RIGHT HERE AT THE TITLE.  WHY SHOULD WE BELIEVE THIS?  WHAT EVIDENCE, NUMBERS, FORMULAS AND FINANCIAL MODELS DOES HE SHARE TO PROVE HIS POINT.  SHOW THE PEOPLE WHY YOU FEEL AMERICA IS NOT BROKE.  MICHAEL, IF YOUR ASSETS EQUAL YOUR DEBTS, YOU ARE BROKE.  IF YOUR ASSETS ARE HIDDEN UNDER A MOUNTAIN OF DEBT, YOU ARE VERY BROKE.  IF YOU HAVE TO BORROW MONEY TO MAKE YOUR DEBT PAYMENTS, AND BORROW MORE MONEY TO MAKE THOSE NEW DEBT PAYMENTS, YOU ARE BROKE.  THAT IS WHERE AMERICA FINDS ITSELF.  MICHAEL, YOU ARE NOT BROKE, BUT AMERICAN IS DEAD-ASS BROKE MY FRIEND.

Contrary to what those in power would like you to believe so that you'll give up your pension, cut your wages, and settle for the life your great-grandparents had, America is not broke. Not by a long shot. The country is awash in wealth and cash. It's just that it's not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich.

Today just 400 Americans have more wealth than half of all Americans combined.

Let me say that again. 400 obscenely rich people, most of whom benefited in some way from the multi-trillion dollar taxpayer "bailout" of 2008, now have more loot, stock and property than the assets of 155 million Americans combined. If you can't bring yourself to call that a financial coup d'état, then you are simply not being honest about what you know in your heart to be true.

And I can see why. For us to admit that we have let a small group of men abscond with and hoard the bulk of the wealth that runs our economy, would mean that we'd have to accept the humiliating acknowledgment that we have indeed surrendered our precious Democracy to the moneyed elite. Wall Street, the banks and the Fortune 500 now run this Republic -- and, until this past month, the rest of us have felt completely helpless, unable to find a way to do anything about it. 

I have nothing more than a high school degree. But back when I was in school, every student had to take one semester of economics in order to graduate. And here's what I learned: Money doesn't grow on trees. It grows when we make things.  

MONEY DOES NOT GROW, IT IS EARNED.  IT IS NOT EARNED BY HARD WORK ALONE, IT IS EARNED BY HARD WORK THAT PRODUCES RESULTS AND CREATES VALUE.  HARD WORK THAT IS WASTEFUL DOES NOT CREATE VALUE AND THEREFORE SHOULD NOT BE REWARDED.

It grows when we have good jobs with good wages that we use to buy the things we need and thus create more jobs.

BUYING THINGS DOES NOT CREATE MONEY OR JOBS.  SAVINGS AND INVESTMENT CREATES JOBS.   VALUE, AND HENCE MONEY, IS NOT CREATED AT ALL.  MONEY IS TRANSFERRED IN EXCHANGE FOR VALUE.  THE MORE VALUE YOU CAN CREATE, THE MORE MONEY  YOU WILL EARN.  SIMPLY HAVING A PULSE AND WORKING HARD DOES NOT ENTITLE YOU TO EARN A SUBSTANTIAL AMOUNT OF MONEY.  IF YOU WANT MONEY, YOU MUST CREATE VALUE FOR OTHERS.  OUR COUNTRY IS GREAT BECAUSE OF THIS BASIC IDEA WHICH DRIVES EVERYTHING WE DO AND RESULTS IN AN EVER-IMPROVING SOCIETY.

The Drug War

Another great graphic from Daily Infographics. This "war on drugs" we are fighting here at home is really disheartening. We've all heard both sides of the argument for and against legalization, and both sides make a number of good points. There just does not seem to be a good answer, and the current situation is just a complete and utter disaster. Think of all the hard working men and women in law enforcement that are risking, and in some cases giving up, their lives for this drug war. The sad thing is that when your economy is on thin ice and unemployment is near 10%, very few politicians want to discusses this issue.  Whatever the solution, this drug war must be considered a failure at this point.

Full size graphic >> Click Here

Gas Price Cartoons

Maybe the only great thing about rising oil and gasoline prices (unless you own OLO and are protecting your family - read "Playing the Game Correctly?") is that we get a tsunami of gas price cartoons!  Enjoy!

Tweet

A Comparative Look at State Taxes

Very interesting infographic from Turbo Tax comparing all the various state taxes and how they differ from state-to-state.  Be sure to click on the last tab "Overall Tax Burden" for a look at the big picture.


                >> Click for interactive graphic

Libya - An Overview

Sharing this great overview of Libya and its economy.  If you have never seen images of Libya, it truly is a beautiful country.  The historical architecture is fascinating and the coastline is breathtaking.  It is very sad that such a beautiful country has been basically off -limits as a vacation destination for Americas for over 30 years!  Perhaps these protest will unleash a renaissances in not only this country, but across the region!

Visit our entire page dedicated to the Crisis in Libya

                                                

Libya infographic, libya economy, libya overview, libya history, libya protests, libya chart

http://precisiontradingsolutions.blogspot.com/p/libya-crisis.html

The Great Fortune Teller

Anytime our buddy Mr. Bernanke speaks on Capital Hill, we feel it is important to remind everyone to not believe one thing that comes out of his mouth when he talks about the future or our economy.  Why not?  Because before the greatest crash since the Great Depression, he thought everything was just fine.  He thought the economy would continue to grow, housing prices would continue to rise, and unemployment would stabilize.  Now, when he tells us that there is no concern about inflation and that oil prices will not hurt the economy, we should remember his track record when it comes to fortune telling!

This "dog and pony" show that takes place when he appears before Congress is outrageous.  A number of congressmen challenge him, as they should.  Most, however, have no idea of his track record.  We should not be surprised that most of our elected officials have no real economic knowledge whatsoever.  They were elected based on their promises to "fix things" and are now responsible for making decision that will impact the future of our society.  They ask him questions as if what he says is Gosphal, which of course is far from the truth.  His record speaks for itself.

What someone should ask Mr. Bernanke is the following...

"In your testimony, you told us that inflation is not a concern, our economy is strong, and oil prices do not pose any threat to the economy right now.  Why should we have any faith whatsoever in those statements?  Here is what you told us back in 2007 before the biggest economic collapse since the Great Depression.....  How do you explain those statements and why did you not  know or tell us about the coming crash before it happened, when so many others saw it as clear as daylight?"

U.S. Uncut - Follow Up

Last week we discussed the organization U.S. Uncut and their plans to stage rallies and protests on February 26th to show their displeasure with  large corporations that dodge taxes  We want to follow up this morning and show you some of the video taken at their protests this weekend.  Apparently they were able to disrupt some business at local BofA branches.

This group is of interest to us for a few reasons, even though we completely disagree with their premise and message. First, we want to bring to light these types of "American Uprisings" to help people understand that this is only the very tip of the iceberg.  Huge austerity cuts are coming to the United States in the not-so-distant future, that is certain.  Once those cuts become reality and politicians begin presenting their solutions, you can bet the protests will be 100x larger than what we saw from U.S. Uncut this weekend.  Second, we want to help explain why these groups are misguided when it comes to their message (see our post American Uprising - The Preview) and help people understand the true nature of our economic problems and solutions.  Third, Americans need to understand the seriousness of what is coming our way and find ways to protect their investments and financial health in the face of these risks.

This first guy is very interesting.  Again, the idea that cracking down on large corporations that do not pay taxes will solve all our problems and have no repercussions is simply misguided.  We agree that these corporations should never have received bailouts of any kind.  However, the men and women that work at these corporations breathe the same air and bleed the same red blood as those at U.S. Uncut.  Their jobs are just as meaningful and important as any, including union workers.  Corporations will do what it takes to earn a profit and an acceptable ROI for their inventors and owners.  That means they will save money elsewhere if they are forced to pay these taxes in some government crackdown.  Most likely they will cut jobs, which means more Americans unemployed.  As we mentioned before, any man or woman is freely able to invest in these "evil corporations" and become an owner, thereby profiting in the same way and earning the same return as all the other shareholders.  By the way, closing all the tax loopholes in the world won't bring in enough money to keep this ship afloat in the long run!

Wisconsin Protest Signs

These Wisconsin protest signs are extremely funny and creative.  We have seen protest signs from around the world, and these are up there with the best.  The people from Wisconsin seem to have a good sense of humor and it shows in their signs!



This is our favorite Wisconsin protest sign!!

















Tags:  Wisconsin protest signs, Wisconsin protesters, Wisconsin Unions, Funny protest signs, Scott Walker, Collective Bargaining

Joe Klein in Madison

Very well done video from Time, Inc. gives a brief overview of the situations along with some great "on the ground" shots.   Regardless of which side you support, there is no arguing the last statement in the video that we are now seeing a major change in American political life.  As we have mentioned in previous posts, changes are coming whether we agree with them or not.  Our generation now has to deal with the mistakes of our parents and grandparents, and it will not be pretty.

American Uprising... The Preview

Looks like we are going to get a small, small glimpse of some organized protests here in the U.S. later this week.  According to sources, a group calling itself "USUncut" is planning gatherings in dozens of cities across the country on February 26th to show their displeasure toward government cuts that affect the poor and middle class.

What we are witnessing is both sad and frustrating.  The people these organizations are directing their anger toward are indeed deserving of that anger, however the reason for the anger is misguided.  Yes, the government is the source of the vast majority of the pain we are feeling as a nation.  However, the reason for the pain is the very thing USUncut if fighting to keep.  It is excessive entitlement programs and and explosion of government spending that helped put us in such a sad situation.  It is government spending off all types!  Republicans and Democrats are all to blame! Hard line conservatives that support military spending and huge tax cuts are just as guilty as bleeding-heart liberals that support higher taxes, unemployment insurance, environmental subsidies and welfare programs.

All of this misguided energy and passion is so very frustrating to watch.  It will become even harder to take when the protests are widespread and violent after serious cuts are proposed for programs that hit the poor very hard.

The fact is that all Americans are going to be affected by these cuts, and the truth is that these cuts are all necessary! Cuts need to be made deep and across the board.  What the Republicans are proposing does not even begin to scratch the surface of true spending reform.  As we have mentioned before, if we do not get control of our spending ourselves, the rest of the world will force our hand.  Either way the day is coming when we will have to make real sacrifices, there is no avoiding that reality.

Below is some information from the USUncut website.  They are suggesting that closing the tax loopholes of huge corporations will provide enough tax revenue to avoid cutting social programs and government jobs.  What they do not realize is that closing those loopholes will result in the loss of thousands of non-government jobs from the private sector.   It is the old and tired idea that corporations are hording money and living large at the expense of everyone else.  If that is the case, and this is what you believe, then you are free to go out and buy stock in those "greedy" corporations so you can profit from all those tax loopholes just like they do!

           Excerpt from USUncut:

US Uncut is about taking action against unnecessary and unfair cuts to public services across the US. Washington’s proposed budget for the coming year sends a clear message: The wrath of budget cuts will fall upon the shoulders of hard-working Americans. 

Obama seeks to trim $1.1 trillion from the budget in the next ten years by cutting or eliminating over 200 federal programs, many dedicated to social services and education. 

For instance, it cuts in half funding to subsidize heating for low-income Americans; limits an expansion of the Pell grant program for students; and decreases Environmental Protection Agency funding by over 12%. 

Meanwhile, Republicans are using their new House majority to slash spending even more brutally. The GOP has made it clear that they are bent on raiding funds for Social Security, Medicare, education; determined to kill health care reform; and gut needed investments in infrastructure, climate change and job creation, at a time when America needs it most. 

These cuts will come on top of very painful austerity measures made at the state-level across our nation–-worth hundreds of billions--since the recession began.

In short, budget cuts demonstrate that Washington has abandoned ordinary Americans.

But there is an alternative: Make corporate tax avoiders pay. 

Enjoying record profits and taxpayer-funded bailouts as the economy slowly recovers from a financial crisis, nearly two-thirds of US corporations don't pay any income taxes, instead opting to abuse tax loopholes and offshore tax havens. According to this study from the non-partisan Government Accountability Office, 83 of the top 100 publicly traded corporations that operate in the US exploit corporate tax havens. Since 2009, America’s most profitable companies such as ExxonMobil, General Electric, Bank of America and Citigroup all paid a grand total of $0 in federal income taxes to Uncle Sam. Tax havens alone account for up to $1 trillion in tax revenue lost every decade, money that could be invested in K-12 education, colleges, public health, job creation and hundreds of other worthy public programs. 

If we pay our taxes, why don’t they? If corporations profit here, shouldn't they pay here?

Playing the Game Correctly?

We are less than two months into 2011, and the news cycle is enough to scare even those that only casually pay attention to world events.  Many people have flooded the Internet looking for news and content on the latest in the Middle East, the U.S. deficit, food inflation, and various other hot button issues.  This is very encouraging as we feel it is critical that everyone understands these events and how they will impact each and every person.

The latest fad is to take a position on who to blame for all of this uncertainty and unrest.   Ben Bernanke, Obama, Republicans, Mubarak, Sarah Palin??   Take your pick, you are certain to find someone that agrees with you.   There is plenty of blame to go around. 


Blame whomever you wish, but all that blame won't help one bit when a crisis comes and you are struggling to make ends meet, make the mortgage payment, or feed your family.  You see, we are all part of the game, and we all must play by the rules of the game.  When the time comes, it won't help to blame the rules of the game, or blame the group that created the game.  You must learn the rules of the game and position yourself correctly to win the game!

Let's take a look at one small way to tell whether you are playing the game correctly or not.  Are you one of those people that drives all over town looking for gas that is 5 cents cheaper?  Do you complain to everyone you know about the price of gas when it starts to go up?  Do you start to think of ways to cut back your driving if gas hits $4.00 per gallon this summer?   If you are terrified of the idea of rising oil and gas prices.. YOU ARE NOT PLAYING THE GAME CORRECTLY! You are going to lose the game if we have a serious crisis around the world or in the United States. You are not protected and are not protecting your family for the risks associated with social and economic unrest.

Every single American can easily protect themselves from rising oil and gasoline prices.  All you need is an IRA or brokerage account.  It is as simple as taking a small percentage of your investment portfolio and buying an ETF that tracks the price of oil or gasoline.   That's it, nothing more has to be done in this case.  You are now protected from rising oil and gasoline prices.  The return you make in your account will more than offset any extra cost you incur at the pump.   If you drive all over town and are very concerned about rising gas prices, simply buy more of that ETF and you will have more protection.  NOW YOU ARE PLAYING THE GAME CORRECTLY!  You will no longer care if gas prices go up, in fact you will be happy because you will see the value of your investment increase!  You will not have to stress about driving all over town to save a few bucks!  Finally, you can relax when your in-laws bring up the price of rising gasoline and help them protect themselves as well!

Folks, this is real and this is serious.  If you lose the game, you will only be able to blame yourself.  If gasoline goes to $5, $8, $10 per gallon after you read this post, and you are not protected, blame yourself.  Everyone has the tools to win the game and protect themselves. There are no excuses.  Educate yourself on your own and put yourself in a position to play by the rules and win the game!

There are many other ways to play the game correctly.  We will continue to write about other strategies in the near future.  If you have any questions, please feel free to contact us at support @precisiontradingsolutions.com.

Wisconsin Budget Protests

Everyone needs to be fully aware of what is going on in Wisconsin, because you can bet your life these types of protests are coming to your state soon!   Wisconsin is facing a budget deficit of $137 million for their fiscal year that ends in June.  That's not even close to the real problem.  If changes are not made, Wisconsin could be facing a $3.6 billion shortfall over the next two years!!  That is a massive amount of debt for a state the size of Wisconsin.  They have no choice but to make serious cuts now.  States must balance their budgets, unlike the federal government, as they cannot print their way out of trouble.

Governor Rep. Scott Walker is proposing a number of initiatives to "repair" the state's budget.  These are the hot button issues:

• Limit the total wage increases for union public employees to the rate of inflation, unless voters approve the increase by referendum. The proposal requires unions to take a yearly vote to maintain their status as a union and prohibits public employers from collecting union dues for unions. During his campaign, Walker received endorsements from the Wisconsin Troopers' Association and the unions representing Milwaukee cops and firefighters, which would be exempted from those changes, as well.

• Require state employees to contribute 5.8% of their pay to their pensions. The proposal also requires state workers to pick up at least 12.6% of the cost of their health care premiums and trims overall benefits in health plans.

• Refinance state debt to push principal payments into the future and save $165 million in this fiscal year. That money would be used to help cover two looming bills for the state - $58.7 million owed to Minnesota following the breakdown of an income tax agreement covering citizens who work across state lines and $200 million owed to a medical malpractice fund that was illegally raided by Gov. Jim Doyle and lawmakers in 2007.

• Change state laws so that unions can no longer negotiate over health and pension benefits.

State employees are now protesting these changes.   Dozens of school districts were closed on Wednesday and Thursday because a large percentage of teachers called in "sick" to demonstrate their feelings on the issues.  Over 10,000 people have been protesting each day in and around the capitol building.

Folks, the bottom line is that the party is coming to an end.  We watched in Greece as thousands protested against cuts to their benefits.  When we learn of why they are so upset, most Americans feel that those in Europe have been eating from the government trough for far too long.  The fact is that government agencies and employees in this country have also been receiving completely unrealistic and uncompetitive benefits and salaries as well.  The private sector simply does not operate in this manner.  This is an "every man for himself" world we live in, and it will always be that way.  If you do not like the changes that the State of Wisconsin is making, you are free to leave and go find a job that compensates you in a way that you feel is fair and just.  Government employees do wonderful work, there is no arguing that fact.  They are hard working men and women that deserve to be compensated for their efforts and results.  However we simply can no longer afford to compensate them at a level that is not equal to what they would receive in the private sector.  If we do not make these changes now, we all will pay the price in the end.

Obama's Budget - "Complete and Total Joke"

Tweet

We couldn't say it better ourselves!   We would however add to this and say that the entire U.S. Monetary and Fiscal policies are complete jokes!  Obama's budget may be a joke, but the problem is that he is caught in a system that gives him and others no choice but to tee up these types of non-solutions to our problems.  We explained much of this in our recent post "Why The Future Is So Clear".




Here is a fact.  No politician will ever make the cuts necessary to get our debt under control until we are in a state of emergency.  What is a state of emergency?  Ask Mubarak, he probably has some idea now.   Someone should have told our government a long, long time ago about the number one problem with spending and entitlement programs.  They are easy to implement, but almost impossible to take back!   The spending part has been easy and fun and has created this false economy we have enjoyed over the last ten years, if not the last 50.  We will now all come to fully understand just how hard the "taking back" part can be for a society.

There is some good news.  Every investor can protect their assets by making the right decisions!

Barack Obama’s Budget For 2012: A Complete And Total Joke

www.theeconomiccollapseblog.com

Februrary 14, 2011 

 Is Barack Obama trying to play a joke on all of us?  The budget that the Obama administration has submitted for fiscal 2012 is so out of touch with reality that it may as well be a budget for "Narnia", "Fantasy Island", "Atlantis" or some other mythical land.  You can view the hard numbers for Barack Obama's 2012 budget right here.  Obama's budget assumes that the U.S. will experience economic growth of over 5 percent for most of the coming decade.  That is so far-fetched that "optimistic" is not the right word for it.  It also assumes that U.S. government income (primarily made up of taxes on all of us) will more than double over the next ten years.  For 2011, the budget projects that the U.S. government will take in a total of 2.1 trillion dollars, and for 2021 the budget projects that the U.S. government will take in a total of 4.9 trillion dollars.  For the Obama administration to assume that the federal government will be able to drain an extra 2.8 trillion dollars per year out of the American people by the year 2021 is ridicul0us beyond belief.  In his new budget Barack Obama does propose some very, very modest spending cuts that he knows have no chance of getting through Congress.  Barack Obama's budget for 2012 also does not even attempt to make any cuts to entitlement programs such as Social Security and Medicare.  In essence, you can sum up Barack Obama's budget proposal for 2012 by saying that it is a complete and total joke.  This budget is so delusional and so out of touch with reality that it is hard to imagine anyone taking it seriously.

           >> Continue reading....

Barack Obama, Budget, Dollars, Economic, Economic Growth, Income, Medicare, Social Security, Spending, Taxes Government Debt, U.S. Debt, Deficit, 2011, economic collapse, GOP budget, spending cuts

Cost of War

When you stop to analyze how our debt will affect our country in the future, take a moment to consider this idea.  The unimaginable amount of debt we are currently carrying has made our country more vulnerable than ever before.   Forget about the "war on terror", our country is financially incapable of fighting any type of "real" war right now.  Anything more than a conflict (Iraq and Afghanistan are conflicts - just ask WWII vets) would push our debt to unsustainable levels.  Consider the chart below, which shows the U.S. debt as a percentage of GDP.  Many of you have seen these charts before, but this does not tell the whole story.  At first glance we see that the total ratio of debt today is below that of the WWII era.   That might seem encouraging to some, however the story is not complete.  Let's go ahead and add the unfunded liabilities, which would take us right up to near WWII levels.    We have the same ratio of debt today as we did when we were fighting for the survival of our country during the greatest war the world has ever seen??  Unbelievable!  Think about how much debt we would have to incur to fight a war right now against a formidable enemy.    The problem is, it does not matter how much debt it would take, because we would not be able to issue any additional amounts of debt, period.  Who is going to buy that debt?  Good luck with war bonds, the general population in the U.S. is already drowning in their own debt and they don't have 2 nickels to rub together.

This is just one example of how enormous debt levels make our country less safe.   We cannot run our debt levels during peacetime at wartime levels.  We must make sure we have enough "available credit" for emergency situations.  We are setting ourselves up for complete disaster if this continues much longer.

Drowning in Debt

We are focusing our discussion this week on a topic that should concern each and every American, the U.S. debt.   Many "normal" Americas that don't spend their time reading financial blogs may wonder why there is so much focus and concern these days about the U.S. deficit and total debt.   We have always had deficits and debt, right?  Yes, for the most part, however the concern is that if we continue on this current trend we will soon arrive at a place nobody ever dreamed we would see in our lifetimes. That is the day the statement "backed by the full faith and credit of the United States government" no longer has any value.  It is hard to comprehend the amount of devastation and despair that we will endure if that day ever comes.

Let's start the week off with perhaps the most disturbing fact that very few people realize....

TOTAL U.S UNFUNDED LIABILITIES NOW STAND AT $112 TRILLION, 51% MORE THAN THE GDP OF THE ENTIRE WORLD ($74 TRILLION) IN 2010!!

Below is a screen shot of the U.S. debt situation.....

Economics of Love

BREAKING NEWS:  Valentine's Day is Monday, February 14th!   That is now only 3 days away!

Now that we have our public service announcement out of the way, let's take a look at some of the interesting economics behind all the hearts, flowers, and chocolates.

TOP 10 ECONOMIC FACTS ON VALENTINE'S DAY

10) Valentine's Day is a $16 billion dollar a year industry

9) The average amount spent per person on Valentine's Day is $116.21

8) Spending on Valentine's day is expected to be up 12.1% over last year

7) The average person spends $5.04 on their pets for Valentine's Day

6) 52.1% of people will buy a card for their valentine

5) 15% of women will send themselves flowers on Valentine's Day

4) Most gifts (36%) are purchased at discount stores

3) 32% of people will do their Valentine's shopping online

2) Men spend double what women spend on Valentine's Day

1) Almost 200 million roses are produced for Valentine's Day

Source: Business Insider

Egypt Economy Close to Meltdown

One of the worst case scenarios, at least economically, appears to now be a reality. The news site DEBKAfile is reporting that a high-ranking U.S. source in Washington has indicated that  military takeover is the only way to avoid a complete economic collapse in Egypt.  The country is now completely shut down as a result of recent strikes and walkouts.  No trains are running, no schools are open, and no tolls are being collected on the Suez Canal.   It is hard to say if the world markets are reacting to this development, but it is possible that the world is preparing for what could be an economic and humanitarian disaster.   Remember, most economies around the world are very fragile right now.  It is unlikely that they can absorb this type of blow.

Egypt's economy close to meltdown. Military coup near

DEBKAfile Exclusive Report February 9, 2011, 11:17 PM (GMT+02:00)

The biggest Arab country with a population of 82 million is on the verge of breakdown as large sections of is economic machinery are shut down by spreading strikes and workers' revolts against managements appointed by the Mubarak regime and Vice President Omar's Suleiman's leadership. 

DEBKAfile's sources report there are no trains since railway workers declared a general strike; the main state highways are barricaded by protesters. Egypt's 1,000-kilometer long Cairo-Aswan lifeline along the Nile was shut to traffic all day Wednesday, Feb. 9 with no sign that the army or security forces are willing or able to reopen it to traffic. 

As protesters continue to pour into Cairo's Tahrir Square, blocked roads are preventing produce reaching shops and markets – or even the soldiers posted in the town centers. Men of the 2nd and 9th divisions on street duty in Cairo have had no food rations for 12 hours. The disruptions threaten Egyptian towns with dire food shortages. 

The work forces of the big industrial complexes have downed tools and customs officers have stopped levying toll fees from the approximately 50 ships transiting the Suez Canal every day and netting the Egyptian treasury $3 billion a year, its main source of revenue. Around 1.300,000 foreign tourists have fled the country since the disorders began taking with them another major source of revenue. 

The closure of schools was extended Wednesday after teachers refused to go back to classrooms until Mubarak was gone. 

Egypt's foreign minister Abul Gheit said that the only way to save Egypt is for the army to step in. He rejected US demands for an immediate repeal of emergency law and accused Washington of trying to impose its will on Cairo and its advice was "unhelpful." 

A high-ranking US source in Washington told DEBKAfile's sources that the situation in Egypt is so appalling that a military takeover of the regime is no longer a threat but the only hope of rescuing Egypt from economic meltdown. Yet at this critical moment, he said, "the Egyptian army appears to have no figure capable of saving Egypt."

           >> Read Februrary 8th report

Bernanke is Smart

In light of the testimony going on this week, let's look at some of the truly fascinating predictions of Mr. Bernanke over the last few years.

Today, he is telling us that the economy is growing, inflation is not a problem, housing is recovering, and not raising the debt ceiling would be disastrous to our country.   Back then he was telling us that housing prices would not decline, growth would continue, and the unemployment rate would remain low.

There really is no reason to believe anything this man says when he talks about the future.

Silver is Strong

We are watching silver (SLV) move back up above $29, which was the previous intermediate-term high.  We shorted SLV back on January 13th near $27.95.   The metal fell down near $26 but has since strengthened.  Our strategy dictates that we do not hold cash, so we will swap from 100% short to 100% long SLV near the close if SLV closes above the previous high of $30.

The overall fundematals remain extremely bullish for SLV from our viewpoint.   Record low interest rates, inflationary signs around the world, and underperformance of GLD over the last number of years.

GE Breaking Out!

GE has been up against major resistance for a week now and is finally breaking out today above $21.  This resistance goes all the way back to before the crash.  If GE can close above this level on the daily and weekly charts that should be a very bullish sign.   Our charts have signaled a long for GE since last fall and the stock is up over 30% since that time.

Take a look at our free charts of GE in our guest section during the month of February!

Egypt Crisis "New Risk" to India's Inflation

We have made a number of posts on the food inflation crisis in India and the overall weakness of the global economy.  People are starting to take notice to the fact that the crisis in Egypt will affect the entire region.   New concerns today from India on how rising oil prices may exacerbate their already dicey inflation problems.  India is going to be a big story this year.  Let's hope they find some solutions quickly!

Egypt Crisis Poses ‘New Risk’ to India’s Inflation

February 07, 2011, 7:34 AM EST

By Anoop Agrawal and Kartik Goyal

Feb. 7 (Bloomberg) -- Egypt’s political crisis may drive oil and commodity prices higher, Indian central bank Deputy Governor Subir Gokarn said, flagging a “new risk” to inflation that may spur policy makers to boost interest rates.

“There’s obviously a risk that the situation will transmit into higher commodity prices,” Gokarn told reporters in New Delhi today. “So, that intensifies the risk.”

Indian government bond yields climbed to a three-week high as Asia’s third-largest economy, which meets about three quarters of its annual energy needs from imports, braces for the impact of higher fuel costs. Oil prices could more than double if the unrest in Egypt forces the closure of the Suez Canal, Venezuelan Oil Minister Rafael Ramirez said Feb. 4.

“Everybody is bearish on bonds due to the gains in prices,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai. “The Egypt issue has also added to the uncertainty on the oil front.”

           >> Continue reading

           Source: Bloomberg BusinessWeek

Egyptian Helmets

A lighter side to the terrible unrest in Egypt...  Perhaps the NFL should consider some of these helmet designs!