Too Many Doomsdays

September 25, 2013

  • A new budget-battle deadline induces sleep at The 5
  • The real reason Ted Cruz can’t stop Obamacare
  • Can the “AmeriCAN” mascot fix the fiscal mess in D.C.?
  • USA: “We’re No. 17,” while Russia looks downright attractive
  • When bankers go out of their way to reproduce… the virtues of a cat-food retirement… and more!

  Oh, no. Treasury Secretary Jacob Lew just set a debt-ceiling deadline.

Surely, the countdown in the corner of the screen on CNN will begin soon: “23 days.” Lew says the “extraordinary measures” he’s been using to stay under the $16.7 trillion ceiling — borrowing from federal employees’ pensions and such — will be tapped out no later than Oct. 17.

“If we have insufficient cash on hand,” he said in a letter to Congress, “it would be impossible for the United States of America to meet all of its obligations for the first time in our history.”

Yawn… stretch.

  If Secretary Lew wants to beat his chest about deadlines, he’d better take a number. There’s another federal budget deadline that hits first, next Tuesday.

That’s when a “continuing resolution” that keeps the government nominally funded will expire. Continuing resolutions — or CRs, as in-the-know wonks call them — are a legislative charade Congress uses in lieu of passing an honest-to-God budget.

You might have heard a few congressional Republicans are trying to tie the passage of a new CR to “defunding” Obamacare. Sen. Ted Cruz (R-Texas) began delivering a marathon speech — technically, it’s not a filibuster — yesterday at 2:41 p.m. EDT in service to this very goal.

As with Sen. Rand Paul’s (R-Ky.) anti-drone filibuster last spring, someone has registered the Web domain As we write, it looks like this…

As if it matters.

 Obamacare is set up like Social Security and Medicare, as “entitlement” spending.

Which means, like Social Security and Medicare, it keeps on truckin’ no matter what happens with the rest of the federal budget. You could even have a “partial government shutdown” — as is being threatened next Tuesday if there’s no new CR — and Obamacare will keep doing its thing.

The caterwauling in Washington is all for show. It’s not going to stop Obamacare. (You are preparing yourself for its full impact, right? If not, start here.)

  “As both parties engage in another battle over the budget,” says Nick Troiano, “we are building support for our campaign to demand a bold, generationally balanced and bipartisan deficit reduction agreement.”

Mr. Troiano, who’s 24, is co-founder of “a nonpartisan and millennial-led campaign to defeat the national debt and reclaim the American Dream.” The name they’ve given their group is The Can Kicks Back, or TCKB.

As in, you know, politicians “kicking the can down the road.” Get it?

Oy, this bunch already has an uphill climb…

Anyway, today they’re launching their “Generational Equity Tour” at the University of California’s Berkeley campus. They’ll traipse the land for the next five weeks, arriving in Washington around the same time the debt-ceiling deadline hits. The tour will culminate in a final rally on Capitol Hill, “where organizers will deliver actual tin cans containing messages to lawmakers of both parties,” says a press release.

Leaders of The Can Kicks Back, with their mascot, AmeriCAN, in tow…

Speakers at various events along the way will include I.O.U.S.A. protagonist and former Comptroller General David Walker, along with former Sen. Alan Simpson — he of the infamous quip that Social Security is “a milk cow with 310 million tits.”

TCKB recently issued a report with which we can’t quibble. It says the real national debt, once you include obligations for “entitlements,” tops $200 trillion. In addition, “while current retirees are set to receive government benefits that far exceed their total lifetime taxes, the report indicated that future Americans will receive a bill beyond their capacity to pay.”

“Generational equity,” indeed. We wish them luck. Especially the poor mascot in the photo above…

  “Every few months,” a disgusted Greg Guenthner weighs in this morning, “our elected officials attempt to derail the markets with one epically stupid move after another.”

The fiscal cliff… sequestration… debt ceilings. “When one distraction ends,” Greg writes in today’s Rude Awakening, “another begins.”

Yet “the market has met every single ‘negative catalyst’ with higher prices. Despite the fact that the broad market has coughed up all of its post-Fed gains, the charts show us that stocks aren’t in trouble just yet…

“Even with a retreat at or below the 50-day moving average, the market could set up nicely for higher prices in the fourth quarter. Now’s the time to prepare for a potential bounce.”

  In the meantime, the major indexes are once again adrift this morning after notching losses the day before. The S&P is a fraction below 1,700 as we write.

  Another day, another mediocre ranking for the United States in a “global competitiveness” survey.

A few days ago, we noted the World Economic Forum ranked America No. 5 in its “ease of doing business” survey. Now Canada’s Fraser Institute is weighing in with its annual Economic Freedom of the World Report.

Back in 2000, the U.S. ranked No. 2. Now it’s No. 17…

The report blames the drop on “overspending, weakening rule of law and regulatory overkill on the part of the U.S. government.”

Meanwhile, the Russians seem enormously pleased with their performance in the report. “Russia ranked 101st out of 151 nations, up 10 places from 1995 and 12 places better than its ranking in 2000,” reads a report from the RIA Novosti news agency. “Russia has climbed up the rankings to be the best placed of the rising economies known collectively as the BRIC countries (Brazil, India, China and Russia).”

  “Russia trades for less than 6 times earnings and pays 4%,” observes the globe-trotting Chris Mayer.

“Government debt is just 8% of the economy. (In the U.S., Japan and the EU, these percentages are over 100%.) And unemployment is only 6%.”

Chris was recently reminded of Russia’s investment charms during a conference in Uruguay, where he was on the same panel with Rob Marstrand, chief investment strategist for the Bonner Family Office.

“There are a variety of ways to invest in Russia,” says Chris. The Market Vectors Russia ETF (RSX) jumped from $12 in early 2009 all the way to $40. Then there are Russia’s big three energy producers — Gazprom, Rosneft and Lukoil. “By whatever measure you choose to use,” Chris explains, “the Russian oil companies are super-cheap” — assuming you can handle the rule-of-law issues endemic to the country.

Mr. Marstrand’s favorite idea in Russia is Prosperity Capital Management — whose flagship fund has returned 21% annualized since inception in 1996. Its other fund is up an eye-popping 37% annualized since inception in 1999.

“The problem with these funds,” says Chris, “is the very high minimum investment required: $1 million.”

[Ed. Note: It takes a much smaller grubstake to get started with a favorite idea of Chris’ that’s much closer to home. And as we’ve been fond of reminding you, the potential rewards are immense — on the scale of turning every $1 invested into $50. Still, the doors to this opportunity open and close at unpredictable times. Check it out while they’re still open for now.]

  Precious metals popped a bit this morning. Gold is up to $1,334, silver to $21.88.

  The City of London crowd has an enormously high opinion of itself — enough to ensure it lives on to the next generation and beyond.

“Data from the London Sperm Bank (LSB) reveals that finance workers are some of the most prolific spreaders of their seed,” according to a story from eFinancialCareers.

An average of 36 finance professionals walk through the doors each month — outnumbered only by IT managers, who number 45.

For real.

“They want to donate and to make a gesture — like blood donors,” says LSB managing director Kamal Ahuja. “Some of them have seen the effects of infertility and want to help.”

Evidently, the donations are in high demand among women bankers in their 40s. “Female bankers,” says Ahuja, “are extremely interested in determining the intellect and profession of their donors.”

We don’t even want to think about what this bodes for the future of Wall Street…

  “Following up on a reader’s sobering 45-year household income chart,” begins today’s mailbag, “and your ‘extraction’ of resources for the few comment.

“Other statistics are pretty clear that when the U.S. financial industry went from 4-5% of GDP’s corporate profits in the early 1970s to almost 28% before the 2008 crash (and bankers are aspiring to rebound up there again), we developed an economy way out of balance — eating on itself. I prefer to eat lettuce versus paper.”

  “Extraction can only explain why the top 5% are doing better than the rest of us,” writes the gentleman who submitted the chart we ran yesterday. “The top 20% are mainly (outside of the top 5%) doing OK because financial repression in the form of ZIRP (artificially low interest rates) and dishonest cost-of-living adjustments are better than unemployment.

“There has to be more to it, and I suspect it involves multiple reasons, some of which relate to technology. But why did the trend change in 1998? One explanation might be that it went parabolic in the years prior to 1998 and reverted to the mean.”

We’ve had to seriously truncate today’s mailbag on this subject to keep to our 5 Mins. Suffice to say here the reader points to a wicked-complex chart from fund manager John Hussman that shows 1998 was the year that stock market value relative to GDP hit a postwar peak.

“I find it interesting,” the reader adds, “and note that we are moving toward the second most extreme ratio of stock market value to GDP since WWII.”

  “I do not pretend to understand the details of economics,” writes our final correspondent on the subject, “but such charts seem to cause the viewer like me an initial assumption that people are permanently in one category, when actually individuals (most, I would say) have moved from the lower levels to the higher levels.

“That may not be the point of the chart, but as long as people understand they have a chance to improve their lot in life, we should be able to sustain our economy. Unfortunately, it seems that recently such opportunities have become very limited.

“The point about incomes versus productivity beckons the question, where did all that value go? Somewhere maybe in the negative productivity of the federal government (just a guess).”

  “You really hit a nerve with this dumbass named Tom Palome!” a reader writes after seeing our hard-luck retirement coverage in yesterday’s episode.

“He made more than six figures and flew first class. He, apparently, like a lot of the dumbass sons of bitches in this country, lived WAY BEYOND HIS MEANS. Who were they showing off to? I’m supposed to feel sorry for that dumbass and others like him?

“My wife and I have never made more than six figures combined. We have worked and scrimped and saved all our lives. Lived frugally to put our son through private school, and he is now graduating from a state university with many job prospects, because we put all our efforts into him being a good student centered on mathematics and sciences. His future is extremely bright, and his mom and I couldn’t be happier.

“Vacations? Not for some time. Hopefully, in retirement we will have enough saved to travel on occasion. New cars? Bought one once and swore what a waste, as it depreciated 20% as soon as we drove off the lot. House? Yes, bought and paid for and don’t plan on moving up — how ridiculous! Investments? You bet! From hard-earned savings. Helped by Agora subscriptions and taking full advantage of current tax laws, self-taught.

“Am I on my soapbox preaching? Well, the message is not such a bad one, is it? Live within your means! I have no sorrow or feelings for someone who made so much money (in my estimation) and doesn’t have a dime.”

  “I’m 72,” another reader writes. “At 68, my 29-year career as a system developer came to an end — coincidentally, just as my employer was opening a branch in India to do what I do.

“I work part time selling tickets in a movie theater. Know what? I’m having the time of my life. I love my guests, get a huge kick out of the kids and get free movies, sodas and popcorn. My chain (once a Bain Capital turnaround) was recently bought out by the Chinese, who are sinking half a billion bucks into refurbishing all 370-odd of our houses. They’re beautiful! The place is well managed; people are thoroughly trained. It’s a great place to work!

“I have time to start a business, do approximately 2.74 zillion blog posts, write letters like this one and generally enjoy myself. Job doesn’t pay much — for all that, some months are better than others, but that’s OK — Social Security and Medicare are almost sufficient to supply all my needs. Yeah, I lost my job and my career with it. This is a lot more fun, though. Sometimes you just have to accept prosperity.”

The 5: A good attitude. Although it doesn’t take a big nest egg to aim higher…


Dave Gonigam
The 5 Min. Forecast

P.S. We took another gander at…

He lasted almost 22 hours, for all the good it will do “defunding” Obamacare.

“Having lived in Asia for many years,” a reader writes after our Obamacare coverage yesterday, “I watched the medical tourism industry blossom in the early ’80s with plane loads of Japanese men coming to town.

“The packages would include air ticket, hotels, golf outings and nights out on the town along with a full diagnostic examination all for less than the cost of just seeing a doctor back home. When the full impact of Obamacare became known my first thought was of potential growth in medical tourism. Today, Thailand is well known for its reputation in this area.

“As usual, The 5 is right there spotting the trends. Well done.”

Thanks. As we said yesterday, even in the age of Obamacare you don’t have to venture overseas for high-quality care at a reasonable cost. But you do have to know the loopholes — which we’ve itemized in our special report The Obamacare Antidote: 6 Ways to Get the Best Health Care of Your Life and Save up to $2,000 per Year.

To learn how to get your free copy, take a look here.


Recent Alerts

Here Comes the AI Cartel

Maybe you saw the news earlier this week: An outfit called the Center for AI Safety issued a 22-word statement — as dire as it is terse. Read More

A Deal in D.C., a Wipeout on Wall Street

Debt ceiling deal, U.S. Treasury auctions, Wall Street liquidity, Fed policy reversal, BlackRock recession call, gross domestic income, GDI, Maryland license plate snafu Read More

Climate, Carbon… and Control

“The climate change agenda is not about climate change,” says Jim Rickards. “It’s about total political and economic control of the population.” Read More

White House’s New Witch Hunt

Go figure: The stock market is at nine-month highs, but the Biden administration is amping up its jihad against short sellers Read More

The Biden Bleed

Presidents have meddled with the SPR for political purposes. But Biden is really leveling up. Read More

Natural Gas Gets Blacklisted

The EPA — with Team Biden’s blessing — proposes an overhaul of U.S. power plants by 2042. Read More

Green Smokescreen

Ray Blanco is on the lookout for presumed do-gooders… blowing “Green Smoke” up our collective rear ends. Read More

“No Blood for Chips!”

Fair warning: This edition of The 5 might be the most controversial issue we’ve ever published. Read More

The Dollar’s Death March

Nine years after The 5 started writing about “de-dollarization,” you can’t get away from headlines about it now. Read More

The “F” Word

No sooner did G7 leaders sit down yesterday than they declared they’re doubling down on sanctions targeting Russia. Read More