There has just been a "reconcilliation" between Hamas and Fatah, the two factions of the Palestinian government. The US should cut off aid to the Palestinian Authority now that terrorist Hamas is part of it. In case there was any doubt about Hamas in any quarter, here are the key sections of that organization's statement on the death of Bin Laden:
"We [Hamas]regard this as a continuation of the American policy based on oppression and the shedding of Muslim and Arab blood...We condemn the assassination and the killing of an Arab holy warrior. We ask God to offer him mercy with the true believers and the martyrs."
Monday, May 2, 2011
Sunday, May 1, 2011
Obama's "risky" gasoline strategy
Reuters is out this afternoon with an article discussing president Obama's "risky" gasoline strategy. Reuters starts by recognizing that the Obama strategy is not resonating with the American people. then comes the truly funny part of the article:
"'The most important thing we can do is have a long-term strategy to make sure we don't end up here again,' Heather Zichal, Obama's top energy adviser, said in an interview.
That strategy includes a push to reduce U.S. oil imports by a third over a decade by increasing domestic production, making cars and trucks more efficient, and fostering biofuels and natural gas."
What can anyone say to this other than "Ha, Ha, Ha!" Obama is pushing to increase domestic production? How can this actually get released in an article from Reuters? Doesn't anyone ever check facts anymore? Obama has stopped offshore drilling and totally killed it in the Gulf of Mexico. the estimate for 2011 is that these moves alone will cut domestic oil output by close to 10%. So now taking steps to cut output is a "push to increase" domestic production? How dumb does Reuters think its readers are?
Or how about Obama is "fostering" natural gas. anyone with a brain knows that this is not true. Indeed, the fear is that Obama's people will take steps to halt the dramatic growth in natural gas production.
I guess that there must be folks out there in the world who read articles like this one and accept them at face value. Too bad. No one should be that gullible.
"'The most important thing we can do is have a long-term strategy to make sure we don't end up here again,' Heather Zichal, Obama's top energy adviser, said in an interview.
That strategy includes a push to reduce U.S. oil imports by a third over a decade by increasing domestic production, making cars and trucks more efficient, and fostering biofuels and natural gas."
What can anyone say to this other than "Ha, Ha, Ha!" Obama is pushing to increase domestic production? How can this actually get released in an article from Reuters? Doesn't anyone ever check facts anymore? Obama has stopped offshore drilling and totally killed it in the Gulf of Mexico. the estimate for 2011 is that these moves alone will cut domestic oil output by close to 10%. So now taking steps to cut output is a "push to increase" domestic production? How dumb does Reuters think its readers are?
Or how about Obama is "fostering" natural gas. anyone with a brain knows that this is not true. Indeed, the fear is that Obama's people will take steps to halt the dramatic growth in natural gas production.
I guess that there must be folks out there in the world who read articles like this one and accept them at face value. Too bad. No one should be that gullible.
The Stock of the Month for May -- VPV Invesco VK Pa. Value Muni fund
My stock pick for May is a closed end fund that invests in municipal bonds in Pennsylvania, the Invesco Van Kampfen Pennsylvania Value Muni fund (symbol VPV). Since the start of 2011, investors hae been wary of putting too much money into municipal bonds, particularly after some of the predictions of increasing defaults made by some pretty big names. Instead of defaults, however, we have been seeing state after state manage to close their budget gaps by slashing spending or, in a few cases, raising taxes. Now, the stars are aligning in a way that ought to make munis in general and VPV in particular the place to be for some of your portfolio.
First, the Fed has made clear that interest rates are going to stay low for at least the rest of this year. To be clear, the Fed is talking about short term rates, so the actions by the Fed is not going to hold rates for long term munis steady, only the rates for short term instruments. A fund like VPV, however, is leveraged to the extent of about 25% of total assets. By keeping the short term rates at next to nothing, the Fed is reducing the cost of that 25% financing to next to nothing as well.
Second, the level of uncertainty in the economy is rising. Economic growth stagnated in the first quarter and the price of energy has continued to soar through April. Unemployment claims keep rising. Inflation is strengthening. Even the Chinese economy may be about to slow down. Indeed, we may be watching the start of the second leg of a double dip recession. On the other hand, the economy may prove strong enough to withstand all of these upsets. A budget deal may be reached that results in an increase in confidence and economic growth. In other words, even more than usual, it is difficult to predict the direction and speed of the economy. In my view, it is not a great time to deploy more assets into the equity markets.
Third, right now, VPV is paying a return of 7.21%. This is free of federal tax (unless you pay the AMT, in which case about 10% of what you receive is subject to that tax, making the tax rate 2.8%). VPV is also selling at a discount of 4.95% from net asset value. This means that the bonds owned by the fund are worth about 5% more than the stock price. Since these discounts tend to move towards zero, there is an upwards push on the stock price which results. VPV also has about four months of earnings socked away which can be used for future dividends. This greatly reduces the likelihood that VPV will reduce its dividend in the next year barring major market upheaval.
Fourth, Pennsylvania has the major benefit of the Marcellus Shale drilling and production to help it meet state and local financial needs. Drilling in this enormous field is estimated to add about 100,000 jobs in Pennsylvania by year end. It is also estimated that economic growth in the state will be about 1-1.5% higher than otherwise just due to the drilling/production activities. What this means is that state and local expenditures will be reduced in the Keystone state at the same time that revenues rise from the increase in incomes. Simply put, this will make the likelihood of default by Pennsylvania localities much less.
Fifth, the city of Harrisburg, Pennsylvania’s capital, is facing some severe financial problems due to construction of a local facility that is draining city coffers. For the moment, this continues to cast a bit of a pall over municipal bonds from Pennsylvania. A default by Harrisburg will have no effect on the other state municipalities, however, so the price depression represents something of a buying opportunity.
VPV is not a home run kind of investment. Rather it is an appealing place to put funds at the present time. It will provide a nice tax-free return with much lower risk than most stocks.
Disclosure: I am long VPV.
First, the Fed has made clear that interest rates are going to stay low for at least the rest of this year. To be clear, the Fed is talking about short term rates, so the actions by the Fed is not going to hold rates for long term munis steady, only the rates for short term instruments. A fund like VPV, however, is leveraged to the extent of about 25% of total assets. By keeping the short term rates at next to nothing, the Fed is reducing the cost of that 25% financing to next to nothing as well.
Second, the level of uncertainty in the economy is rising. Economic growth stagnated in the first quarter and the price of energy has continued to soar through April. Unemployment claims keep rising. Inflation is strengthening. Even the Chinese economy may be about to slow down. Indeed, we may be watching the start of the second leg of a double dip recession. On the other hand, the economy may prove strong enough to withstand all of these upsets. A budget deal may be reached that results in an increase in confidence and economic growth. In other words, even more than usual, it is difficult to predict the direction and speed of the economy. In my view, it is not a great time to deploy more assets into the equity markets.
Third, right now, VPV is paying a return of 7.21%. This is free of federal tax (unless you pay the AMT, in which case about 10% of what you receive is subject to that tax, making the tax rate 2.8%). VPV is also selling at a discount of 4.95% from net asset value. This means that the bonds owned by the fund are worth about 5% more than the stock price. Since these discounts tend to move towards zero, there is an upwards push on the stock price which results. VPV also has about four months of earnings socked away which can be used for future dividends. This greatly reduces the likelihood that VPV will reduce its dividend in the next year barring major market upheaval.
Fourth, Pennsylvania has the major benefit of the Marcellus Shale drilling and production to help it meet state and local financial needs. Drilling in this enormous field is estimated to add about 100,000 jobs in Pennsylvania by year end. It is also estimated that economic growth in the state will be about 1-1.5% higher than otherwise just due to the drilling/production activities. What this means is that state and local expenditures will be reduced in the Keystone state at the same time that revenues rise from the increase in incomes. Simply put, this will make the likelihood of default by Pennsylvania localities much less.
Fifth, the city of Harrisburg, Pennsylvania’s capital, is facing some severe financial problems due to construction of a local facility that is draining city coffers. For the moment, this continues to cast a bit of a pall over municipal bonds from Pennsylvania. A default by Harrisburg will have no effect on the other state municipalities, however, so the price depression represents something of a buying opportunity.
VPV is not a home run kind of investment. Rather it is an appealing place to put funds at the present time. It will provide a nice tax-free return with much lower risk than most stocks.
Disclosure: I am long VPV.
The Media Blitz about the Budget -- 2
In a piece in the Weekly Standard, John McCormack writes about the town hall meetings held by congressman Paul Ryan of Wisconsin, the author of the GOP budget proposal. I had seen the media coverage of the Ryan meetings. For the most part, the coverage began and ended with discussion of those who came to oppose Ryan's plan. From watching the coverage, it seemed that there was massive anger against Ryan for his budget work. Now that I have read McCormack's article, I learn that (as I had suspected) the large majority of those attending the town hall meetings supported the Ryan plan.
One town hall that was prominently featured in the media was the one at which a heckler was eventually escorted out for disrupting the meeting. It was a "sign of anger" we were told by the media. Now I learn that after the man was removed, another person at the same meeting thanked Ryan for his budget and for doing the right thing with the result that ryan then got a standing ovation. So much for widespread anger.
One town hall that was prominently featured in the media was the one at which a heckler was eventually escorted out for disrupting the meeting. It was a "sign of anger" we were told by the media. Now I learn that after the man was removed, another person at the same meeting thanked Ryan for his budget and for doing the right thing with the result that ryan then got a standing ovation. So much for widespread anger.
The GOP field for the presidential nomination
The Sunday New York Times has a big article about the "weak" Republican field of presidential candidates and about how party officials are getting desperate to push additional candidates into the fray. This is now becoming the conventional wisdom among those in the media. It also is just so much nonsense.
Four years ago, when the 2008 campaign began at the end of 2006, we heard lamentations about the ridiculously long path to the presidency in the USA. the campaign began too early, we were told by the same people now shaking their heads over the GOP field. Only a crazy person would go through the endless camapign, they told us over and over. It has to be shortened, they bleated. So now, the GOP candidates are not running to get into the campaign even though there is only (gasp!) just under nine months until the Iowa caucus. Oh, the horror! It is a calamity!
The truth is that the only reason why a candidate has to jump into the campaign at this point is that the media gurus have done there best to make it a requirement to show that one is "serious". There is also the much lamented need to raise enormous amounts of campaign cash; not only do they want to tell us how debilitating it is to raise the cash, they also want to tell us that anyone who tries to do it in a shorter time period cannot be "serious".
At this point in the year, the only thing that is out there for the GOP candidates to do is to take part in the debate that is coming up next week. What is the point? Isn't it a better thing for the Republicans to spend their time trying to get the federal budget under control so that job growth can return to the USA than carping at each other in a way that will just split the party into warring camps? The real battle is not between Mitt Romney's view of trade agreements and Newt Gingrich's position on free trade. The real battle is between those who want to prevent the demise of the American economy and those (like Obama) who want to follow policies that will cause further damage to the economy.
Over the next few months, more candidates will get into the race no matter what the New York Times says. Indeed, any GOP candidate who listens to the "wisdom" published by the Times will not have much chance of success with the GOP electorate. The party faithful know that the Times does not wish them well. Essentially every political article in the Times has an agenda that it is pushing. At the moment, the agenda is to show that president Obama cannot be beat for re-election. After all, Obama is going to raise a billion dollars! The GOP field is "unserious", weak and divided. It is getting too late for a strong GOP candidate. Sorry! Even if the Times pushes the myth of Obama invincibility, it will not make it so. Indeed, the next election will be basically a yes/no vote on Obama by the American people. So long as the GOP nominates a candidate who the people can see as being president(which basically rules out a jerk like Trump or someone like Palin who has just too many negatives attached to her, the focus will be on Obama and his failures. Does anyone think that if Obama gets a billion dollars from his cronies at GE and elsewhere that it will lower unemployment? Will it strengthen the dollar? Lower inflation? End the fighting in three wars? Lower oil prices? Improve the prospects for the future of the USA? A big chunk of the American people have stopped listening to Obama and the Obamacrats. Obama can run 1000 commercials, but it will not change their views. They know what Obama has done, and they do not like it. They know that Obama is not a man of his word, so they will not listen to commercials. Indeed, this will probably mean that Obama will run a very negative campaign against the GOP nominee in an effort to create someone to run against. For most of the possible "unserious" and weak GOP field, however, it just will not work. Unless Obama can turn the country around fast, he is in big trouble. Sorry NY Times, you just do not get it!
Four years ago, when the 2008 campaign began at the end of 2006, we heard lamentations about the ridiculously long path to the presidency in the USA. the campaign began too early, we were told by the same people now shaking their heads over the GOP field. Only a crazy person would go through the endless camapign, they told us over and over. It has to be shortened, they bleated. So now, the GOP candidates are not running to get into the campaign even though there is only (gasp!) just under nine months until the Iowa caucus. Oh, the horror! It is a calamity!
The truth is that the only reason why a candidate has to jump into the campaign at this point is that the media gurus have done there best to make it a requirement to show that one is "serious". There is also the much lamented need to raise enormous amounts of campaign cash; not only do they want to tell us how debilitating it is to raise the cash, they also want to tell us that anyone who tries to do it in a shorter time period cannot be "serious".
At this point in the year, the only thing that is out there for the GOP candidates to do is to take part in the debate that is coming up next week. What is the point? Isn't it a better thing for the Republicans to spend their time trying to get the federal budget under control so that job growth can return to the USA than carping at each other in a way that will just split the party into warring camps? The real battle is not between Mitt Romney's view of trade agreements and Newt Gingrich's position on free trade. The real battle is between those who want to prevent the demise of the American economy and those (like Obama) who want to follow policies that will cause further damage to the economy.
Over the next few months, more candidates will get into the race no matter what the New York Times says. Indeed, any GOP candidate who listens to the "wisdom" published by the Times will not have much chance of success with the GOP electorate. The party faithful know that the Times does not wish them well. Essentially every political article in the Times has an agenda that it is pushing. At the moment, the agenda is to show that president Obama cannot be beat for re-election. After all, Obama is going to raise a billion dollars! The GOP field is "unserious", weak and divided. It is getting too late for a strong GOP candidate. Sorry! Even if the Times pushes the myth of Obama invincibility, it will not make it so. Indeed, the next election will be basically a yes/no vote on Obama by the American people. So long as the GOP nominates a candidate who the people can see as being president(which basically rules out a jerk like Trump or someone like Palin who has just too many negatives attached to her, the focus will be on Obama and his failures. Does anyone think that if Obama gets a billion dollars from his cronies at GE and elsewhere that it will lower unemployment? Will it strengthen the dollar? Lower inflation? End the fighting in three wars? Lower oil prices? Improve the prospects for the future of the USA? A big chunk of the American people have stopped listening to Obama and the Obamacrats. Obama can run 1000 commercials, but it will not change their views. They know what Obama has done, and they do not like it. They know that Obama is not a man of his word, so they will not listen to commercials. Indeed, this will probably mean that Obama will run a very negative campaign against the GOP nominee in an effort to create someone to run against. For most of the possible "unserious" and weak GOP field, however, it just will not work. Unless Obama can turn the country around fast, he is in big trouble. Sorry NY Times, you just do not get it!
UBS may move some people -- Is anyone surprised?
The head line in the local news is that banking giant UBS may move hundreds of workers out of its Stamford offices. Leaders like Governor Malloy (who used to be mayor of Stamford) claim to be shocked by the prospect. Why is that? Since taking office in January, Malloy has moved aggressively to raise taxes throughout the state, but with a big focus on the high end of the income spectrum. That means that the big advantage that Connecticut had with regard to tax rates when UBS moved here in the late 1990's is all but gone. There is no real difference anymore between the top income tax rates in New York and Connecticut. Back before Connecticut had a state income tax, Stamford was able to rebuild the entire downtown of the city based upon luring large corporations whose executives wanted to excape from the high New York tax rates. Even after the state put in an income tax, there was still a major differential in rates between Connecticut and NY. The flow of companies relocating dwindled, but it did not stop. With the latest moves by Malloy and the Democrats, the flow is starting to reverse.
The most important industry in Connecticut insofar as tax contributions through the income tax is concerned is the combination of banks and hedge funds in Greenwich and Stamford. To the extent that the Obama economy has not damged these industries, the Malloy tax rates are now driving them out.
The most important industry in Connecticut insofar as tax contributions through the income tax is concerned is the combination of banks and hedge funds in Greenwich and Stamford. To the extent that the Obama economy has not damged these industries, the Malloy tax rates are now driving them out.
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