Archive - Apr 3, 2011

While the government wrangles over a whopping $30 billion in spending cuts for the 2011 budget (with fiscal 2011 already half way over), which threaten to shut down the government yet which we all know will be successfully addressed in the 11th hour, with a compromise of sorts confirming once again that both parties are incapable of dealing with the relentless climb in US government debt (and oh so eager to turn their back on campaign promises when faced with reality), which unfortunately is the only fuel driving the US economy, the GOP's Paul Ryan is expected to announce a whopper of a 2012 budget, one which trims a record $4 trillion in spending over the next 10 years. What this means is that the GOP is about do away with Obama's health care "revolution" and things are about to go back to the way they were. Not only that, but any hopes the Fed may have had that congressionally-mandated fiscal stimuli will take over the central bank's monetary boosts, can be put to rest, meaning that very soon the Chairman et al will be back to the drawing board debating just how much more cash needs to be injected in the economy next time around (as a rough guideline, we expect it will be about 75% of the next debt ceiling increase). And while we expect the current government shutdown crisis will be resolved within a few weeks on the back of promises of massive cuts over the next decade, which will never happen, the only thing to watch for is how big the debt ceiling increase will be when announced some time over the next 3-4 weeks. Everything else is smoke and mirrors.

I was quoted in FT
about David Sokol, CEO of a Berkshire Hathaway subsidiary, buying
shares in Lubrizol a few months before Buffett’s Berkshire Hathaway
bought Lubrizol at a significant premium, which made Sokol 3 million
dollars on his $10 million purchase.

You won't hear anything about it from the mainstream financial media or the Federal Reserve, but this chart is screaming "stocks are extremely overvalued." Although the mainstream financial media is touting low price-earnings ratios and permanently rising profits as the backdrop for a permanently bullish stock market, this chart reveals that stocks are more overvalued now than they were just prior to the Great Crash of 1929. Only the bubble of the dot-com era reached a higher extreme.

I have been patient with GE. I don't know why. My patience is totally unwarranted.

There were some interesting developments coming out of Libya suggest that much of the fear that Libya oil export could be offline for years or even ‘indefinitely’ seems to be somewhat hyperbole, and a bit of a red herring.