Saturday, March 1, 2008
The 2008 Animal Tug of War Explained, with a Twi$t of Lime
Greetings to our weekend readers, As you probably know, the mascot of the Democrats is the Donkey, whereas Republicans prefer the Elephant. The animals differ greatly and every individual animal-politician has a distinguishable and relevant psychology that will affect your investments. Do you prefer taking a chance being trampled under foot, riding up high, or a slow stubborn and deliberate ride? It depends upon what your standard of living is today. Please take a deep breath and read on In broad terms, considering that we're addressing your investments/money, the effects of taxes are where these Animal-Politicians differ the most. The Donkeys have stated publicly they will repeal the Bush tax cuts, which means higher taxes going forward. Higher taxes point to larger Government. Both Donkeys believe every American must have Healthcare, so repealing the Bush tax cuts seems logical to them. Please don't get ahead of yourself and start Googling healthcare stocks. The Psychology of the Call has only begun to referee this wild and dirty tug of war. The Elephant has stated publicly that he agrees with the Bush tax cuts and wants to make them permanent, meaning lower taxes going forward. Yes, lower taxes do spell smaller Government. The Elephant agrees with staying the course in Iraq and Afghanistan, so defense stocks won't get trampled. But before you pick a winner, we haven't even touched upon the two animals' individual psychologies/personalities, and here's where our analysis comes in to play. We’ll not bore you with the details as to why these investment scenarios may play out and we urge you to always do your own research before you agree or disagree with our final resultati. We considered many diverse facts in handicapping the two personalities, including party affiliation, work experience, voting record (or lack thereof), family back ground, age, spouse and children, social issues, health, wealth and life styles, and of course we weighed the forces of taxes on supply and demand. We have to mention two boring factoids: one of the Donkeys was a paid member on Wal Mart's board of Directors from 1986-1992 and the Elephant was shot down flying his 23rd attack mission in Vietnam in 1967 and imprisoned for 5 1/2 years (He would rather spent those 5 1/2 years as an Elephant in a zoo, if given a choice.) http://en.wikipedia.org/wiki/Image:Vietcapturejm01.jpg This formerly imprisoned Elephant may be very kind to France and Nicolas Sarkozy in general, since it was some Paris Peace Accord that eventually released him in 1973. If you're still reading, you are now more informed than 75% of voters in the United States. Here's how the Psychology of the Call team carved up the Donkey: Barack "Hussein" Obama -BUY Healthcare Application Software Gold (GG) iShares MSCI Africa Index (EZA) -SELL Aerospace/Defense (NOC) Brokerages/Banks (GS) Oil & Gas (HAL) Canada Latin America U.S. Dollar And now the Elephant: John "Sidney" McCain III -BUY Aerospace/Defense (NOC) Beverage/Brewers (BUD) Biotechnology (DNA) Farming & Const (JOYG, CAT, DE) France Oil & Gas (HAL) First Solar (FSLR), based in Arizona? -SELL Gold (GG) Russia Out of respect for our readers, we opted not to plagiarize any talking heads, cable channels, radio hosts, or even Wikipedia. Again we ask American citizens to do their own research and please vote, and as the saying goes "vote early and vote often". What’s that? The twi$t of lime? Ah yes, sorry! Are you anticipating the little green fruit? Sorry, no; we're talking about the natural resource. Latin: Calx, Old English: Lim, modern English: lime. Calcium Oxide (CaO), also known as burnt lime and quicklime. The production of lime is one of the oldest chemical reactions exploited by man. Extremely high temperatures are used to create it and its use predates recorded history. Lime is concentrated in rocks, especially limestone, but also in chalk and even coral reefs. When mixed with water and sand, mortar results. The stress on natural resources over the last 30 years is mind numbing and lime is but one example of a natural resource taken for granted today. Is it the Mayan culture of 3,000 years ago, in which a natural resource was used to make mortar for their pyramids that we want to blame for the inflationary bubble that we're in? Not really, but we must acknowledge that interest rates are too low in the U.S., fueling a Global bubble of sorts in all commodities, especially oil. Cheap money policies (low interest rates) are only fueling inflation and driving the price of everything from corn to wheat, oil, and food completely out of control. China is especially guilty here in a non-direct sense. Since the pegging of the Yuan to the Dollar in the 1990's, China is exploding with growth. Although we respect our Chinese partners, we feel China must reform its Banking structure and currency structure after the Beijing 2008 Olympics. Ironically, we see this upward bias in price action as the result of more freedom and Democracy around the Globe. Who would have imagined back in the late 1980's, that China, Russia and countless other countries would claim Capitalism? But is it truly Capitalism they are running? We’re suspicious. Chinese human rights and social issues in relation to labor (wages) and food safety laws in some Provinces are more ancient than those of the Mayans. The explosion in World population from the mid 70's and the need for technology are other factors stressing the supply and demand curve for all goods we buy. Contrary to what many suppose the weak U.S. Dollar has held up U.S. Corporate profits extremely well. A weak U.S. Dollar signals low interest rates and here's where the dislocation lies. As of this writing, the S&P 500 Index is trading less than 16X earnings, looking like a buy to most accountants. But we know that accounting is a study of the past and only wise Financial Forecasting can save those backward looking bead counters. The tug of war between the Donkey and Elephant may not be relevant, regardless of who ‘wins’. Most likely, the winner will wish he lost in the long run; sort of like the pain President Bush has suffered through since the terrorist attacks of 9/11. We urge great caution in the equity markets until a true shake out occurs, an event/shock that when it comes, will bring you back to this article and make you say the Psychology of the Call matters.
Posted by The Call Team at 11:26 PM