There once was a guy named Obama, who caused quite a financial drama, when he scolded the banks, their share prices tanked, and investors went running to Momma!
Wow, what a week on Wall Street. The big dogs of gluttony were given a kick in the rear by no less than the President of the United States. Did they derserve it. Yes they did. Do they deserve the financial and regulatory chains that will envelope them over the next few years. Most certainly.
When "banks" like Goldman Sachs use their clients money to buy tankers full of oil, sitting in docks around the world until the price of oil spikes, and when J.P. Morgan owns wind farms in direct competition with some of it's own clients and investors during a green energy revolution, it's time for change. When Goldman Sachs and other big banks drive up food prices in both the developing world and the developed world, it is time for change. When they pay out $160 Billion dollars in executive bonuses in the face of the devastation of the U.S. economy, it's time for change!
What do these companies make? Why they make money, lots and lots of money, and they make "no apologies". Now I know that statement goes to the very heart of capitalism, but at what cost. For each and every member of the United States congress, they have three lobbyists in Washington to look after their interests. For clarity, the American public have one person speaking for them for every "three" people speaking for the banking lobby, and that doesn't even address the tie in with actual Government bodies that were meant to regulate these behemoths and did not.
Maybe President Obama should consider financial advisers who "are not" the alumni of Goldman Sachs and J.P. Morgan. Just maybe, an outsiders point of view might bring clarity to a bungled regulatory regime. After a full year of "back burner" status while the health care debate took center stage, the economy is finally and decisively, in Obama's sights.
So where does this leave the small investor trying to find sense from the current fiasco? Technology, green energy and resource companies. Companies that actually make things that will make the world a better place and that will make life easier, and the environment cleaner. Companies where they still "make things" as well as make money. Buying such companies on the current dips could boost your Retirefund tremendously over the coming year.
Don't cry for the big banks. They always find a way to wriggle free. Watch for that to happen over the coming months.
No it's not drastic, but it is far and away more than any previous administration in the United States have ever committed to. A 17% reduction in CO2 levels by 2020, below the 2005 level. It's not Kyoto, but it is a solid commitment, and when the USA leads, everyone else is bound to follow. Even China, who has taken over the title as worlds biggest polluter this year (from the USA) is catching the drift with some promises of Carbon reducing policies of it's own.
Canada's Prime Minister as well as many other world leaders will also be in attendance at Copenhagen. Now you must ask yourself, what affect will this have on my Retirefund?
In a nutshell, it is a complete game changer and will have a huge affect on investments all over the world. If these leaders come to an agreement, no matter how small, on reducing their carbon footprint on this planet, it is the beginning of the end for some companies and industries and it is the beginning of great wealth and prosperity for other companies who embrace the Green Energy revolution that is just beginning. The COP15 summit is the catalyst which puts this revolution into overdrive. That's how much of a game changer it is.
At this writing, California is legislating that fully 20% of all energy produced in the State beginning in 2010, must come from renewable resources. Federally in the U.S., there is a strong movement to legislate a similar law for the entire Country of 15% of total energy being produced by renewable resources beyond 2010. Billions of dollars are in play. Wind and Solar companies are springing up like the oil derricks of the 1890's. The "hydrogen highway" is being built in California. Hydrogen fuel cells burning, at first, natural gas and eventually pure hydrogen, will eventually play the major part in the greening of our planet. This is no time to be a wallflower. If you are not invested in the green revolution, you will merely be a spectator in the game, which will be the greatest wealth building era since the industrial revolution.
Make no mistake (as President Obama likes to say) This is a game changer. If you are invested in coal energy, you should probably get out now! If you are invested in pure oil plays you still have some time. If you are piling your money into Wind and Solar companies, you should maybe take a double check on that. They will eventually only be bit players in this great game but they will gain significantly in the short to medium term. Hydrogen is the future of energy, no matter how you look at it, and Natural gas is a great store of hydrogen for fuel cells, which have the greatest potential to produce the most wealth. PEM fuel cells can be stacked and therefore, can produce energy at the back up generator level, and at the giant energy plant level. They have the capacity to actually replace large oil fired, coal fired, and even nuclear power plants.
There will be flashes in the pan, so to speak, of ideas that, at first seem like solutions, but that will peter out like a late night camp fire. Clean coal (an oxymoron - as there is no such thing as clean coal) is the obvious one. Corn ethanol is another. It produces at least the same or even more carbon in it's production, than it saves by it's use as a gasoline additive.
"Could be the largest economic opportunity of the 21st century." - Venture Capital Firm Kleiner Perkins Caufield and Byers
Do your homework and do it well before you invest, but don't sit on the sidelines of this great race. As Wayne Gretzky once said, "You miss 100% of the shots you don't take"!
When discussing the upcoming COP-15 Global Environmental conference in Copenhagen, many pundits suggest that there are so many differences of opinion between countries and within various countries, both developed and developing, that the chances for any kind of agreement will be slim to none. I believe these naysayers have completely ignored one of today's most powerful, global phenomena, the Obama Effect.
The United States President is in full court press mode on this subject, as is evidenced by his recent push at the G20 summit and his National Energy Summit which basically lays out how he believes the United States will lead in the Green Energy revolution. He is essentially changing the game that has been played by Business and Government thus far.
Under the Bush administration the whole subject was framed as a battle between business-economy and Government-Environment. Barrack Obama has already re-framed the message as "essential" to economic prosperity. He has re-framed the word "Green" in the American Lexicon into the word "competitive", and those businesses and Governments who ignore this simple marketing message, do so at their own financial peril. So do investors.
As an investor, if you are betting against the Green revolution taking center stage at Copenhagen, then you stand to lose and lose big. A number of major players on Wall Street are already positioning themselves to benefit from this giant green shift in business. Some have even laid out their entire investment horizon over the next 20 years, based solely on the Green revolution in business. It is talked about in terms of other monumental shifts in economic power such as the Industrial revolution and the Information revolution. It will make and break fortunes in the coming years, so if you haven't already, start doing your research.
Companies with first mover status in Wind Energy, Solar Energy, Electric batteries (for autos) and fuel cell power have made jumps between 100% and 150% in just the past 8 months. It is the start of what might become the largest bull market since Microsoft and Apple first emerged as the Information age began. Once the United States lays out it's plan to lead this new economic shift at the Copenhagen summit, other countries will have no choice but to play by the new rules, or be left behind once again as the future of energy will be dictated by the worlds largest and most diversified economy. Look for fossil fuel subsidies to be replaced by green energy subsidies. The shift will be monumental.
Don't miss this great ride which is only just beginning.
On the day that President Obama took his oath of office, America was 10 $Trillion in debt. By the end of this year (2009) U.S. debt will surpass 13 $Trillion. By 2017 (8 years out) that debt will surpass 23$Trillion if nothing changes! How did this happen? How will this affect your Retirefund? How can America cope with this huge debt load? What effect will this have on the U.S. dollar?
The trail down this slippery slope of deficits and debt began over 8 years ago. On the day he took the Oath of office, George W. Bush (Bush 2) inherited a "national surplus" from President Bill Clinton. It was the first U.S. surplus in 30 years! Bush 2 campaigned on a promise to cut taxes and reduce Government. Dubya had been there when his father, George Herbert Walker Bush (Bush 1) spoke those now infamous words about not increasing taxes "Read my lips, no tax increases"! He was also there when his father famously recanted on that promise and set in motion substantial tax increases to help pay for the first Iraq War (operation Desert Storm). That controversy probably lost Bush 1 the election to President Clinton and it might be said that it was burned into the consciousness of Bush 2.
After George W. bush took office, he introduced the largest tax reduction in United States History. He and other Republicans looked back fondly at the Reagan years of Reaganomics ie: "lower taxes, reduced Government" which many people believe to this day was Reagan's legacy. However President Reagan was a pragmatist and when recession hit and deficits followed, he went on air to explain to the American people that he was not about to let his grand children pay for his debts and promptly raised taxes in a number of areas. Many of today's Republican politicians like to forget that simple fact, but every President in history acted when the unpopular decision to raise taxes had to be made to reduce the national debt, and they reluctantly did so, knowing full well that American voters want lower taxes, more medical benefits, more social security and high pensions but do not want to pay for them. Sometimes they paid the price at the polls, like Bush 1 did.
Bush 2 was having none of that. He did not make decisions based on fiscal responsibility, but on political expediency. He simply did what he thought the voters would reward him for. Immediately upon taking office, he announced the largest tax cut in American history, albeit, cuts that would benefit mostly rich Americans. When 9/11 hit and America declared it's "war on terror" (actually it is a war on "terrorism not terror", but that's for language critics to debate)President Bush directed U.S. Forces into Afghanistan to route out Al-Queda but at the same time, he and the hawks in his administration looked for a reason to attack Iraq, a country that had nothing to do with 9/11. We all know how that worked out don't we, but I digress. My point here is only financial and I will leave the debate about Iraq to others for now.
The bottom line is that, in the middle of two extremely costly wars, and after the largest tax cut in U.S. history, Dubya did what no other wartime President had ever done in history. "He cut taxes again"!
This second set of tax cuts were, arguably, larger than his historical cuts upon taking office. No other President in history had ever done this before. In fact every other President faced with such challenges, had always raised taxes, or cut benefits, or both, to pay for war. Americans, and indeed all freedom loving nations know that this is a necessary thing to do at such times. Apparently Bush missed that class at Harvard.
That essentially brings us up to today's gigantic and growing, U.S. Debt! Those massive tax cuts, which mostly benefited wealthy Americans, are still taking their toll on the country. Two wars are still going on, and are being paid for with borrowed money from other countries, the largest debt holder being Communist China at approx. 1.6 $Trillion in U.S. Treasury bills. China has made no secret of the fact it is worried about the possible future decline in the U.S. dollar (and thus it's foreign reserves of Treasuries) As of late, they have been on a buying binge of commodities from oil, to potash, ingredients for making steel, plastic etc as it seeks to diversify the stored value of it's reserves. Now China is openly calling for the establishment of an "international currency" based on five national currencies, the dollar, Euro, Pound, Yen and Renmimbi.
Suffice to say this is not going to happen any time soon, but it should give pause (or even shudders) to America and the entire west. By 2050 China's economy will be twice that of the U.S.A. and that has ramifications far beyond just financial. China is still, after all, a communist, totalitarian country and democracy is a pipe dream still.
Now how will all of this affect the Retirefunds of we mere mortals? Since I brought you to here, I'll give it a shot!
1. Taxes will increase in the U.S.A. and this "must" happen soon.
There should be a new gasoline tax of perhaps 10% instituted now, before gas starts to rise again. This will spur investment in green energy.
The tax deduction for housing (mortgage interest deductions) should be capped at $250,000 so as to allow the deduction for basic housing but not for extravagant housing in the millions.
There should be an immediate 2% "goods and services" tax implemented federally on all goods and services sold/purchased in the United States.
There, now that I've fixed some of the deficit problems, how will all this affect our Retirement funds in the meantime?
1. The U.S. dollar will decline in value over the next three years spurring inflation! 2. As this occurs investors will seek better stores of value and the stock market will rise along with commodities, oil, gas, food etc.
3. The U.S. cost of living will increase reducing the standard of living in the USA for many of those who aren't prepared.
4. U.S. Housing prices will decrease, or at least that market will remain stagnant for years to come.
5. The U.S. national defense budget will be reduced.
6. Health care, (medicare, medicaid, etc) will be drastically reformed, or it will be the ball and chain that drags the U.S. economy ever deeper into the abyss.
And remember this my Canadian friends. When the U.S. Sneezes, we always catch a cold. What will happen if the U.S. catches pneumonia? Here's hoping it won't. Here's hoping the the good ole U.S. of A will lead the rest of the world out of this mess that it led us into!
President Obama announced yesterday that the Derivatives Market is about to undergo a major overhaul in that these exotic investments will become more transparent by hopefully being (for the most part) listed on Derivatives Exchanges
Since the big banks and Insurance Companies (such as AIG) have written most of these contracts, and since there are potentially $Trillions of dollars in assets that cannot be valued properly, and therefore cannot be cashed by the buyers, affecting the health of the entire global financial system, don't bet that the administration will have an easy time convincing these entities to list their contracts on open exchanges.
Though this transparency may be good for the overall economy, it may not be very good for some big players whose financial future may depend on keeping these contracts from the public eye.
However, if I don't miss my guess, the Obama administration will make these changes, or at least a strong oversight regimen, probably this year.
President Obama said today that every company who gets a taxpayer bailout (excluding those who already are on the dole) will be held accountable in several ways, not the least of which is to set CEO salaries no higher than $500,000!
To most of us average tax payers, this makes solid, common sense. Too bad the Bush administration did not make the same requirement for Citibank, AIG etc. when they received the first of these bailouts.
However better late than never I say. The same goes for infrastructure spending! With the Retirefunds of many now cut in half in some cases, it is imperative that these projects both in the USA and Canada start immediately.
But what about the Futures Exchanges like the Nymex and CME and Options Exchanges like the CBOE and ICE that have accommodated the selling of Trillions of dollars in Derivatives, every day, to the point where there is almost 4 times the value in Derivatives sold around the world, than the value of the underlying stock!
After all, isn't this the main reason for the financial meltdown?
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