Don't Fight an Expensive Bull Market

[Excerpted from Bill Cara's Week in Review]

Washington is still hunkered down in negotiations that will hopefully result in immediate relief to the short-term credit market problem, and may give these legislators some breathing room over the next couple years to solve much bigger problems. Yet, no one really knows for sure if the Plan will work, do they?

There is no shortage of developments and perspectives on this rapidly evolving Washington story, but it behooves traders to continue to focus on what is crucially important to them, which are market price direction and personal portfolio management strategies and tactics.

Try, if you can, to put your other concerns on the side burner for now. Admittedly, if Dutch bank Fortis goes under, that may be difficult to do.

In fact, just reading this week’s WIR may be a challenge. With all my ISP and computer problems this weekend, I am afraid my report will be rather incoherent. Call it a work-in-frustration.

Setting aside the credit market blow-up for the moment, there is a serious piece of business being played out in the market today that does affect Mom & Pop’s wealth, which must be addressed. As you know, I have constantly harangued the so-called ‘professional managers’ of Other People’s Money, where Mom & Pop have zero control, such as in their pension plans for instance, where their life savings are being destroyed by the ‘system’. The situation has gotten worse.

Because of the nature of the explicit trust relationship involved with managing pensions, the pension fund managers are obligated to practice the Prudent Man Rule. It is a bloody shame, then, that the SEC has looked the other way as literally trillions of dollars have been stolen from people who are being treated as chattels of the system.

Any child who can read would know that Bear Stearns, Lehman, Fannie, Freddie, IndyMac and WaMu were collapsing this year under the burden of holding dubious quality investments. But even on the day these companies finally declared insolvency or bankruptcy, which wiped out all or most of their investment value, there were pension plans of Mom & Pop just stuffed to the gills with these worthless stocks and bonds.

That isn’t fair; in fact I think it is criminal. I am not talking financial abuse through mere incompetence; I mean flat-out theft. Pension managers, who ought to know better, maintained client positions in the above noted companies right to the end. These so-called professionals would not have dared to invest their own family’s capital that way. They did so for blatant conflict of interest reasons, to protect their precious financial system.

For their lack of oversight in the pension area, the SEC also ought to be censured. Just like the fund managers, the SEC was also caught up in conflict of interest issues, which is completely unacceptable for a regulator.

Federal and state prosecutors must investigate these pension managers and lay charges as soon as possible. When the public sees what’s gone on here, they’re going to be mad as hell, and not ready to make nice.

Forgive, sounds good
Forget, I'm not sure I could
They say time heals everything
But I'm still waiting

I'm through with doubt
There's nothing left for me to figure out
I've paid a price
And I'll keep paying

I'm not ready to make nice
I'm not ready to back down
I'm still mad as hell and
I don't have time to go round and round and round
It's too late to make it right
I probably wouldn't if I could
'Cause I'm mad as hell
Can't bring myself to do what it is you think I should

The Dixie Chicks sang that little ditty after their run-in with George Bush. I can hear the chorus now.

For the past two years, I have discussed Paulson’s Folly, essentially blaming his actions -- starting on Wall Street early this decade and in the White House since July 2006 – for the credit bubble and subsequent deleveraging dilemma that is hurting us all today.

While I detest the Plan he brought to Congress, I now believe that a new Deal will likely put the man under tight control. Apparently, he knelt to kiss the ring of Speaker Pelosi in a meeting this weekend.

Now I am going to switch horses and say that, if he can be trusted to do the right thing (yes, I’m nervous!), I think he’s probably the best person to do a work-out on behalf of the people. This man is anything but incompetent; he is also a leader. But, in saying this, I have already noted the tight control pre-condition, and have already opined that there should be an independent Resolution Trust Company 2 put in place under William Seidman to resolve these issues. Putting liars and criminals in charge of fixing the mess they created is not my idea of a solution, but at this point action must be taken or the credit ring between banks will have been broken, and many banks will fail within days.

That’s the reason the regulators have been working day and night in seeking to adopt a Plan they think might possibly get them re-elected in November.

Years after his departure from the White House, historians will have written books on this mess, and Paulson’s role in it. I’ll leave it at that.

Today, I will address why I think the 2007-2008 Bear has ended and why prices will now start to work through a series of higher highs and higher lows, which is the definition of a Bull market. I know that most people will disagree with my perspective, not because of analysis, but due to their manifest anger at politicians, government and regulators who allowed the situation to become such a crisis and to apparently decide to have the very perpetrators fix the problem and, worse, financially benefit for their misdeeds.

People ought to be upset. But they also need to maintain a level head and go about their business. The rest is out of their control.

Many of you watched the first US Presidential Debate of the Party candidates. Depending on your personal bias, you happened to see it much the way you expected. Republican-biased Fox Network viewers responded to a poll of who won the debate, 82% voting in favor of the Republican candidate John McCain. I don’t think the national audience saw it that way.

Personally, I am not going to get into this other than to make a couple observations.

This debate was properly initiated by the moderator, pointing the candidates to the urgent financial crisis facing the nation. However, for these two key people, one of whom will soon be the elected leader of the most economically powerful nation in the world, and who have said they are intimately involved in negotiations of “the Deal”, they seemed to know little to nothing. They had sufficient time to prepare, and knew the question would the first one asked. Both men stumbled and came out flat. Disappointing to say the least.

I was also immediately struck by Sen. McCain’s refusal to look in the eye the person he was debating in front of maybe 100 million people. It was bizarre to me that he looked away from his opponent, which was shockingly impersonal. I think Sen. Obama picked up on that right off and started to call his opponent by his first name, John. I thought that was clever.

I also thought it was an error on the part of Sen. McCain to have Rudy Giuliani and not his running mate, Gov. Palin, speak on his behalf in the wrap-up, as did Sen. Obama with Sen. Biden. Attracting voters is such a confidence game, and I think McCain stumbled on this as well.

The polls of independent voters, which is the demographic that will decide the outcome of this election, went apparently 39% for Obama, 24% for McCain and the rest undecided. As I say, many of you disagree because of your bias.

There will be a lot of water under the bridge in the next five weeks, so I think we need to take it all in, including the decision in Washington, before speaking out. I will try to stay out of the noise-making as best I can.

What most of you want to know from me is why I switched from Bear to Bull. Just like those Fox Network viewers are always going to overwhelmingly support McCain, I will not convince a goodly number of you, and I won’t try. I’m not selling anything, and I’m not running for office. What I will do is show you how I think about these important matters, with one proviso: I may know how to trade very well, but nobody’s perfect. I may be wrong. Clearly, if there is no Plan set in place today, in Washington, Brussels, London and Tokyo, the carnage in the market this week will be ugly.

First off, I am a strong believer in the Relative Strength Index technical indicator, particularly in certain types of market environments. If prices move in what we call fast markets, like mid-October 1987 as an extreme example, I switch to the more sensitive (but similarly constructed) Stochastic technical indicator. As today’s markets have been grinding through the Bear for about 14 months, this is not a fast market setting, so I tend to rely mostly on RSI.

As you know, my experience has taught me to use all technical indicators with a combination of Monthly-Weekly-Daily price series data, relying on the longer data series for telling me how long-term cycles are evolving. This momentum analysis is telling me that the long-term cycle is bottoming.

Without my usual systems at hand, I’ll have to forgo the charts that show this.

Next I look at history because, as I often say, the market is us.

Yes, increasingly trading decisions are being decided by computer-based algorithms, but except for the fact that these programs have been lowering volatility in average market conditions (ie, where, over time, the VIX measurement continues to fall), the algorithms have still been developed by us, and approved, implemented and tweaked by us. Because of the nature and crucial importance of wealth management, people are still involved; the system is not yet on auto-pilot.

History, then, tells us that there is such a thing as a stock cycle, which happens to be a period of about 4 to 5 years on average where prices start very low, then build, reach a peak, then sell back down to a low. Boiled to its essence, this cycle is natural law, something that is well described in The Book of Ecclesiastes, Chapter 3, which starts, “There is a time…To every season there is a time for every purpose under the heaven; A time to be born and a time to die; a time to plant and a time to pluck up that which is planted; A time to kill and a time to heal; and a time to break down and a time to build up…”

Just like people don’t run with clocklike precision, there is no fixed time to the stock cycle; but if you look at a very long history chart of the DJIA index for instance, you will see the stock complete bull-bear cycle repeats every 4 to 5 years on average going back more than a hundred years. The bottom of the last Bear was 4Q02 and this one is bottoming in 3Q08. I believe that the Bear was about to start in 3Q06 when Paulson was hired to puff it back up. His actions extended the bullish phase of this cycle an extra year, probably in hopes the Financials could use the time to work through the real-estate market collapse from its peak in 3Q05. Then there were related credit market issues I am sure the bankers and broker-dealers knew existed in 2H06 and 1H07, before the public started seeing the credit market fall-out in July 2007.

Regardless of time extension to a particular cycle, there will be a limit because there always has been. Always. What often happens, however, is that when a new Bull starts before the economic backdrop is ready, or a Bear starts without fundamental causes, there is subsequently what is called a magnitude failure.

Following the 1973-74 Bear, the 1974-77 Bull suffered such a fate, and the one after that from 1978-81 did the same. Then the inflation of the 1970s was brought under control and the Bull that started in the summer of 1982 reverted to its typical, if not extended, magnitude, resulting in a severe, but short, Bear in October, 1987. This history explains my thinking as to why this next Bull will be muted and also range bound between DJIA=10500 and, say, 15000 or less.

With the goings-on in Washington, and the election campaigning coming to an end in five weeks, and the near total anger by voters, I believe there has been a major change in thinking by all politicians who will seek election on November 4, which happens to be the majority of them in the legislature and the White House. Voters are issuing marching orders this weekend; clean up this mess or else it’s the end of your political career is what they are saying. I think there will be significant legislative changes made in the next Congress as a result.

I suspect the people, while fearful and skeptical, are starting to come around to this notion. Bear markets end when there is a purging of emotion, replaced by a new attitude. Traders of big money sense this and start to change their strategies, which I think is happening presently.

This week, for example, the winners were DJIA big hitters: Microsoft (MSFT), JPMorgan (JPM), Wal-Mart (WMT), Exxon (XOM), and Merck (MRK), while the biggest losers were among the smallest capitalized companies in the DJIA index: General Motors (GM), DuPont (DD), Alcoa (AA) and United Technologies (UTX).

Concurrently, financial sophisticates like Warren Buffett (Berkshire Hathaway (BRK.A)), Jamie Dimon (JP Morgan), John Mack (Morgan Stanley (MS)), and the others in their league, have started to call in their chips. The out-going President, Treasury Secretary, Fed Chairman and SEC Chairman are under huge pressure to give these players a break now because it may be a long time before Congress again yields such immense power as held until now by Wall Street’s titans.

What these people are trying to accomplish, I believe, is the construction of a few mammoth banks – maybe five of them – and they will become the new power brokers for America.

I call them banks, but I have always seen their plan, which is why I refer to them as Humongous Bank & Broker, only now it should be Humongous Lending Bank-Agency Broker-Product Creator, Syndicator and Dealer-Insurer-Wealth Manager-Government, Corporate and Personal Advisor-Hedge Fund Manager-Venture Capitalist-etc. 

At the end of the day, these banks will own the Fed, and the bad joke of it all is that they will continue to be self-regulated by the Fed. These are the chips being played, I think.

If it were up to me, the Fed would be regulated by a restructured, independent SEC.

As much as I see the inevitability of this evolution to mega-HB&B, and how bad it will be for Mom & Pop, and independent traders like me and most of you, it would take a super-leader to be elected President of the US and a very strong Congress to derail the Wall Street train. However, I believe both Presidential candidates and most of the others have already been bought-and-paid-for by HB&B, so I’m not going to fight it other than to continue to speak out and later have people recognize the truth. To fight the system is a job for the American people and their politicians.

Some of you will argue that such powerful banks are what America needs to fight its enemies, real and imaginary. I say it’s the worst thing; size and scope to this level doesn’t solve anything. It puts too much power into too few hands. Absolute power corrupts absolutely, as we all know. What we need in its place is exactly the opposite; laws that support the sovereignty of the people and free markets, so that individuals can truly make their own decisions in life.

For now, most of the people, including traders, will mistakenly take heart that a newly fortified Fed and HB&B network will protect us, will stabilize the $USD, and so forth, and that’s enough to float a new Bull market. They will believe that even when they won’t understand the Plan.

I acknowledge that this Plan may be a good one to solve the immediate credit market crisis, but my bigger fear is that politicians are being pushed by HB&B to take steps that will solidify the power of the Fed and HB&B well into the future.

This weekend Treasury Secretary Paulson, the ex-CEO at Goldman Sachs, brought into the White House a former high level banker to help him do that. Of course, the man came from Goldman Sachs (GS). All I wanted, to set us on a path for social equity, was to have an independent Resolution Trust Company 2 under somebody like 87-year old William Seidman. But, no, Congress and the Administration have added to the Goldman Sachs team.

That situation being what it is, all I can do is to re-focus on market prices.

As you know, every new Bull needs firepower. Usually that comes in the form of credit from HB&B, but it may also come from cash that has been saved by prudent corporations and individual traders. Through the Bear, these people have been awaiting the day when, for example, they can spend $5 billion to take a piece of a Cara 100 company like Goldman Sachs. Did you get your piece? Yes? Did you get Warren’s price?

You have probably noted over the years that Warren Buffett likes to buy value, and so do I. If you have the cash, there are values out there.

As for getting a loan from HB&B, presently that is an issue; the banks are financially strapped. A package of some $700 billion plus the $400 billion guarantee of Money Market Funds as well as the several hundred billion already put out for Fannie, Freddie, Bear Stearns, Lehman, IndyMac, WaMu, AIG and others, is going to be a $2 trillion rescue. I gather that’s about 200 times the cost of monthly expenditures of the military program in Iraq, which most people find mind-boggling. So that’s 200 times mind-boggling.

I have always said, never fight the Treasury and Fed when they start reflating via printing presses. In other words, $2 trillion is an expensive Bull market. Mind you, a new Bull will lead to more paper wealth and more taxes, and might even lead to a recovery of much of that $2 trillion, so it’s going to happen. As I say, if it costs even more, say 3 or 4 trillion dollars, it will happen. Don’t fight it.

When paper money is issued by government, its value depreciates. Real property prices will hold here and start to increase again; oil and precious metal prices will increase as these commodities and storehouses of value are limited in amount, while paper is in endless supply. So what we need to do is look at the attractiveness of shares of companies that produce, administer, sell, and/or deliver these commodities, which will continue to be in demand.

Now some of you fear deep recession and even economic depression, but the Washington Plan will halt the slide in foreclosures and lay-offs, and the economic slowdown is already knocking inflation down. Of course people are consuming less, bank credit may take some time to revert to normal, and oil prices are likely not going to sink much further (maybe 85 is the lowest we’ll see, which is still very high), so Consumer Discretionary stocks are not going to enjoy their usual popularity among traders. And HB&B will continue to lie to one another about the quality of their assets in hopes of getting a better deal from the Washington Rescue team, and the other banks who come round seeking cheap assets. Without a true market being made for these syndicated loan assets being held by financial intermediaries, traders will continue to distrust them, and bid low for their shares (longer term). P-E multiples will fall. Traders will favor those financial companies that have the balance sheet strength and cash flow to be able to pay higher dividends and actually buy back shares without handing over the keys to the bank. 

So these are two sectors to avoid, and they are important ones. A roaring Bull market, of course, needs to be hitting on all ten sectors, not six, seven or eight. Yes, health care could be another misfiring sector. Who knows what a Democrat Administration will do to mess that up. Even Consumer staples will suffer. In fact, a lot of once discretionary items became staples in recent decades, like coffee shops (Starbucks (SBUX)) and natural foods (Whole Foods (WFMI)), for instance. Can you imagine a line-up at cash registers in Starbucks and Whole Foods during the Great Depression? People were too busy scrounging coal from railroad tracks! 

The excesses of the past 25 or 30 years must be worked off, so I look at things like automakers and airlines to suffer. There are only going to be x number of cars and airplane seats needed, and the largest, most successful companies will grab market share. Detroit is likely to end up with only one auto manufacturer, for instance, albeit a big and healthy one. Same with fewer national and regional air carriers.  

Local and regional banks will be hampered by new branch offices of Mega-Bank. Yes, the Wal-Mart Effect will see Bank of America (BAC), JP Morgan, Citi (C), etc, and their ATMs coming to your neighborhood, putting many of the small financial services companies out of business. So I’d avoid the smaller banks.

People will always need Energy; so, even if the oil companies are forced to expand into alternatives, the best managed, financially strongest ones that control their resources will be in demand. At this point in the Bear, the big oil companies like Exxon and others can be purchased for 6 to 7 times cash flow. The higher risk juniors of Western Canada are available for just 1.5 to 3 or 4 times cash flow. When compared to prices over the past 50 or more years, these are strong values, similar to what happens as Bear markets come to an end.

Without getting into specifics today – the ISP modem and/or my PC network card failed this weekend, so I’m way behind – I will look for some good values for you. Already I mentioned a couple. Dell (DELL) was one.

The point I’d like to make is that I usually can tell a peak when I see the RSI-7 for the Monthly-Weekly-Daily at very high levels. That’s when, when I analyze a particular stock, I know I cannot legitimately seek annual +26% Total Returns (dividend and capital growth). At the peak, that happens a lot. Now I’m seeing the reverse. So, I know we are close to the bottom. Since I also know nobody can pick absolute tops or bottoms without luck, I choose to apply my experience and skill to acquire values, which I know will be at cycle lows. I never chase stocks on break-outs unless the Bull is just starting. Most of the time, that’s a mug’s game, ending in losses unless you are the person running the promotion and are doing an illegal pump and dump.  

Yes, I stick to value within the shares of quality companies only, based on my analysis of high Return on Equity, high operating margins, high revenue momentum, high dividend growth, strong balance sheets and management that has a good all-round track record. If I see also a reasonable Price Target that could return me at least +26% or more, with a high degree of confidence, knowing life is a risk, I’ll commit to adding bullish positions. If I see many of them following a Bear market, I’ll start thinking of the next Bull. That’s where I am in my thinking today.

The favored list would be the shares of the highest quality companies in the following sector ETFs: (XLE) (senior and junior producers, plus drillers and oil services), (XLB) (chemicals, papers, miners, and precious metals (senior and junior if the latter is well funded), (XLI) (industrials, conglomerates and transports), and (XLK) (hardware, software, networks, Internet… how about Oracle (ORCL) and RIM (RIMM)?). I also like the gas and nuclear utilities in (XLU). In the Staples, there are some solid dividend payers trading at low prices that I like. I don’t really want to give many specific recommendations because this blog is not a tout sheet.

If you noticed that the sector ETFs identified above were mostly comprised of US-based companies, that was deliberate on my part. I think the US market is the most stable, and most ready for a new Bull. The BRIC markets may have the most magnitude to the upside at the start, but the risks are also greater, and I don’t think the Bull there will be as strong as most traders think.

The monetary authorities of England, Europe, and Asia are going to have to go through their own work-out issues, including credit market, inflation and high interest rate problems. This weekend, for example, big Dutch bank Fortis appears in trouble, if the collapsing share price on Friday is used as a tell, as it was with all the US banks that failed. So, America is not alone in this mess.

In the past, much US capital was invested abroad. That led to much inflation in those countries, especially the rapidly growing ones, which was imported into the US, but it also led to exporting of jobs from the US. The Washington Plan will sooner or later address that because the marching orders being sent by the voters to Washington include the message, “Burden those capital exporters, and save our jobs and way of life.” I think the message gets through this time around. Besides, as rates increase in the US, which they will after this Plan locks down the present risk to credit markets, there will be less incentive by US capital managers to seek higher interest returns offshore. In the more stable markets of Japan, UK and Western Europe, I don’t see any great need for Americans to go searching for higher quality companies in those markets. There are some, but for the population size, not nearly as many. 

As much as Americans have been scared and angered by the present crisis, I think the majority of people are far too pessimistic. It was the shareholders of the big banks, broker-dealers, insurance companies and telcos that are hurting the most today, and into the future until the Plan starts paying off. Hopefully most of you avoided that train wreck and have a clear head for thinking ahead. Most of the other sectors and industries in the market are where your future action should be.

Moreover, while we may disregard Financial sector ratings from HB&B, I believe there will be (self-preserving) rating increases in the other sectors, plus encouragement from the Financial services industry for capital managers and Mom & Pop to jump back into the market.

Another observation is that throughout the latter stages of the Bear the daily trading volumes were light. Some of that has to do with tight emotions, but there is now a pent-up demand by those who have been building cash, including the Funds that continue to take in monthly deposits as the economy cranks along. This cash must be put to work. As it is, the risk-free instruments are earning less than the inflation rate. I believe most Bull markets show a booming daily volume as prices surge to the upside and this market will be the same.

I can just envision the screaming to come on the CNBC Squawk Box show, and from Kudlow and Cramer, and the rest of them as money flows back into the market. These media personalities have a lot at stake in the GE (GE) stock price, so that will be a stock I think will be given a strong boost.

It took less than two months for Crude Oil to plunge from $145 to under $100. That’s the Bear. Ian Notley used to say; turn that chart upside down – that’s the Bull. It will be amazing how quickly people will change their attitude when prices start higher, and the wealth effect kicks into gear. Two months for an oil market crash; think about that. These things don’t take long.

Don’t miss it.

Mind you, if you tried to read these rambling notes, you might sleep through it.

Comments

[investor88:]

Bill is getting bullish but it is not easy to follow the logic of his long article. I think market action and analysis of the underlying problems would suggests Dow 7000 before Dow 15000, and we want to navigate the immediate risks first before looking up.

2008 Sep 29 09:09 AM

[RCA:]

"However, for these two key people, one of whom will soon be the elected leader of the most economically powerful nation in the world..."

I would rephrase that to say, "the formerly most economically powerful nation in the world."

I'm not sure that we will survive this current crisis and maintain anything resembling economic (let alone moral) leadership. The "liars and criminals" you cite, just may have taken us over the brink to the point of no return becuase of their philosophy of "Greed is good for me. The rest of you be damned!"

The next few months will be very interesting, to say the least. We are at a watershed moment in American history. Whatever happens with the financial services industry, the credit crisis, the bailout, and the elections, we will emerge from it all a very different nation. It will be a brave new world. God help us!

2008 Sep 29 11:28 AM

[Stone Fox C...:]

The earnings yield of the S&P 500 is significantly above that of the 2 year note making the market currently 70% undervalued. Its hard to argue that stocks aren't the cheaper investment at this point.

2008 Sep 29 07:22 PM

[peterthepai...:]

yes...down first...earnings will fall...sure we'll go up...in time!
but down first eh?

2008 Sep 30 04:57 AM

[alajac:]

PROTEST THE FED`S EXTORTION RACKET
A WRITE-IN ELECTION CAMPAIGN TO REVOLUTIONIZE RESOURCE DISTRIBUTION AND TAXATION
The `HOW TO FIX THE ECONOMY` plan addresses three problems with America`s economic system which are destroying our financial security.

Problem 1.
America`s National Debt is approaching 10 trillion dollars and the system is less than 100 years old. Nice work. If human bodies worked like America's currency supply, every time kids grew a little they would need to take out a loan so they could buy a transfusion of new blood. We can do the same things for ourselves that the Federal Reserve does without creating any debt at all.

Problem 2.
The Income Tax law was drafted by the same rich guys who invented the Federal Reserve system. They came up with a way to tax us `cash cows` while simultaneously avoiding paying taxes on their own wealth. A kid right out of college shouldn`t be paying a greater percentage of his accumulated wealth in taxes than Bill Gates. We need a flat, transparent, automatically-collecte... taxation system which corresponds closely to `benefits previously received`.

Problem 3.
Thanks to automation, robotics and computers, the days of plentiful, highly-paid jobs employing vast numbers of manual and mental laborers are gone.
Remember the days when there were millions of jobs that paid well enough to buy a house, two cars, an RV and a cottage on the lake...and still save plenty for retirement? If you do, then you`re pretty old. For most of us, those days are gone and they`re not coming back. To address this problem we need to either `kill off a lot of people` or else develop a new resource distribution model suitable for a world where jobs are going the way of `the buggy whip`.

The solutions in the plan were developed from the following premises.
1. Life is inherently unfair. The only legitimate function of government is to counter that unfairness.
2. Whatever story they tell you, it`s always and only about `the money`.
3. The results of any system depend on the incentives the system creates.
4. Cooperation is not communism. When they try to tell you it is, remember #2.
5. Property is actually owned by whoever can defend their claim to it.
5. Within a framework of proportionately equal costs and benefits for all, advantage should fall to those born into the worst circumstances.

Tell Congress we need a TOTALLY NEW DEAL!
Replace the Federal Reserve System
with U.S. Government Debt-Free Money,
Replace the Income Tax with a tiny, flat tax on `Benefits Received`,
and Create Better Social Security for ALL

WRITE-IN Alan Jacquemotte for U.S. President
More by and about alan can be found on U4Prez.com (user=alajac) and classmates.com
Send no money, just make copies of the plan and hand them out.



HOW TO FIX THE ECONOMY a plan to stimulate the economy, lower taxes, start paying off the National Debt, alleviate poverty and decrease crime
by replacing our OLD economic system with a NEW system based on
a new and debt-free U.S. currency to replace Federal Reserve Debt-Money,
a 0.5% tax on electronic transfers to replace the Federal Income Tax and the IRS,
and $1000 per month government privatization compensation for legal U.S. residents

The problem is always THE SYSTEM, never just `the people who screwed up`. Until we fix THE SYSTEM, similar bad things will keep on happening. Fault for the credit scam lies not with the banks and borrowers who lost their shirts and homes, but with our predecessors for allowing this SYSTEM to become law, and with ourselves for not getting rid of it earlier.

The primary problem with the OLD SYSTEM is that `our` money (actually the Federal Reserve`s Debt-Money) leaks its purchasing power like a bucket with a hole in the bottom leaks water. The Fed dollar currently buys less than 5% of what it bought in 1913. (To view a video that makes the problems inherent in our use of the Fed`s Debt-Money much clearer, do an online search for `Zeitgeist Fed`.) There is NO BENEFIT AT ALL in having a Central Bank (well, none for us) compared to having the U.S. Treasury print and distribute to ourselves our own debt-free money, and THE ONLY DIFFERENCE between having a central bank (like the Federal Reserve System) or not, is that ``One system costs us 95% of our wealth every hundred years and puts us and our posterity into mind-boggling debt until the end of time``... and the other one doesn`t. So the first thing we need for our NEW SYSTEM is our own, debt-free U.S. Government currency, backed by the value of all of the property within the nation`s borders. Bankers will tell you this will cause the end of civilization. It won`t.
Another problem is that the OLD SYSTEM`s income-based taxation creates wasteful tax avoidance behavior, requires an expensive tax reporting industry and an intrusive collection bureaucracy, and is, arguably, a form of `involuntary servitude`. Under a NEW SYSTEM, we could replace all income-related taxes with a one-half percent, automatically-collecte... electronic transfer tax (also known as a `debit tax`) which would be avoidable by business transactions that used only cash or barter. This change will not only rid us of the IRS (saving us the billions of dollars that are currently spent on `tax reporting`), it will also end the OLD SYSTEM`s penalization of work and entrepreneurism, as well as freeing up further untold billions currently spent on `tax avoidance`. (Also inhibits market speculation.)
The third problem with the OLD SYSTEM is that, because governments privatize all of their claimed property (allocating it however they like), everyone winds up being denied their natural right to free access to all property without being compensated for that loss. That`s not a problem for those with access to capital and property ownership, but for the rest of us, it is totally unfair and creates a slanted playing field upon which wealth tends to gravitate to the rich and well-connected. Free-market or socialist, every government`s allocation method results in `denial to everyone of free access to all land`, for which ALL governments should provide compensation.
Consequently, our NEW SYSTEM should pay to every legal adult resident $1000 per month (of the new, non-Fed, non-Debt-Money) which can REPLACE ALL FORMS OF PERSONAL AND CORPORATE WELFARE AND SUBSIDIES, no financial qualification required and no restriction on earning additional income (saving us billons in Social Security and Welfare bureauracracy costs and leaving Congress very little to do). Compensation for minors should be held in a trust fund to avoid incentivizing `baby factories`. Since everyone gets the same amount of compensation, this plan does NOT redistribute wealth, but will be of most help to those with the least accumulated wealth. Besides its immediate and direct assault on poverty, the benefits of this part of our NEW SYSTEM should include a reduction in crimes of all sorts, more jobs at better pay, better childcare, more rural homesteading, better maintained urban areas, no more `homeless veterans`, less intrusive and cheaper government with lower military-related expenses and a safer world in general. We can expect residents of other countries to insist their governments either copy our NEW SYSTEM or else apply for U.S. statehood (as Texas did in 1845) as soon as the see how well this NEW SYSTEM works.
HEALTH CARE...the AMA and FDA work to constrain competition in order to maximize the medical and pharmaceutical industries` ability to extort unconscionable prices for services and substances that should be affordable out-of-pocket. We need to train up thousands more doctors and other healthcare professionals and to decriminalize and unbridle access for adults to WHATEVER drugs adults feel they need and let the market work to make prices of normal medical help and pharmacology affordable. TO KICK OUR CRUDE (OIL) HABIT, Congress could add on a 10% surcharge at the gas pump, bump it up another 10% every 6 months, and rebate the surcharge revenue in monthly equi-dollar amounts to every registered car OWNER, regardless of how much they drive. The surcharge will incentivize cheaper alternatives which will rapidly come to market, no government subsidies or mandates required.
HELP ME SEND THIS MESSAGE to candidates running for Congress in 2010 and 2012. In order to get elected, you will need to pledge to help us THROW OFF the predatory Federal Reserve System and devise a NEW SYSTEM, one that ``provides new Guards for our future Security``. We can send a very clear message to those candidates with a MASS WRITE-IN CAMPAIGN for an unknown candidate running for no other purpose than to send that message. (That`s where I come in.) With the major parties fielding candidates who seem to be decent people but who are apparently unaware of the damage the present system is causing to us NORMAL folk, and with the 3rd parties addressing only symptoms rather than the BAD SYSTEM at cause, this election is the ideal time to vote for REAL CHANGE, not just new faces. I will register as a write-in candidate in every state from which I get emails expressing support. Pass this message along to several people every day (or, even better, to everyone you know today, and to everyone you meet from now on). IF EACH OF US EVERY DAY CONVINCE EVEN ONE OTHER PERSON TO JOIN US, OVER ONE BILLION PEOPLE CAN BE `ON BOARD` IN 30 DAYS. Get out (and online) and DO IT! For questions or more info, email alan_jacquemotte@yahoo...
MAKE COPIES OF THIS PAGE AND HAND THEM OUT. THE HARDER WE PEDAL, THE FASTER WE`LL GET THERE.

2008 Sep 30 09:51 AM

[icandoitdon:]

"The earnings yield of the S&P 500 is significantly above that of the 2 year note making the market currently 70% undervalued. Its hard to argue that stocks aren't the cheaper investment at this point. "

wake up.

the 2 year note is artificially depressed, yielding almost nothing, precisely because it is a flight to safety trade. as far as the earnings yield is concerned, current estimates for the s&p 500 are virtually worthless.

the market is 70% undervalued. sure it is. in your dreams.

2008 Sep 30 04:40 PM