"The time has come to affirm our enduring spirit, to choose our better history..." said OBAMA! yesterday at the high point of his inaugural address. Choose our better history? What does that mean? I'd like to choose a better history every time my wife asks me where I've been.
The consensus opinion seems to be that things can't get any worse in Washington. I'd take the over on that bet. There hasn't been a bigger collection of dreamers and dopes in the White House since FDR.
We've got a Treasury secretary who doesn't pay taxes, a secretary of state whose husband has taken "donations" from every large business interest in the world... after renting the Lincoln bedroom during his presidency, and a secretary of agriculture (former Iowa Governor Tom Vilsack) who promulgated an executive order allowing convicted felons be allowed to vote again. Not a big surprise who got their vote in the next election, right?
If you were trying to write a novel about a group of scurrilous ne'er-do-wells taking over our government, you couldn't have made up characters like this! Worst of all, you've now got a president who seems to honestly believe the problems in our country can be solved by the government. Forget about choosing our history, he hasn't learned anything from it! It seems to have never occurred to OBAMA! that the government doesn't produce anything; it can only deliver to Peter what it has previously stolen from Paul.
Judging from the U.S. bond market and bank stocks, it seems the market thinks OBAMA! would like to choose a history that doesn't include Americans borrowing so much money. Maybe our enduring spirit will pay it all back for us. If not, then our great grandchildren will have to assume the obligation.
Below is a chart of the iShares U.S. long bond ETF, which tracks the value of U.S. government debt. The more promises OBAMA! makes, the lower these bonds will fall. Oh, by the way, the Treasury must sell $144 billion worth of new bonds in the next two weeks to fund the government's current spending. Who in their right mind would buy these debts?
While Americans are right to worry about the stability of the dollar, at least we don't have to worry about our currency disappearing overnight. Over in Euroland, spreads on different European government debts are widening sharply, revealing the markets believe the euro will come unraveled as countries exit the currency union. Bonds issued from Greece are now trading at nearly 300 basis points over similar German bonds – the widest spreads between euro-member government bonds since the currency was introduced in 1999.
We've been saying for several months that the problems in residential real estate would soon find their way into commercial real estate. Yep. That's what has happened. (Too bad we can't choose a better history here, too.)
Says Susan Merrick, the head of Fitch's commercial property bond group, "What began as weakness in the performance of smaller properties located in tertiary markets now includes larger collateral in secondary and primary markets..." And these problems don't factor in the bankruptcy of Circuit City. The electronics retailer operates 567 U.S. stores, which range from 35,000 to 40,000 square feet (that's over 21 million soon-to-be-vacant square feet).
Two of the real estate investment trusts (REITs) hurt worst are Developers Diversified Realty (DDR), where Circuit City accounted for 1.7% of annual revenue, and Kimco Realty (KIM), where Circuit City accounted for 1.5% of annual revenue.
Subscribers, please refer to the December issue of my newsletter, PSIA, where I list the dozen commercial-property companies most likely to go bust this year.
More layoffs... The parent of Clear Channel Communications, the nation's largest owner of radio stations, will cut 1,850 jobs – about 9% of its work force. Telecom company LM Ericsson said it will slash 5,000 jobs. Warner Brothers Entertainment, the studio behind The Dark Knight – the biggest grossing movie of 2008 – will cut 10% of its workforce, or around 800 people. The studio is also reducing the number of movies it releases, falling from a peak of more than 40 a year to about 25 in 2009.
The biggest round of cuts come from the world's largest mining company, BHP Billiton, which is cutting 6,000 employees and contractors. The Australian company is also shelving operations at its Ravensthorpe nickel mine and cutting production at its Mount Keith nickel mine. Nickel has fallen from a peak of $15 a pound to around $5 a pound.
This makes me a little nervous... Morgan Stanley recently jumped on the gold bandwagon, saying the precious metal will steadily climb through 2012, reaching $1,075 an ounce by then. The bank expects gold to average $900 an ounce this year... "Devalued currencies, growing global incomes and a renewed appreciation for gold should keep prices higher," Morgan Stanley analyst Hussein Allidina wrote. "A globally synchronous and aggressive fiscal and monetary stimulus may be needed to re-inflate the global economy, and we think this continues to present significant upside to gold prices."
All I know for sure is that Morgan Stanley will be dead wrong. Of course, judging by the way things are going, it'll be dead wrong on the downside and gold will be far above $1,075.
Big news for income and dividend-focused investors... Our income analyst, 12% Letter editor Tom Dyson, is taking advantage of lower stock prices to load his portfolio with the world's safest, highest-yielding stocks. Last month, Tom recommended one of the world's mos
t dominant companies. This company controlled 56% of its market in 2007. And its No. 1 brand is the No. 1 brand in its industry.
No competitor could dream of dethroning it. Yet, shares have still fallen 25% and the dividend yield is an extremely safe 7.5%. With Tom's special way of investing in the stock, you can tack on an extra 10% annual yield. Readers of The 12% Letter can refer to Tom's January issue. If you're not a subscriber, and you'd like to learn more about The 12% Letter, click here...
New highs: none.
In the mailbag... Just a bunch of garbage. You must be delusional if you think anything about our government will change just because some new slick gangster is president. It doesn't make any difference who is in power or whether the president is smart or stupid. They are all the same. They're all liars, thugs, and thieves.
The government is the leviathan in our society. It takes what it wants. It always grows more powerful. Oppose it at your peril. Comments: feedback@stansberryresearch.com.
"I am not an OBAMA! supporter. Look at his spotty political record and experience. He is a blank sheet yet has dealt more with radical left wing groups than any other groups. His liberal leanings make me nervous and his distribute the wealth mentality makes me even more nervous. He is very inexperienced in foreign policy and the way he will engage the U.S. military and foreign policy will be interesting to watch. However, with no balancing force of conservatives in the federal government I expect a return of the corrupt Clinton administration but this time on steroids." – Paid-up subscriber B. Hansen
"I supported Barack four years ago because he spoke of uniting America. I supported Barack three years ago because he spoke of hope. I supported Barack two years ago because I wanted a president smarter than I am. I supported Barack a year ago because he understood the 21st century. I support Barack now because he's shown that he wants to learn, knows how to listen and is interested in results, not ideology. It's easy for those who have never had to do anything but line their own pockets to sit on the sidelines and carp about this mistake or that, but he's out there in the trenches, trying to make a difference. Walk a mile in his shoes before criticizing but never hesitate to advise. Criticism is cheap, advice is precious." – Paid-up subscriber Frans Bouman
It's not 'OBAMA!' It's 'President Barack Obama'. When will you people admit that you lost and show some respect for the new President. It's not that he's done anything wrong - yet - he may even improve things. They can't get any worse! Why not give him a chance! He can't be any worse than BUSH!!!" – Paid-up subscriber Joann Slate
Porter comment: Give him a chance.... Ha, ha, ha. I don't have to give the government anything – and certainly not respect. Our government takes what it wants from me and everyone else around the world.
Regards,
Porter Stansberry
Baltimore, Maryland
January 21, 2009