Hmmmm.... Interesting.
You do know what "copyright" means right??
Did they have to forward you approval to re-post this information?
We think this sums up the economic situation in the U.S.:
If the unemployment claims figure was not bad enough, the Philly Fed survey was even worse... I thought it was a misprint! – Legendary trader Dennis Gartman in the August 20 issue of The Gartman Letter.
The much-touted, government-led recovery seems to be stalling. The Philly Fed index measures manufacturing conditions in the Mid-Atlantic states. The index is set between +100 and -100. It has been as low as -40 at the depths of the recession and should be registering positive numbers based on the consensus view that the economy is recovering.
Instead, the print on the report read -7.7. Meanwhile, unemployment claims rose to 500,000, a level not seen since the fall of 2009. In short, the economy seems to be weakening again, despite all the stimulus... or perhaps because of it...
One more obvious sign of a weakening U.S. economy: the energy complex. Take a look at the chart (below) of the Dynamic Energy PowerShares ETF. This fund invests in a broad range of leading U.S. energy companies – everything from natural gas pipelines to Schlumberger.
Demand for energy is perfectly correlated with economic activity. Thus, watching these stocks gives us a window into the market's expectations of future demand. After rallying steadily off its lows in early 2009, this ETF fell off a cliff in early May. Interestingly, that's the exact point in time most of the government's tax credits for new homebuyers expired. I know from sources in the industry that foot traffic at new home sales centers came to a complete halt at the same time.
The cockroaches in Washington now face an interesting dilemma. The economy seems unwilling to move forward on the basis of private business. Corporations are hoarding cash. They're not hiring. And wealthy individuals are leaving the United States in record numbers – more than 700 people renounced their citizenship last year, up from 235 in 2008.
However, all of the government's efforts to spend its way out of this downturn have failed. We would have pointed out to them that bailing out the banks that got us into trouble and giving tax credits to build still more houses might not have been the best idea. We have yet to find a credit bubble in history that was repaired by borrowing more money or planting more tulips...
What will the government do? We're pretty sure it won't do the right things. Nobody seems to be in favor of vastly cutting taxes, government spending, or regulations. In fact, nobody seems to care that taxes are set to soar next year for the very people whom we need most if we're going to grow our way out of this serious economic crisis: small-business owners. Nobody seems to care that allowing capital gains and dividend taxes to soar next year will drive up the cost of capital needed to expand businesses. And nobody seems to have even noticed that adding a 55% estate tax onto the average entrepreneur's list of taxes makes it nearly impossible for most successful small businesses to be left in control of the founder's family.
Ask yourself the obvious question: Why would anyone take the risk of starting (or growing) a business when the government is going to take a total of 70% of the upside and leave you holding the bag if it doesn't work out? Why would anyone be surprised more businesses than ever are moving jobs overseas and taking the best and brightest of this country with them? If you want the rest of America to look like Detroit, just keep on trying to tax and spend our way out of this recession.
I'm concerned about these problems for one reason: There's almost no chance any of the proper policies can be passed by Congress. No one is going to vote for sensible policies because more than half of all Americans no longer pay any federal taxes on a net basis. The mob is now living at the expense of the Treasury.
That's a big problem in a democracy. America is becoming a new type of fascist state, where government employees, unions, and everyone else on the dole constitutes the largest voting block. It's not communism because the government doesn't directly control the means of production. But true private property doesn't exist in America anymore. If you don't pay taxes on it, you don't own it. And if the government decides you're not using your property the right way, it'll take it away from you. I don't know what to call this kind of regime... but I know damn well where it will lead.
Rather than merely ranting about these problems, I'm working hard to make sure you can either mitigate the risks or avoid them altogether. First, I'm hosting this year's Alliance conference in Switzerland, where we will meet with leading emigration attorneys. Not many people know that with the right connections and a reasonable amount of capital, you can get a Swiss passport, which is still the world's best.
Most people also don't know you can immigrate to Switzerland and negotiate your future tax burden before you move. Hundreds of Americans are doing this right now. And thousands more will follow them if this situation in America continues to deteriorate. Nobody wants to live in Detroit. The best part is, not only will your taxes never go up again, but a Swiss passport lets you live practically anywhere in the world.
I realize that not everyone will consider leaving the country. (But just wait until the Treasury market collapses, the dollar becomes nearly worthless, and the food-stamp crowd starts rioting...) If your net worth is more than $5 million and you're not going to move, you should take several steps right now to ensure OBAMA! and his crowd don't end up getting 55% of your estate. I'm working with leading estate planners in the U.S. to put together a simple solution that can shelter 100% of your assets from state and federal estate taxes. I'll be announcing a meeting in New York about the topic at some date in the fall. Whatever you do, if you're under the age of 75, don't allow the feds to take your assets. You don't have to let them.
Poor Roger Clemens. It's bad enough to be exposed as a steroid user. And it's even worse to be caught lying about it (as it appears he has been). But the worst thing, from my perspective, is being accused of lying to Congress. I mean, that shouldn't even be a crime, should it? I thought you had to be a pretty damn good liar just to get into Congress. Imagine going to jail for doing something that nearly every other person in the room gets paid to do.
When it comes to lying to Congress, Clemens is a small-time perp. The big fish never get charged. Why haven't Hank Paulson and Ben Bernanke been investigated for the whoppers they told the world in front of Congress in July 2008? I watched both of them swear that Fannie and Freddie were "sound" and "well capitalized" just months before they completely collapsed. I knew they were lying and told you so at the time. What do you think is more important to our country... No. 1: On the record comments by the Secretary of the Treasury and the Chairman of the Federal Reserve about the solvency of government-backed financial institutions that were $10 trillion in debt and owned or guaranteed 50% of the mortgages in the United States? Or No. 2.: Whether or not Roger Clemens used steroids?
Give me a break. The whole episode would be hysterical for its banality if our country wasn't going down the toilet at the same time. It's just humiliating. Imagine what the Chinese must think.
We close with a parting shot at Steve Rattner. You might recall us heckling Rattner earlier this year during a presentation at an elite investment conference in New York. We were flabbergasted that a guy like Rattner – who made hundreds of millions as a private-equity manager while his clients reportedly made almost nothing – would lecture a room of real investors about the supposed "evils" of income inequality. We booed him and then called him a joke – to widespread applause from the audience. (By the way, Vanity Fair reports about the spectacle in its current issue.)
Our booing, the negative press, and even a corruption indictment for bribing New York State pension officials don't appear to have slowed him down or weakened his impressive self-esteem. He is not only publishing a book that brags about his role in restructuring General Motors (where he arranged for the union to steal 20% of the company, despite the fact that the union's policies and strikes led to the firm's demise). Rattner now says the tens of billions of dollars the U.S. taxpayers are going to lose on the upcoming GM initial public offering are a great stimulus for the U.S. economy. I'm not making this up. Here's what Rattner told Fortune: "If the government loses $10 to $20 billion, that's one of the most effective stimulus programs around."
Apparently Rattner and Nancy Pelosi went to the same school of economics. (Remember, Pelosi said paying for people to stay unemployed was the best way to stimulate the economy...) If the government losing money in bailout after bailout was truly good for our country, why wouldn't the government simply print billions up every day and mail it randomly to people across the country? We could have new billionaires every day!
It has never occurred to these people (Rattner and Pelosi) that when you take money away from profitable and productive people (taxpayers) and give it (by the billions) to failed companies and unemployed workers, you're not stimulating anything but more failure. Or maybe it has occurred to them... but they're merely operating (successfully) under the new rules of Amerika, where everything is done to appease the mob.
ALL CONTENTS OF THIS E-MAIL ARE COPYRIGHT 2010 BY STANSBERRY & ASSOCIATES INVESTMENT RESEARCH.
