So the speech was what I expected, except it had even fewer details than I thought it would. What was amazing is how President Obama connected the dots to $14.5 trillion in debt and a $1.7 trillion deficit to the wealthy. The focal point of the White House's war on prosperity isn't on the "millionaires and billionaires" mentioned so often during the tough-toned budget speech, but on households making $250,000 or $400,000 a year. Yes, these people are blessed, but they weren't born with silver spoons. I was raised to give back as most Americans are taught, but after the government takes their pound of flesh I demand the right to decide who I think is unfortunate enough to get my hard earned dollars.
This brings me to the line that all Americans "deserve basic a measure of security and dignity", which piqued my interest. What is a basic measure of security and why does anyone deserve it? Sure, it's in the Judeo-Christian faith to help and protect our neighborhoods, but how far does that extend? Physical security is obvious, and a universal benefit for all citizens. But, the idea that all Americans should pitch in and carry the weight of others that are not even trying to put skin into the game is wrong. We are a forgiving nation, but we draw the line at being suckers, and we draw the line when things are taken from us against our will and consent. Yet, when it's done via the government, this would-be crime is not only noble, but supposedly going to solve our financial dilemma.
Then there is the notion of me having to contribute to someone else's dignity.
1. bearing, conduct, or speech indicative of self-respect or appreciation of the formality or gravity of an occasion or situation.
2. nobility or elevation of character; worthiness: dignity of sentiments.
3. elevated rank, office, station, etc.
4. relative standing; rank.
5. a sign or token of respect: an impertinent question unworthy of the dignity of an answer.
I always thought dignity came from within and people had to extend respect to those that carried themselves with respect. I think dignity in the speech was a euphemism for money in the Huey Long sense; every man deserved money to live and buy a house even if said man didn't work. In my lifetime I've always looked up to those that walked with dignity even as odds were against them. Great men like Martin Luther King fight with dignity for opportunities not to be a ward of the state, but to get a chance to get in the game. A chance to develop God's gifts and reap the rewards of being an American.
I guess now the rewards for being an American means chilling out at home all day while others work to make sure you feel dignified. The plan would only turn great minds and great potential into domesticated zombies stuck outside the mainstream surviving, with pride, on money forcibly taken from those that have their own individual obligations. Consider this would-be utopia.
* The harder I work the more I owe society.
* The less I work the more society owes me.
"Yes, we take responsibility for ourselves, but we also take responsibility for others." - President Obama
In this brave new world, the mugging victim would do the jail time for the mugger. In this brave new world, embezzlers would live in mansions staffed by their victims. In this brave new world, college graduates would do the jobs they trained for while high school dropouts would get the paycheck for that work. Who takes responsibility for others? We take responsibility for family and friends and some co-workers and neighbors. We occasionally take responsibility for complete strangers. But, the "we" are each person as an individual making a decision not the government looking to punish success.
By the way, are we being responsible by driving the economy off a cliff, handcuffing commerce and bashing capitalism?
NAHB Chairman Bob Nielsen issued a statement saying "homeowners cannot afford higher taxes at a time when the housing market is struggling to recover and contribute to economic growth...any attempt to chip away at the mortgage interest deduction would represent an attack on middle-class families." Piggybacking off his comments it will be the less wealthy that will be stuck under a heavy tax system that truly suffers the most. The same is true for financial regulatory reform and all the other schemes that purport to level the playing field or punish job creators.
In its initial assessment of Obama's budget, the CBO says spending would average 23.3% over the next decade, up from 19.7% in 2007 and 18.2% in 2001. Assuming all the President's taxes went through, along with endless surtaxes and taxes associated with Obamacare, the nation would face endless budget deficits averaging 4.8% of GDP. Federal debt held by the public would double under the budget from $10.4 trillion (69% GDP) at the end of FY11 to $20.8 trillion (87% GDP) by the end of 2021.
What the President somehow fails to take into account is the psychology of people and small businesses once the government starts to snatch more money from them (by the way, the notion that it costs the government money to allow hardworking people to keep more of what they earn is preposterous and bizarre). The current recovery was delayed at least a year longer than it had to be because of the saber rattling and single-minded focus at wealth redistribution.
Businesses, banks, and households went into a shell, like frightened armadillos hoping the noise would fade. The tax cuts desired by the President on regular people, not Warren Buffett, would kill the economy as it kills the spirit of determination and success.
Update on BP Largess
I had to update the BP story as it is the ultimate cautionary tale. When populist plans to dismantle companies or limit profits go into affect it leads to something akin to the New York City blackout of 1977. I'm talking about wild looting with no consequences. In a Washington Post story about "Spillionaires" and the "BP Rich", it was revealed just how deep the greed was in this free for all. One sub contractor billed BP $15,000 a month for a generator normally rented for $1,500 a month. One land owner charged BP $1.0 million for land that rented previously for less than $1,700. St. Bernard parish enjoyed the kind of Marti Gras not seen since government checks poured in post Katrina.
Once a 30-day emergency was declared, the parish president was able to assign contracts without typical checks and balances. So winners were picked just as losers were picked. Government officials took the first $1.0 million BP check and bought cameras, printers, a file cabinet, and 712 shirts with the parish name emblazoned. One contractor won $125.0 million to do work many say it had no experience doing. Parish homeland security director David Dysart (a parish in Louisiana has a homeland security director?) got $23,000 for working 497 hours of overtime in less than seven weeks. I pride myself with being one of the hardest workers out there, I work almost every single day of the week including most holidays and late nights, but after crunching the numbers I couldn't pull off what Mr. Dysart apparently did.
The economy continues its slow drift higher, but it's widespread, and becoming stickier as witnessed through the Fed's Beige Book report.
Rooting for More Trash
By: David Silver, Equity Research Analyst
I found an interesting chart in my travels around the internet trying to show a correlation between rail shipments and GDP, and while there is a link, there is an uncanny correlation between waste shipments and GDP growth. The chart on the left is somewhat dated (only goes through the end of 2010), but it still shows the correlation. The chart on the right shows the comparison of GDP growth from the first quarter of 2010 through 4Q10 (red line) with year over year changes in waste shipments (blue line). Hopefully, the correlation will break the trend as waste shipments were extremely weak during the first quarter of 2011, falling 10.9% year to date.
Refer to our website at www.wstreet.com for the remainder of the piece.
Building Material & Housing Market History
By: Brian Sozzi, Equity Research Analyst
Outside of the furniture and home furnishings category, building material and garden supply sales, which were up 2.21% in March compared to February, caught my attention from the retail sales report by the Census Bureau. Building material and garden supply sales have been on an impressive streak, rising year over year for 13 consecutive months, and representing 6.4% of total retail sales in March. Total building material sales in March of $25 billion were still 15.9% below March 2006, which happened to be the monthly peak in the category from the previous economic expansion.
For historical context, from peak (March 2006) to trough (October 2009), building material sales slid 27% as new build activity slowed to a standstill, homeowners moved to renter status for whatever reason, flippers exited the market amid tight credit and plunging home values, and those gainfully employed refrained from pouring more money into an asset class bleeding value.
Please visit www.wstreet.com to read the remainder of the piece.
The market was already wobbly from news the 10-year Greek bond is now yielding over 13%. Add into that initial jobless claims jumping back above 400,000 and it's going to be tough sledding out of the gate. The one plus is the IPO market is heating up.
Arcos, the largest McDonald's (NYSE:MCD) franchisee and Latin American giant, has expanded its offering and will raise more than $1.25 billion.
ZipCar is also expanding its offering by 31% to $174.0 million. I must say I hate driving behind one of those damn ZipCars. The people driving get behind the wheel once or twice a year and act like their hauling Faberge eggs. Plus, they're often the kind of people that think if they drive ten miles below the speed limit it might save a tree or insect that is down to its last 100 billion.