I’d love to find someone that can venture through a single day without reading, hearing or talking about the current state of the economy, the stimulus plan, the bailouts or ponzi schemes. It’s sickening but what’s worse is the fact how NO ONE talks about fixing the problem correctly. Does anyone learn from the past?

I didn’t read the stimulus package in its entirety (it appears that our representatives didn’t either) so take what I say with a grain of salt.

We can blame Bush, blame Clinton, blame Obama, blame Regan, blame Nixon, etc. – it’s all the same; they work for the same crooks, I mean corporation, the US Government!

Time magazine recently published a list of the top 25 people most responsible for this crisis but I would argue that their thinking is flawed and dated by at least 100 years. As Victor Sperandeo noted in his book, Trader Vic – Methods of a Wall Street Master, Thomas Jefferson understood better than any political leader in world history that government “profusion” can only be paid by the “labors of the people.” He knew that a growing government budget and an extension of the services government offers “under the pretense of caring for [the people]” can only come at the expense of private property and individual liberty.

“I place economy among the first and most important virtues, and public debt as the greatest of dangers … We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.” – Thomas Jefferson

“The issue is always the same: the government or the market. There is no third solution.” – Ludwig von Mises

This blog entry is not about playing the blame game, pointing fingers or determining who is responsible but rather a move towards first discussing and then implementing responsibility and accountability based on how economics 101 truly works (without government interference). I am certainly not ruling out oversight and regulation but I am asking the government to just butt out of the free-market system we call capitalism. They will not make things better. For example, Ludwig von Mises once said:

“Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other.”

He made this statement more than half a century ago but the current administration is doing exactly that, spending an unprecedented amount of money (trillions when they look in the mirror and state the truth) on a stimulus plan that will most likely fail to achieve what its authors claim. I am not arguing that is won’t create jobs but how many jobs will be lost due to the new package. What will the net gain or loss total be once we look back in five or ten years?

The talking heads of the media offer no help as they skew the unemployment numbers every chance they get so they can “GET” their headlines. Even the president is talking about the economy and unemployment numbers reaching levels not seen since the Great Depression. Really? What stats are they looking at? This is a sensitive topic as several of my family’s closest friends have lost jobs in recent months but the truth is the truth.

Business Week noted:

In the last year, the U.S. economy shed 3.4 million jobs. That’s a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost — fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82. This was reflected in unemployment rates.

The latest survey pegs U.S. unemployment at 7.6%. That’s more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can’t equate 7.6% unemployment with the Great Depression.

Come on, 7.6% is not 25.2%. Gross numbers of jobs lost today may be larger than a specific time in the 1930’s but an apples-to-apples comparison using percentage ratios shows us that the comparison is stupid. Times are tough and many people have lost their jobs and many small businesses are shutting their doors but let’s not spew inaccurate data to rush a stimulus plan through congress.

“The wavelike movement effecting the economic system, the recurrence of periods of boom which are followed by periods of depression is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom expansion brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

As the quote says above, economic cycles of booms and busts are inevitable so let them run their course rather than have these non qualified elected politicians (with lobbyists in their pockets) making the decisions. How many current and past administration members actually started and owned a business or were active investors? So why are they the ones trying to pull us out of this mess? It’s a joke!

I don’t have all of the answers and I am not the smartest or most qualified guy in the room; however, Washington doesn’t have the most qualified guys in the room either (the most qualified guys/gals were not even on the ballots prior to the election)! With all of the bailouts running though Washington, what’s the incentive to do the “right thing” when Uncle Sam will come to your rescue and in some cases reward you for fucking up! Sorry but this pisses me off.

Many of the quotes throughout are from Ludwig von Mises (1881 – 1973), who was an Austrian Economist, philosopher, and a major influence on the modern libertarian movement. Although I don’t agree with everything Ludwig wrote, I can say that the vast majority of his writings are singing the tune: “I told you so”.

One last thing – I HATE THE PHASE: “Distribution of Wealth”

• “The masses, in their capacity as consumers, ultimately determine everybody’s revenues and wealth.” – Ludwig von Mises
• “Taxing profits is tantamount to taxing success.” – Ludwig von Mises
• “It is untrue that some are poor because others are rich. If an order of society in which incomes were equal replaced the capitalist order, everyone would become poorer.” – Ludwig von Mises
• “The riches of successful entrepreneurs is not the cause of anybody’s poverty; it is the consequence of the fact that the consumers are better supplied than they would have been in the absence of the entrepreneurs effort.” – Ludwig von Mises

Finally, I sure as hell hope we are not walking down the path of Socialism (and I am not targeting Obama and his administration; this journey started decades ago).

“A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism: is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings.”

Tell me what you think, let’s start a discussion! I prefer to hear from you as the media and these so-called experts are pure garbage.

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We read the book a few years ago after it was released and I remember my wife couldn’t finish the last chapter, she avoided it for months and for good reason (the movie does a great job with this aspect of the book). Excellent book – good movie. Below is a picture galley of my Marley: Bob.

Marley and Me Movie
John Grogan Blog

Pictures of my wonderful lab, Bob:

So, why are the same goons that created our mess trying to solve it?
The politics in our country is a joke!

By the way, we are not in a depression (the talking heads just won’t shut up). The restaurants and movie theatres are packed, the malls and box stores are packed, the parking lots are filled with SUV’s, etc…

Recession, yes, but we are NO WHERE NEAR a depression. Just some thoughts as I celebrate my grandmother’s 85th birthday; she lived through a “real” depression.

Yes, my post title is slightly misleading…

The Stock Trader’s Almanac (2009) shows the following impact of presidential elections on the stock market (based on 96 years of historical data):

• Post-election years have been worse for Republicans.
• Mid-term years have been inferior under Democrats.
• November is much better in election years when the incumbent party is ousted.
• Markets fare better under Democrats while the dollar is stronger under Republications.
• The combination of a Democratic president and a Republican Congress has delivered the best market results.
• The first two years of a presidents’ term market performance lags behind the last two.

4-year Presidential Cycle – Historical Gains
Year/ Total Gain/ Average Gain/ Up years vs. Down years

• Post Election year: 67.3% total gain, 1.6% average gain, 19 up years vs. 24 down years
• Mid-term year: 176% total gain, 4.0% average gain, 26 up years vs. 18 down years
• Pre-election year: 464% total gain, 10.5% average gain, 33 up years vs. 11 down years
• Election year: 288.3% total gain, 6.7% average gain, 29 up years vs. 14 down years

I don’t know what today will bring but please head out and VOTE!

Take a vote, we’d love to hear what you think:

As you have read, I have had a couple of excuses as to why this blog has been mostly dormant over the past few months but now you can understand why: My wife is pregnant.

I won’t lie, the market has been kicking in the world’s rear-end since the summer so the timing couldn’t have been better to take a couple of months off. My priorities changed and the blog was no longer at the top of this list.

However, I do plan to keep writing on the blog and no time in my mind could be better than this weekend to write a couple new articles and some quality analysis realted to this market recession (not even close to a depression). The time to buy depressed shares is now/ near; we don’t have to jump in with both feet but accumulation from this point forward is something I am taking serious.

So, now you know where I have been since my trip to Europe (yes, the baby was conceived in Portugal). I will be back but do understand that my priorities have changed. My family always comes first, then my career, my investments, our friends and finally this blog. Chrisperruna.com won’t die but I can’t say that I can post everyday as I have in past years. However, when I do post, it will be of the highest quality!

Don’t forget to vote on the baby names!

Take a close look and you will see that I added my dog into the poker picture below!
Now, that’s what I call a good looking lab!

To put this into perspective, the top hedge fund manger last year earned 61,157 times more money than the average American family ($3.7 billion versus $60,500). He averaged $422,374 per hour, every hour for 365 consecutive days (more than $7,000 per minute).

Take a look, I have always been intrigued by these “masters of the universe” compensation packages: 2006: Hedge Funds – Richest of the Rich

Wall Street Winners Get Billion-Dollar Paydays
By JENNY ANDERSON, Published: April 16, 2008

Hedge fund managers, those masters of a secretive, sometimes volatile financial universe, are making money on a scale that once seemed unimaginable, even in Wall Street’s rarefied realms.

The richest hedge fund managers keep getting richer — fast. To make it into the top 25 of Alpha’s list, the industry standard for hedge fund pay, a manager needed to earn at least $360 million last year, more than 18 times the amount in 2002. The median American family, by contrast, earned $60,500 last year.

Institutional Investor
By Stephen Taub, Posted April 15, 2008

• Five of the managers on this year’s list each made more in 2007 than the $1.2 billion that JPMorgan Chase & Co. agreed to pay for the almost failed 85-year-old Bear Stearns Cos.
• When we published our inaugural list, in 2002, Soros led the way with $700 million, a showing that this year would have put him at No. 9. Back then it took $30 million to crack the top 25; this year, $360 million.
• The grand total earned by the top 25 in our 2003 ranking, almost $2.8 billion, was less than what any of the top three managers made this year and less than one fifth of what the top ten made altogether ($16.1 billion).
• Though we doubled the size of our list from 25 to 50 this year, longtime New York–based star managers Mark Kingdon of Kingdon Capital Management and Raj Rajaratnam of Galleon Group both miss the cut, despite each making about $200 million. This year’s minimum: $210 million.

Bringing home more than a billion in 2007: Five hedge fund managers rake it in
By Peter Cohan, Posted April 18, 2008

• John Paulson (Paulson & Co.) — 2007 earnings: $3.7 billion. Beginning in 2005, Paulson made huge bets on the decline in value of securities backed by subprime mortgages
• George Soros (Soros Fund Management) — 2007 earnings: $2.9 billion. Soros’ $17 billion flagship Quantum Endowment fund racked up a 31.7% return in 2007, its best annual showing since the high-tech implosion at the start of this decade. Soros’ $2.9 billion payday comes almost entirely from his personal stake in the fund (which he no longer manages). I don’t know how he made that 31.7% return.
• James Simons (Renaissance Technology) — 2007 earnings: $2.8 billion. Simons, a mathematician and former Defense Department code breaker, uses complex computer models to trade.
• Philip Falcone (Harbinger Capital Partners) — 2007 earnings: $1.7 billion. Like Paulson, Falcone placed a winning bet against the mortgage market. He pulled in returns of 117% after fees in 2007.
• Kenneth Griffin (Citadel Investment Corp.) — 2007 earnings: $1.5 billion. Griffin manages $20 billion and is a big information technology innovator that trades derivatives. equity securities. and listed options and buys distressed assets at a discount. For example, In late 2007 a Citadel-led group put $2.55 billion into struggling E*Trade Financial Corp., (NASDAQ: ETFC), the U.S.’s fourth-largest discount brokerage.

We relaxed on the beaches, played volleyball, visited the Mayan ruins, shopped in the villages, enjoyed the local dancers, tasted the Mexican cuisine and enjoyed a few coronas (and cocktails). And best of all: swimming with the dolphins!

Enjoy the images. Regular posting will return this week. I see that GU and BX started to move while I was away. I bought and sold GU earlier in the year but will be looking for a possible position after I start to run screens again.

The Next Chinese IPO – GU
Gushan (GU) Making a Move

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