What Dolphins owner Wayne Huizenga fears… and what you, too, need to prepare for
Today's Financial News - Posted October 28, 2008
The prospect of a neo-Marxist White House and a rubber-stamp Congress does nothing to relieve the selling pressure in the markets!
by J. Christoph Amberger
Baltimore — (TFN): Remember the good old days? Gasoline cost over $4… oil was at $140 a barrel… gold at $900 an ounce… and your financial e-letter gurus were chiding American consumers for borrowing to spend… and spending to borrow more. “If only the American consumer could be set straight. Stop consuming. Start saving. Buy gold.”
Of course, they forgot to mention that, macro-economically speaking, saving itself doesn’t come without baggage. Household savings are no indicator of a nation’s economic strength. In fact, high rates of savings point at increasing economic uncertainty.
For one, the need to save is a reflection of pessimism. People who believe in a bright future, with easy availability of jobs and incomes, are far less likely to save than those who expect natural averages to catch up with them.Plus, money that’s being saved by households is money that’s not being re-injected into the economy:
The seventy bucks not spent on a pair of shoes won’t pay for the Chinese sweatshop who made them, the freighter crew who shipped them over, the union longshoreman on the West Coast, or the tiger-striped hairdo of the cashier at DSW who swiped your credit card. The lawn you mow yourself won’t pay for your neighbor’s son’s college textbooks. And the car you decide you can’t afford right now will send automotive workers into forced hibernation in Detroit, Spartanburg, Stuttgart and Munich:
Take Germany’s car manufacturers. After a drastic earnings warning from Daimler — apparently neither the Yankees nor the Russkies are in a mood to buy luxury limousines at the moment — the company will idle manufacturing capacities in all 14 German locations for up to four weeks. BMW has similar plans, as has automotive supplier Bosch.
Oil may be on its way down, with Brent crude dipping below $60 today. But the cost savings on energy and raw materials pale in comparison to falling revenues.
Pessimism and savings are on the rebound.
Neither bodes well for the economy and the stock markets!
Sure, there are plenty of reasons to be pessimistic about the future. I, for one, can see no economic upside in socialist domination of not just House, Senate, and Presidency… but U.S. media, academia and now, thanks to government “bailouts”, key financial industries. The Nazis had a term for this kinda thing: Gleichschaltung — “forcible coordination,” as Richard J. Evans translated the term.
It’s the hallmark of anti-individualism and totalitarianism — much as heated debates and divergent opinion are the hallmark of free-market democracies. And totalitarianism is the death of prosperity and freedom.
I am not quite isolated with that concern… and its practical implications.
Miami Dolphins owner H. Wayne Huizenga intends to sell up to 45 percent more of the team sooner rather than later, mostly because a President Obama — supported by a monolithic rubber-stamp Congress — is likely to make good on his “social justice” threat of penalizing Capitalist investment via higher capital-gains taxes.
Huizenga may be ahead of the curve (considering even a lockstep Congress may take until 2010 to turn threats into reality.)
But investors with assets more liquid than football franchises are unlikely to wait around. Take hedge funds, who control some US$2 trillion in assets in the U. S. alone. Diane Francis, of Canada’s Financial Post, called them “weapons of mass destruction to markets because of the high, but unknown, number of redemptions by unitholders”.
You see, hedge fund investors have to give 60-or 90-day notice to funds managers that they want their cash back by the end of the year. According to insider reports, these redemption notices have been snowballing in since late September.
With a very good reason: Hedge funds by and large have been clobbered right alongside the commodities and equities markets. The upside has melted away. And the prospects of higher capital gains taxes down the road is shifting investment horizons. From the medium to long term to the short term. Rather than waiting around to have what’s left of one’s gains pilfered by an out-of-control collectivist administration, the pressure is on to take and secure the remaining upside under the old tax legislation.
That means by December 31, 2008.
What does this mean for us? Enormous hedge redemptions will force funds to sell stocks into every stock market rally to obtain the cash needed for redemption requests.
“Because there have been zero disclosure requirements imposed by governments on these players,” writes Diane Francis, “the bottom is impossible to guess or, possibly, to reach for months.”
The practical solution: I say use the next couple of months to dollar-cost average into the stocks you’ve always planned to buy. $107 will buy you 50 shares of Ford Motor Co. (NYSE:F) and $100 will buy you 25 shares of recession-resistant death services magnate Stewart Enterprises (NASDAQ:STEI).
Buy for the long-term, though: There’s nothing collectivist governments hate more than appreciating assets they cannot tax. Like when individual investors build lasting legacy wealth in long-term buy-and-hold portfolios that, for lack of selling, do not generate capital gains taxes.
Cordially yours,
J. Christoph Amberger
Executive Publisher, TodaysFinancialNews.com
P.S. Our “crash protection” put option on gold has gone up as much as 63%. There’s still further room to fall. But we’re now getting into striking distance of substantial rallies. Just the thing we have hedged against in our Ultimate Gold Hedge… You really need to read this report.
Recommended Reading
“Not a lot of options for SIRIUS XM Radio (SIRI)”
“Yen’s strength is Sony (SNE) and Toyota’s (TM) weakness”
“Blue chips at penny stock prices”
Next Article: Obama Presidency: Goodbye, rule of law! Welcome, rule of social “empathy”!
2 Responses to “What Dolphins owner Wayne Huizenga fears… and what you, too, need to prepare for”
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October 29th, 2008 at 1:28 am
I've had it up to here with pretentious blockheads bandying about words like “neo-marxist” as if they knew what they were talking about, as if the mere mention of the concept would lend them some kind of intellectual caché to heighten their negligible credibility.
October 29th, 2008 at 3:35 pm
Dale, other than most Americans, I grew up right next door to a Marxist society. In fact, my mother's family didn't emerge from the socialist paradise of East Germany until 1989. Cliché? Maybe. Maybe not as much a cliché as prosperous Western suburbanites selling out the base of their prosperity for a $250 welfare handout at the first sign of economic hardship…