Buckle up the Fiscal Cliff is guaranteed. Reply

I’m so proud that Patty Murray, House Democrat, and Maria Cantwell, Senate Democrat, are from Washington state.  Both have made comments this week stating that we would be better off going over the “fiscal cliff.” This kind of thinking is what made this country great.  We should never compromise with the “other” party.  Instead of compromise we should self-inflict credit down-grades, and avoid balancing a budget until we get sufficient leverage over the other party.  Why pay our bills anyway?  We’re America.  People will always buy our debt; where else are they going to go… Japan?  Hell the people who vote our Congress, President, and Senate in will only suffer a little bit from their unwillingness to do the job.  I mean, why solve such an important issue?  They can always go on vacation and push it further out.  It’s not as if, voters pay their salary. Oh wait.  If you can sift through the massive amount of sarcasm, follow me.

Let me be clear, it is NOT the point of this piece of this article to put down Democrats.  These two ladies have been the only law-makers that have made comments implying that it would be beneficial to jump off said cliff.  We all know that both sides are equally stubborn.  If you have ever had a question about where the House and Senate’s loyalties lie, this should make it VERY clear.  Instead of tirelessly working on a Grand Bargain that can lead to avoiding this problem, they are holding strong to their donors’ wishes.  This has nothing to do with voters.  If it did, they would get this solved.  Instead special interests, lobbyists, and large donors have their loyalties.  No one is willing to bend for fear that they will not have the flood of donations after all is said and done.  Bottom line, all they care about is being re-elected.  This fact looms largest: 94% of the time the winner of an election is the candidate that raised the most campaign money.  So in essence they know they will win yours/my vote if they spend enough money on the campaign.  The only way to do so is to keep their campaign donors, lobbyists, and special interests happy.

 

 

Market Stupidly puts its faith in stimulus. Reply

Good day people.  It’s time to warn against stupidity.  Usually this is a straight up political blog, but when I see something play out that is ridiculous, I feel it is my obligation to point it out.

We are nearing the end of the earning season for U.S. markets.  This is when all publicly traded companies disclose their earnings for the quarter.  Since 2008, this has been a rather volatile time.  Big swings go with the beats and the misses of the season.  This quarter has been nothing short of a bummer.  70% of the companies reporting are missing their previous forecasts and, or guiding down for the remainder of the year.  The crazy thing:  The market is up huge!  Both the DOW and S&P are at four-year highs.  What?  That doesn’t make sense right?

Well, we are rallying off of the promise of more bailouts.  Seriously.  The ECB is promising to bail out nations like Spain and Greece, and the Fed is promising that they will step in at any sign of GDP slowing.  Get this, the market is getting excited as GDP slows because they are counting on the FED stimulus.  Am I the only one who sees the crazy in this?

In addition to markets being at 4 year highs on the promise of ECB and FED stimulus we are heading towards the “fiscal cliff.”  This is the stupidity of our national government.  This time last year they couldn’t agree on a national budget and we got down graded by Moodys.  Is there any reason to believe that we will not do the same this year?  I think not.  Especially because both sides are digging in to make it a political issue for the upcoming Presidential election.  Matter of fact, it was supposed to be decided this month.  Instead, our government went on a five-week vacation and promised to fix it upon their return.  All I can say is that there is a fat chance of that happening.  Even when they appointed a small group of congress members to do this last year, neither side budged an inch.  Why would it be any different this time?

What I am most worried about is the fact that markets are becoming complacent.  What do I mean by this?  There is an indicator in the market called the VIX.  This is an instrument that measures the “fear factor” of the markets.  When people are hedging towards the down-side and buying puts to protect their long trades, it raises.  As of today, it is about 15.5.  The average for the past four years is 20.  It is a pretty good idea of people’s protection should the market start going backwards.  Let me repeat the above statement.  70% of our companies are reporting missed forecasts and, or guiding down for the rest of the year.  In all rational thought, this should elevate the VIX.

Bottom line, this worries me because big hedge funds are not protecting their clients retirement money.  Should we see any kind of market sell-off, people’s retirements will pay the ultimate price.

Natural Gas exhonerates Speculators! 1

Ok, I have conversed with many via twitter that think speculators are the devil.  While I agree, as a speculator, that they are a part of the problem, I disagree that they drive price.  Instead, speculators only carry the momentum that is already pushed upon it by outside factors.  I am excited to point out the latest example of speculators being neutral when it comes to price.  Natural Gas is a commodity that is played just like oil.  There are a hundred different ways to play this commodity, but the most important point is that it is at multi-year lows.  Has demand gone down? No, but supply has gone up.  Due to fracking (no comment on the legitimacy of this process here) they are finding it under every rock in the U.S.  I exaggerate this on purpose.  Because the notion that it is everywhere is speculation.  Speculators are getting out of the trade because of an assumed over-supply.  They are correct!  This lowers the price to unheard of levels.  It is almost a 1/3 the price is was in 2010.  Where are the Senators now?  Why aren’t they out congratulating us?..  Hypocrites!

The major difference between Natural Gas and Gas at the pumps is that there are more factors for gas at the pump.  When it comes to gas, we are far more subject to feuding countries that supply it, and profit lines of major refiners here in the U.S.  Remember that it is Oil that is speculated, not the price of gas at the pump.  Big oil companies are profiting huge on the difference between the price of oil per barrel and what they can get at the pump.  Here is what I mean: Last April price of light sweet crude was $125 per barrel and oil companies were still able to make a good profit at $3.25 per gallon.  Now that oil is only $103 per barrel, they are able to charge over $4.10 at the pumps.  This isn’t speculation, but profit.

The GOP Conspiracy 1

Before I begin, I must be very clear that I am not a conspiracy theorist kind of guy nor an anti-Republican!  Therefore, it is an internal struggle to put this out there, but after several months of introspection I feel it is time.  The Republican Party seems to have conspired to keep Buddy Roemer out of the race for president.  He would never come out and say it because it opens him up for an all out attack from the party.  He would then have an even smaller chance to win an election.

What are the facts?

Buddy Roemer has all the experience you would want for a commander-in-chief.  At Harvard, he earned a BS in Economics and later an MBA in Finance.  From 1981 to 1988 he served as a Congressman.  From 1988 to 1992 he served as Louisiana’s Governor.  While there he cut the unemployment rate in half, reformed their campaign finance laws, and balanced the state’s budget.  I don’t mention this to get readers to vote for him, but to show how qualified he is to have been a candidate.  The problem isn’t what he has done, it is what he hasn’t: He has never accepted Super PAC, or special interest money.  Matter of fact, this has been his platform to get elected.  The fact that he doesn’t accept this money makes him an enemy of the state, if you will.

Imagine running Buddy out there when his platform of campaign finance reform and getting SuperPAC’s out of politics could make your party look bad, as a whole.  Fox News network, a GOP slanted news network, hasn’t even hinted that Buddy Roemer exists.  He was left out of all debates.  Why you might ask?  At first they told him he wouldn’t be allowed in the debates until he officially signed on as a candidate.  That makes perfect sense until you realize that several others hadn’t that they allowed in debates.  So, Buddy officially announces his running.  Then they told him that he had to have at least 2% of the votes of a given state to qualify.  Again, you might think that this is a fair request.  We cannot have everybody and their brother in a debate, but you have to know that when they required this from Buddy, John Huntsman, Michelle Bachmann, and Rick Perry didn’t have 2% yet they were invited into these debates.  Despite the hypocrisy of the situation, Buddy attained the 2%.  Then they said he had to have 5% of the votes.  At this time only Perry and Bachmann didn’t have the 4% but they were allowed in the debates.  Matter of fact, Buddy was ahead of both of them in the polls.  You still saw no mention of his existence on Fox News and he wasn’t allowed into the debates.  Buddy Roemer was working hard to get the 4%, and then they dropped the bomb.  They told him that he had to have a minimum amount of money raised for his campaign to get in the debates that was far beyond what he had raised to that point.  This, they knew, went directly against his platform.  He will not accept more than $100 per campaign donation.

As a result, Buddy Roemer has dropped out of the GOP race and decided to run as an Independent via the American’s Elect process.  Although I’m voting for Governor Roemer and love his platform of Campaign Finance Reform, this is not my point.  I hate the fact that politics has come to this.  Republicans snubbed one of their own because he was a threat to their pocket-book.  Democrats would have done the same thing if the situation was reversed.  It is a bi-partisan problem.  They will do anything they can to “keep the money in.”  This is why we, as a Republic, have to fight our own apathy and do something about it.  We have to support someone like Buddy.  Even if you don’t plan on voting for him, you should want a man like him in upcoming presidential debates.  His take on money in government shouldn’t be silenced or big corporations will continue to own our democracy.  We have to get the money out, and supporting people like Buddy is a way of going about it.

 

 

 

Profit, not speculation, driving gas prices! Reply

One year ago Crude oil was $120 per barrel and never broke $3.25 at the pump. Currently, Crude Oil is resting at $102 per barrel and the average price at the pump is over $4.00.  Therefore, since April 2011, oil companies are saving $20 a barrel while gas prices have risen 23%. This equals a profit increase of 40%.  Real demand has been very steady, so we have to assume that prices are merely profit based.

Several Senators and Congressmen and women have come out to attack “rampid speculation.” Senator Bernie Sanders has gained popularity just for his stance against Wall Street on this issue.  Sanders is sponsoring the End Excessive Oil Speculation Now Act.  Now I don’t see any problem with this idea, but they are so far off the point here.  It is like Papa Bear getting mad at Mamma Bear because Goldilocks ate Baby Bear’s breakfast.

Speculation does have a piece of the blame here, but it is minute compared to the almighty profit of big oil companies.  Also, speculation drives the price down just as much as it drives the price up.  The major fault with speculation is that it swings the prices more dramatically than it would otherwise be.  For example, at the end of 2008 we thought the financial world was collapsing.  Because everything in speculation is anticipation, speculators figured that demand would diminish further than it actually had.  This assumption led to the price of oil to fall to $32 a barrel.  In actuality, it had dropped, but only minimally in the grand scheme of things.  Within a year, prices had gotten back to $80 a barrel.  At that price, everyone was pretty happy.  You see, $80 is the breaking point for big oil companies to make money.  They were returning to big profits and we were still under $3.00 per gallon at the pump… a far cry from being over the $4.00 we were seeing in the summer of 2008.

Exxon Mobile, a company I love, makes 17 billion dollars a year before taxes.  Knowing that they are losing money in Natural Gas, where do you think they are getting record profits?

 

Understanding Oil and Gas Prices Reply

Because understanding the price in oil is a bit of a specialty of mine, I thought I might share (in the simplest of terms) why the prices are what they are.  There has been so many wild accusations and finger-pointing that I feel it is time for some rational explanations.  To quote just a few people and media comments: “Speculators are strangling America.” “Obama has no energy plan.” “A vote for Newt, is a vote for $2.50 gas.” “Drill baby Drill.” “We have to make ourselves energy independent from the middle east.”  While all of these comments have grains of truth in them, they are really founded in misconceptions about the oil markets, where we get our oil, and how much policy can even affect prices.”

Let’s start with speculation.  Speculation does drive up the price of oil, but remember it also drives down the price of oil!  Speculation is just that, speculating on demand.  This really just makes for greater swings in oil, not a simple driver to higher levels.  Here’s what I mean: Summer of 2008 we had oil hovering just under $150 a barrel.  Prices at the pump were in the $4.25-$4.50 range. People trading futures, options, and companies that represented oil were looking at problems in the middle east and possible limited supply.  That December the price of a barrel bottomed at around $32 a barrel and at the pump around $2.65 a gallon.  This right there is a very telling point.  People were not decreasing demand of oil by 4.5x.  In fact, actual supply/demand ratio didn’t fall by much, yet the price per barrel tanked.  This was a result of insane speculation.  It was a much larger swing than was warranted due to fears that our entire economy was swirling around the toilet.  This important fact is also an explanation of price gouging.  Realize the price at the pump has moved significantly less, percentage wise even though it is much cheaper for them to purchase the oil.  This is a very important realization.  The price of refinement hasn’t changed.  Only profit margins increased.  Oil per barrel is only 21.33% of what it was, yet they are able to charge 58.88% of what they used to. I assure you they were making a killing even though the price of oil was at $150, now we’ve just increased their profit margins.  The only ones losing are the people who actually take the oil out of the ground.

Let’s use the Saudi Arabians as an example.  When prices were at $150 a barrel, they were rolling in money, but they didn’t set that price.  Matter of fact, they were actually increasing supply as much as they could to take advantage of the prices.  If you speak to anyone in the know about oil, you will find out that they need prices to be $80 or more to turn a profit, so $70 above is great for them.  There are a multitude of reasons why it is dangerous to become dependent upon some of the middle east countries for their oil, but it is important to note that none of them have ever even hinted at the fact that they would decrease supply.  We are their life-line.  When I say we I am including China and all major oil consuming countries.  We get more than 20% of our oil from Canada, we are increasing our Brazil Oil connections, and have always been a large oil supplier ourselves.  So, in summation, we don’t rely too heavily on middle eastern countries for oil.  They are just a player and do everything they can to keep us happy.  They know they are not a necessity in this game, much like Coke tries to appease their vendors.  They are the biggest and the baddest, but it comes down to keeping your customers happy.

The idea that Obama has no energy plan is hilarious to me almost as much as Newt Gingrich saying he will give us $2.50 per gallon gas.  Both are ridiculous.  Obama does have a plan, and you cannot simplify it too much by saying he just wants to use “green energy.” What he has is plenty of supply, but two strong forces working against him.  Exxon Mobile is one of the largest players in the game.  They are going to sap every bit of profit out of a gallon of gas that they can.  I don’t blame them because they are beholden to their stock holders and, after all, it is a profit driven business.  Are we to assume that they should take losses so that you can drive to the grocery store on the cheap?  No, that is ludicrous.  There is the chance that companies would go out of business.  The fewer refineries, the higher prices.  You get the drift.  Not to mention, that there is no way Obama has the pull to completely rid the stock market of speculation.  Republicans are “free-market” and pro-capitalism.  Is there a chance in hell that they allow him to pass legislation limiting the amount of speculation on Oil as a whole?  For both of these reasons, Newt doesn’t have a chance of bringing gas down to $2.50 a gallon on his own.  Why?  If he proclaims “Drill baby Drill” it will only be a temporary fix.  Speculation will drive prices down because people will assume that Supply will go up… This is not the case!  They will only drill what is economically feasible.  Exxon is NOT going to drill themselves out of a profit!  As supply maintains virtually what it does already, the prices will eventually reach a norm and be subject to speculation about the next middle east squabble.

Bottom line.  Speculators, big oil companies, and politics all play their role, but the only way to get prices low and keep them low is to find an alternative forms of energy (which I know is a sin to say out loud), or the government has to get into oil production itself because it is a for profit game.

How to restore our Republic Reply

I understand the concept of limited government, and in many cases agree.  There is such a thing as too much of a good thing.  Since, Citizens United (PAC) v. FEC in ’10 allowing Corp.’s the same rights as individuals in donating, election spending is up 460%.  This was considered a “win” for freedom of Speech and limited government conservative republicans.  Unfortunately, there are unintended consequences for this freedom.  We can now voice our free speech by spending unlimited amounts of money on behalf of the government officials of our liking.  Great thing huh?  Constitutionalists feel that this is adhering closely to our forefathers intentions, but this is absolutely not the case.

Our forefathers saw this coming and tried to write into the constitution checks and balances to combat this.  In early United States history they saw it could be a problem for foreign ambassadors accepting gifts from foreign countries:  “no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.”  Bottom line, they were worried that these men would become corrupted.  They couldn’t foresee the possibility of Super PAC’s being established, or that contributions from campaign donors would someday purchase legislation.  I guarantee that they would never consider money as free speech.

8 of 10 congressman & senators have given earmarks directly to campaign donors.  That’s just earmarks.  Think of all the legislation that is put into law that is tailored specifically for a donor, or the tax loopholes that are insisted upon on behalf of a campaign donor.  Lobbyists are not allowed to take congressmen to dinner, unless they bring donor checks and call it a campaign fundraising.  Why would we make it law that they cannot take them out to dinner if we didn’t realize there is a corrupting influence there.  Because money is involved, we allow them to get around the rule.  Thinking rationally, it become obvious who makes the laws.  It is almost as if they are stating, “you can’t take me to dinner… unless you bring me a whole bunch of money.  Otherwise it would be unethical.”

Proposal to fix the before mentioned problems:

  1. Limit campaign contributions to $250 annually.
  2. Eliminate all middle man donations.  (A lobbyist can’t show up w/ a stack of donor checks)
  3. Eliminate SuperPAC’s as they are already borderline illegal.
  4. Cap fundraising to 500k per election.  (this can be tailored to the office)
  5. Government match all donations up to the previously mentioned cap.

These five things would eliminate Quid Pro Quo because no person in their right mind is going to write legislation for a $250 donation.  It would cut down on the time lawmakers spend fundraising.  Currently they spend 30-60% of their time just fundraising.  The elimination of bundled donations would ensure that lobbyists don’t have undue leverage on their lawmaker.  It would really limit them to educators on issues which is all they should be.  There is a term that Buddy Roemer uses: Free to Lead.  If no one entity had donated to a congressman/senator more than $250 they would be “Free” to govern with their voters in mind instead of the Corporation that put the most into their campaign.

 

When it’s Presidential to Apologize. 5

It is rare that politics includes an apology.  President Obama apologized for troops burning the Koran this week.  It was an unintentional slight where they were disposing of many things in a clean-up effort.  I won’t go into the mission, but it is important to note that they were not trying to disrespect any culture or religion.  Afghan and Muslims are protesting and rioting in response.  This uprising has left several dead.

The President made the correct move.  I applaud his efforts to convey our unintentional slight.  I would take it a step further and actually go to Afghanistan to apologize publicly.  Why?  Because we disrespected an entire religion and culture.  There is nothing that can be done but to apologize.  Just because it was unintentional does not mean that it is ok.  Rick Santorum and Newt Gingrich have publicly criticized Obama for apologizing.  You know what that tells me?  They are not presidential.  People that follow me know that I am very supportive of Governor Buddy Roemer for his stance on getting the money out of D.C., but had he come out and criticized Obama for this I would no longer support him!

A perfect analogy is if my kids accidentally knock over a stack of boxes in a store.  I help clean it up and apologize to the person in the store that helps me.  There is no excuse for Santorum and Gingrich’s comments.  They are playing to the far right who are racist!  There are millions of Muslims that are NOT radical, and they DESERVE an apology.  I am disgusted that this is an issue and embarrassed so many people in America wish he hadn’t apologized.  Shame on them.  No I am not Muslim, and it shouldn’t matter.

Do we need campaign finance reform? Reply

Today’s government has become incredibly dependent upon money.  It is as simple as that.  Forget, for a moment, the idea of corruption, and move onto the fact that politicians didn’t become politicians to raise money.  Despite this fact, members of the House and Senate spend between 30-70% of their time fund-raising.  This is not an exaggeration.  There is constant pressure to raise money.  If not for their own election, they are expected to do so on behalf of their respective party.  It is outrageous the time spent, and the money they are continually asked to conjure up.

Now, knowing that politicians are constantly raising money, we have to wonder what effect this has on their work.  Corporations and Lobbyists are always looking for an in.  What do I mean by this?  They are looking to survive financially, and who could blame them.  If a House Representative is looking for campaign money and they call you, you have to answer.  You WILL find the money they are asking and you WILL show up to the fundraiser they ask you to attend.  It is in your best interests to do so.  That Representative will eventually vote on something that you want their ear on.  You might even have an earmark in mind, you will need them to sponsor.  It is not Quid Pro Quo, necessarily, but you have to remain in good graces in order to get your idea looked at.  If you have developed that relationship and always backed them financially, you have a much better chance of them working in your favor.

What is wrong with this?  Quite simply, you get a system where a Representative or Senator is working for lobbyists and Corporate dollars instead of the voters that put them in office.  Who is going to get their Senator on the phone first: a lobbyist that has continually been at fundraisers with a bundle of checks from donors, or a voter in their district with a question about campaign finance reform.  The answer is obvious, but not acceptable.  This is not the system intended by our forefathers.