From Mike Krieger of KAM LP
The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation.
- Barack Obama in an interview with the Boston Globe on December 20, 2007
If the administration believes that any -- any -- use of force against Iran is necessary, the President must come to Congress to seek that authority.
- Hilary Clinton in 2007
“Well, we would welcome congressional support,” the Secretary said, “but I don't think that this kind of internationally authorized intervention where we are one of a number of countries participating to enforce a humanitarian mission is the kind of unilateral action that either I or President Obama was speaking of several years ago.”
- Hilary Clinton in 2011 when asked why not go to Congress for approval of the “Kinetic Military Action” (Newspeak for War) launched against Libya
From my simple reading, the Constitution is fairly clear on the subject: Congress is given the power to declare war. At that moment, the president as commander in chief is free to prosecute the war as he thinks best. But constitutional law and the language of the Constitution seem to have diverged. It is a complex field of study, obviously.”
And now in Libya, we have reached the point that even resolutions are no longer needed.
It is said that there is no precedent for fighting al Qaeda, for example, because it is not a nation but a subnational group. Therefore, Bush could not reasonably have been expected to ask for a declaration of war. But there is precedent: Thomas Jefferson asked for and received a declaration of war against the Barbary pirates. This authorized Jefferson to wage war against a subnational group of pirates as if they were a nation.
I began by talking about the American empire. I won’t make the argument on that here, but simply assert it. What is most important is that the republic not be overwhelmed in the course of pursuing imperial goals. The declaration of war is precisely the point at which imperial interests can overwhelm republican prerogatives.
- Quotes from George Friedman’s (of Stratfor) excellent piece from earlier this week “What Happened to the American Declaration of War?” It can be found here http://www.stratfor.com/weekly/20110328-what-happened-american-declaration-war This is MUST read for every American.
On the Road...Again
The last real vacation that I took was back in June when I spent six weeks driving around the United States of America. The trip changed my life in a variety of ways, the most significant being the decision to move out of NYC to Colorado, which has so far been a fantastic choice. Next week, I will be heading out to the West Coast for a little three week adventure, where I will be exploring parts of Northern California, Oregon and Washington state. The latter two states I have never been to but I have heard fantastic things regarding the natural beauty and unique culture of the region. After this journey is over I will have been to 44 of the 50 states. For those that care, the ones still unvisited will be North Dakota, Minnesota, Oklahoma, Alabama, Kentucky and Alaska. To be fair, I am not sure whether or not I have been to Rhode Island. I think I went through there as a kid but seeing as I don’t remember the experience I am not convinced that should count. In any event, the point is that most of you won’t be hearing from me for about a month. While I would like to say things in the market will be calm during this period I highly doubt it. Below I am going to try to outline some of the key things I would focus on while I am back on the road.
Keep a Very Close Watch on Oil
Wholesale gasoline prices as tracked on Bloomberg (XB1 Commodity) is hitting a new post-2008 high and is only about 15% from the highs reached in that year (see chart below). The overall investment community and financial media are like little children. Most of them have no idea what is happening and really do not incorporate the idea of limited resources in the short-term into their investment outlooks . The whole idea of money in the first place is that by using it to transact a market economy is able to attribute accurate prices to goods and services and then these items can be allocated in as efficient a manner as possible. This will then send price signals to the broader economy which then responds with appropriate capital investment. Human ingenuity wins and human progress ensues. This is how it is supposed to work. The dirty little secret however is that we do not have a market economy and what we call money is actually a liability of the private Federal Reserve (Federal Reserve NOTES) and thus none of what I just said is happening at all in the world today. Rather, we have a corporatist/fascist monetary regime in place that believes in socialism for the rich and connected and harsh free market forces on the poor and marginalized. This is enforced via the Federal Reserve and their counterfeit money. So...while in a hard money world (where money is backed by something or the expansion of it is kept strictly under wraps) market prices would send the correct signals, we cannot use these theories for the corporatist/fascist world we currently live in. As such, an investor needs to understand the true macro environment one is investing in to get things right over any extended period of time.
Wholesale Gasoline Chart, Last 4 Years
The backdrop is pretty simple but is too terrifying for the brainwashed amongst us to admit. The old order, of corporatist/fascism is on its last legs and it clutching onto its power desperately. This includes the Central Banking system itself and by extension pretty much all governments around the world. When rats are cornered they attack and that is what is happening now. In their attempts to save a dead system they will do everything they need to try to survive. The well being of the citizenry is largely irrelevant. Keeping them quiet and subservient is much more important. Well, the problem here is that in order to do this various countries need to achieve conflicting goals. In the West, the governments are merely attempting to keep standards of living flat or masking the deterioration (inflation) and in the emerging economies they must continue to raise living standards rapidly. Both of these things cannot happen in a centrally controlled global economy where money is being spewed from spigots and no one is investing. Let’s get real, everyone I know with half a brain and a lot of money is hedging themselves. Whether this means precious metals, a second passport, growing their own food, buying land overseas or all of the above, one thing they are not doing is investing in this economy. So instead of trying to deal with the root of the problem (monopoly money, rampant corruption in D..C and no rule of law) they just print money. If the root problems were dealt with, the TBTF banks shut down and executives jailed, the Federal Reserve shutdown gradually and replaced with hard money I promise you after a very challenging recession the smartest Americans would put their money to work and this economy would boom. Of course this won’t happen because the rats are in charge so an uncontrollable collapse is more likely the outcome. They would rather bring us all down into the depth of Hades rather than lose their grip on power.
Dow/Gold and Currencies
In any event, the point above is that oil further is one of the ways the market can fight back and destroy the terminal system in place today. Another more significant way will be via gold and silver. As more and more people wake up to what is happening, more and more will come to the conclusion that they have to own physical precious metals. Hey, even Jim Cramer is starting to get it (http://videos.thestreet.com/v/38540740/cramer-buy-physical-silver.htm). As much as the elites will fight to their dying breath to stop precious metals from forming the cornerstone of the next monetary system (because it takes away their money power and they are control freaks) they cannot stop the tide of destiny. By buying physical precious metals one is merely getting on the right side of history.
So far this year, the Dow has rallied by about 6% versus gold. This means that stocks are up in real terms in 1Q11. Not only do I not expect this to last, I think it will turn around with a brutal vengeance in the quarters ahead. Specifically, I have a target of about 6x at some point this year. This implies a real decline in stocks of 30% from today’s level.
I also want to reemphasize the point I made about the DXY last week. It is a useless indicator that compares one bankrupt currency region to another. The ADXY is the one that matters and it is what will correlate best to commodity moves. One of the currencies in the index I like watching is the Korean Won, which busted through resistance last night (see chart below, chart is inverse). I think this portends to renewed commodity strength in the key ones I think will outperform. Namely, precious metals, oil and agriculture.
Korean Won Versus U.S. Dollar, 1 Year Chart
Corporate Welfare: GE and Google...They Don't Pay Taxes!
So below I have two stories for you that are must reads. They basically summarize America today under Barack “Change and Noble Peace Prize” Obama and the big corporations he whores himself to. So not only does GE employ a tax department staff of 975 people to avoid taxes, but they were still about to go bankrupt in 2008 like Buffett (your day is coming big boy don’t worry) without the backdoor bailouts. Oh and now guess what? Immelt gets as a reward for doing all this? He gets to run economic policy at the White House. Meanwhile the Google boys are always hobnobbing with Obama they should just open an office at 1600 Pennsylvania avenue. And let’s not forget Daley the new Chief of Staff was JPM exec. The joke is on us. Go USA!
Some excerpts from GE article: “Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.”
“Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.”
“The shelters are so crucial to G.E.’s bottom line that when Congress threatened to let the most lucrative one expire in 2008, the company came out in full force. G.E. officials worked with dozens of financial companies to send letters to Congress and hired a bevy of outside lobbyists.”
“Minimizing taxes is so important at G.E. that Mr. Samuels has placed tax strategists in decision-making positions in many major manufacturing facilities and businesses around the globe. Mr. Samuels, a graduate of Vanderbilt University and the University of Chicago Law School, declined to be interviewed for this article. Company officials acknowledged that the tax department had expanded since he joined the company in 1988, and said it now had 975 employees.”
Full article here.
Ok…and now for “Don’t be Evil” Google. This article is from late last year but is incredible. Look at what they do to avoid paying the government taxes. Ever heard of the “Double Irish” and “Dutch Sandwich”? You will now. This is how google makes so much money, they dodge taxes and screw us.
Quote: “Google’s transfer pricing contributed to international tax benefits that boosted its earnings by 26 percent last year, company filings show. Based on a rough analysis, if the company paid taxes at the 35 percent rate on all its earnings, its share price might be reduced by about $100, said Clayton Moran, an analyst at Benchmark Co. in Boca Raton, Florida. He recommends buying Google stock, which closed yesterday at $607.98.”
Full article here:
Debt for Share Buybacks
Ok, so this is 2007 again in so many ways, but one of them is the acceleration of these debt raises for share-buybacks companies are increasingly doing. Look, I am personally of the belief that companies doing this when the stock market is 100% up from the lows will prove to be extraordinarily value destructive in the long-run but I do not run these companies or invest in them so that is neither here nor there. I do have a question for my readers however. What are the rules for share sales by executives in companies that do this? I personally think it should be completely illegal for any top executives to sell ANY shares why they lever up their company to buy back shares. They are essentially selling their own shares to the company they run. Maybe these rules exist and I hope they do. I really don’t know. Can anyone shed light on this?
Farewell for Now
One of the reasons I really wanted to travel America by car last summer is because quite frankly I think the window of opportunity to do so is rapidly closing. I think oil in dollar terms will become so expensive the iconic “road trip” like the one immortalized by Jack Kerouac could become a thing of the past. That is until we get back to a real economy with real money and then start to innovate again. I hope this day isn’t too far off into the future.
Over the next several weeks, I will be thinking a lot about what it means to be an American. Our leaders are trying as hard as possible to make this a figment of the past. By not going to Congress before launching missiles at a foreign nation and then coming on television to say that the UN said it was ok and that was all that matters is just another way of conditioning us away from our Constitution and core values that had previously allowed more freedom here than almost anywhere else on earth. Well I for one will not be conditioned. I know truth when I see it and I know lies when I see them and all I am seeing from our leaders are lies and deceit in an attempt to break us down into beasts of burden.
On a related note, thank you Jon Stewart for once again exposing the hypocrisy with humor. See attached link on America’s “Freedom Packages.” http://www.thedailyshow.com/watch/mon-march-21-2011/america-s-freedom-packages
Wishing everyone safety, wisdom and joy in the month ahead. See you in May,