I AGREE WITH OBAMA

Finally I've heard President Obama say something about health care that I can agree with wholeheartedly.  In a recent news interview talking about health care reform, he said he didn't think a person should "have to go bankrupt to pay for health care" in this country.  I definitely agree with him there.  We do live in the richest nation in the world and there is no good reason why anyone in this country should have to be destroyed financially because they get sick.

However, what the President and Judge Vinson (Florida judge who declared it unconstitutional for the federal government to require individuals to purchase insurance coverage) may or may not be missing here is, individuals who would be required to purchase health insurance under the health care reform bill are not necessarily people who stubbornly refuse to buy coverage, but most likely are ones who simply can't afford to do so.  I certainly would love to have insurance coverage again, especially after having a couple of heart attacks and heart surgery, but there is simply no way possible for me to stretch my income to pay for it.  As it turned out, I was able to negotiate with health care providers and settle my debts for much less than originally billed.  So in my case it all worked out and I avoided going broke. 

Perhaps what we really need is to make sure people are aware of programs already in place to help those who cannot afford health insurance coverage. 

IN THE NEWS

In the news this week, Ron Paul wants to create competition for the Federal Reserve by allowing U.S. citizens to use gold in place of the dollar.  I've a feeling that won't really catch on anytime soon, but I do agree with his thinking on the Fed's "monopoly" like control of U.S. currency and would like to see a little more restraint on the free wheeling printing of dollars.

Obama invited Bill and Melinda Gates and Warren Buffett to the Oval Office for a meeting to discuss their charitable giving.  Could it be that he's thinking we might all be in need of some charitable support by the time the Democrats are through spending?

Speaking of Warren Buffett, his company Berkshire Hathaway has done a great deal of selling in the past quarter.  There is speculation it is to raise cash for the incoming investment manager at Geico after the retirement of Lou Simpson at the end of this year.  I think it might just be a move to collect capital gains in an up market.

As for my own trading, I pulled out my original investment in Centerpoint energy (CNP:NYSE) and reinvested it in Invesco Mortgage Capital (IVR:NYSE).  My stake in CNP was up over 28%, so I kept the remaining shares and will continue to draw the dividends on those.  At the same time I'll triple the dividend income I was earning on my investment in CNP by putting the money in IVR shares which currently yield 17.77%.  Like Annaly Capital (NLY:NYSE) I do not consider this a long term holding, it's purely a dividend play as long as interest rates are low.  Since a rising interest rate could drastically affect earnings for REITs, I'll be watching this one closely and move to trade out if interest rates should begin to rise.  Not expecting that to happen anytime soon, so I'll collect the dividends in the mean time.

REPUBLICANS OR OBAMA OUT OF TOUCH?

Obama, in a desperate attempt to help his fellow Democrats keep their seats in the upcoming elections, lashed out at Republicans for being "out of touch" with the daily problems of ordinary Americans. Really? Did the his administration listen to ordinary Americans when they overwhelmingly opposed recent health care reform? Did they listen to ordinary Americans who opposed massive spending of taxpayer money to bail out some of the corporations largely responsible for causing the economic collapse? Have they listened to ordinary Americans who would much rather be going back to work than getting yet another extension of unemployment? I think not. One has to ask, who is really out of touch here. I think ordinary Americans decided who's out of touch when they elected a Republican to fill Ted Kennedy's seat. Hopefully they follow suit later this year.

As for the President's comment, regarding the GOP,

"Their prescription for every challenge is pretty much the same—and I don't think I'm exaggerating here: basically cut taxes for the wealthy, cut rules for corporations and cut working folks loose to fend for themselves."

Who exactly does he think creates the jobs ordinary Americans are looking for? It's America's wealthy, who invest their money in American corporations and businesses who create jobs, not rhetoric spouting, self-righteous politicians. Don't get me wrong, I think President Obama is basically a good man, definitely a smart man, but we should always keep in mind that he is also a politician with a political agenda. Is this agenda in the best interests of ordinary Americans? I personally don't think so. It is not in the interest of ordinary American citizens to have an administration who spend the taxpayers money like a bunch of drunken sailors on shore leave. It is not in the interest of ordinary American citizens to have an administration who thinks it's O.K., on the one hand to destroy one corporation over an accident, while on the other hand, bailing out other corporations with taxpayer dollars, who deliberately engaged in business practices which should have landed them in prison, but instead earned them large bonuses at the taxpayers and shareholders expense.

Once again, we have to ask, who is really out of touch with ordinary Americans here? Right now, I'm thinking one-term presidency.

For more information see: Obama Slams GOP Comments on Wall Street Reform, BP at http://www.cnbc.com/id/38021006

GE Showing Signs of Improvement

GE is one of the core holdings in my personal stock portfolio. Even though this past year has not been kind to their stock price or their investors, I still believe the company has a bright future (no pun intended). Recently they announced improvement in their Capital division, which was largely responsible for their poor performance of late. While loan losses are expected to continue into 2010, they're predicting the division will show a profit by 2011. In the mean time, I'm looking to add additional shares to my stake while the price is low ($15.66 currently). Their dividend yield of 2.55% is well below the average yield of my current investments, however I'm expecting to make up for that through growth in stock value. If Warren Buffett feels confident enough to loan GE $3 billion, then I feel pretty safe investing my money with them. Bottom line, it's a magnificent company with a fantastic pedigree, strong management, great product line and a franchise name. You can't really ask for much more than that.

On an entirely unrelated subject, Obama recently announced tax incentives for small businesses who hire new workers. I have to say I think this is the smartest move the man has made since being elected. Getting people back to work is the key to getting the economy moving again. When the government gives business incentives to put people back to work, it's a win win situation for everyone concerned. The businesses save money due to tax incentives, the workers gain jobs and paychecks which they spend, in turn benefiting other businesses. With sales of goods and services going up and more people working, tax revenues increase for local, state and federal governments. So jobs should be JOB 1 for our political leaders right now.

Job Losses Bad News For Democrats

U.S. service industries may be recovering, stocks are up, banks are lending again and home prices are holding. But with no improvement in employment, a major part of the recovery is still missing. And that is bad new for Obama and the Democratic party.

According to the Labor Department, if you add in people who have stopped looking for work, or who are underemployed instead of working full time, the effective unemployment rate is a staggering 17%. With such outrageously high unemployment, it's hard for workers to understand how the recession can be deemed over.

It's an important political dynamic as 2010 midterm elections approach. At some point, continued job losses could easily push the economy back into negative territory, for a "double-dip" recession. Rob Shapiro, an economist who was a top official in President Bill Clinton's Commerce Department, sees "substantial, continued job losses" for some time if the government doesn't take more aggressive steps to foster job growth. In the meantime, the Obama administration should "prepare the American people to wait a while for real results," said Shapiro. White House aides concede they missed the mark with their January estimate that the stimulus package would keep unemployment from rising above 8 percent. In a letter to Obama and House Speaker Nancy Pelosi, House GOP leaders asked, "Where are the jobs?"

That is the same question I'm asking, along with a lot of other unemployed voters. "Where are the jobs?" Obama and Pelosi may well be asking, "Where are the Democrats," after midterm elections.

Merck and Schering Plough Merger

It has been an uneventful week in the stock market. Although I'm pretty pleased with the merger agreement going forward with Merck and Schering Plough. I own shares in both companies and stand to get some cash, $10.50 per share plus .5767 shares of the New Merck for each share of Schering Plough I own. I like the mergers where I get cash, cash is almost always good. Since I bought both stocks when prices were low, I should come out ahead on the deal. Plus the new company anticipates continuing Merck's current dividend payout. So that's the bright spot for the week.

Made some changes to the appearance of my blog, trying to encourage more visitors, I think it's a big improvement. Be the first to sign up as a follower of my blog!!!

News affecting the economy was not particularly good this week. Obama's approval rating is slipping over bailout programs and lack of results. Warren Buffett thinks we need another stimulus package, although I'm a huge fan, I disagree with him on that one. And the jobless rate continues to rise. While it all seems a little overwhelming at times, we just have to keep in mind it won't last forever. Things will eventually gravitate back towards the norm.

A Second Stimulus?

While talk is circulating among top Democratic leaders about the possible need for a second stimulus plan, the Republicans are wasting no time putting Obama and the Democrats in the hot seat for lack of results from the original stimulus package. Personally, I've seen no improvements in the economy other than some stabilization in financials and the auto industry. I tend to agree with some who think that any further stimulus package should include payouts to taxpayers, legal citizens of the United States. If they want to get the economy moving, give the money to the people who will put it back in to the economy, i.e. consumers. The banks have horded stimulus money, while at the same time increasing the burden on the taxpayers through fee and interest rate increases. If you're not helping the cause, then you're hurting the cause. Charging more fees and higher interest rates while cutting charge limits is not going to get consumers spending again. I personally have stopped using credit cards entirely.

The real bottom line is, we are not going to see the economy improve until people go back to work. An unemployment rate of 9.5 % will continue to drag the economy down and now experts are saying it could go as high as 11 %. That's a great deal above the what Democrats predicted with the passage of the economic stimulus, so I think the Republicans and the American taxpayers are right to be throwing some hard questions towards the current administration.

Given all this, I think the stock market will remain down for the better part of this year and in to 2010. It does present some great buying opportunities, the price of good companies being down along with the bad. But it does call for investors to be very selective. As I mentioned in an earlier post, I've recently invested in Proshares TWQ fund, which shorts the Russell 3000 index, as a hedge against falling stock prices. I'm doing this on an experimental basis and while it is too soon judge overall effectiveness of this strategy, the price per share did go up as the overall market fell earlier this week. The real test will be its' effectiveness over a longer period of time. I'll keep the readers posted on how it's working out.

INFLATION The Ugly Side of Obama's Spending

With all the hoopla and manufactured sense of urgency from the Obama administration, main street seems to be forgetting the ugly side effect of massive government spending programs. INFLATION! While the Democrats are so busy patting each other on the back over their bank, auto and insurance bailouts, their greenhouse gas reduction plans and the looming health care reform, what will they really have accomplished. If you make peoples lives better through health care reform and, at the same time, create skyrocketing inflation on everything else, in my opinion you've accomplished nothing. As soon as government spending kicks in, demand for oil and other commodities will see major increases leading to higher prices. At the same time, new debt to fund these programs will lead to a weakening dollar causing prices to go up even more. If they are truly interested in helping the poor and middle class, how can they possibly justify passing legislation that will ultimately lead to more taxes and higher prices? The only conclusion I can draw from what I've seen so far is, the current administration could care less about the people of main street.

I'm sure they'd argue, we needed to save the banks, the major auto manufacturers and AIG. As far as global warming goes, I'm still not convinced that it isn't a naturally occurring phenomena, nature's way of re-balancing the planet. Even if I'm wrong, which is entirely possible, scientists have already stated that unilateral implementation of green house gas controls by the United States may have marginal to no effect on global warming. Don't get me wrong, I'm all for solar and wind energy and reducing pollutants in our atmosphere, I just don't think we need to destroy our economy to do it. I think more can be accomplished by grass roots programs. Getting people to think more about recycling, cutting back on energy usage, switching to more efficient appliances and lighting would make a tremendous difference in our carbon footprint as a nation. We don't need ever expanding government to implement more control over our lives or to burden us with more taxes.

I know there are people who will read this and say "your no expert." That is entirely true, but you don't have to look to far to see what the experts are saying about coming inflation. The July issue of Smart Money magazine has an interesting article entitled "Stocks That Beat Inflation." In it, they quote George Schwartz, head of the Ave Maria Catholic Values fund, as saying, "You can't run the printing press and spend like drunken sailors without consequences." They also say in the article, "a small but growing number of investment pros are betting inflation will return much faster than the conventional wisdom anticipates, and when it does, it will be far more widespread and potent than we've seen in years."

Lastly, when Roosevelt's administration passed legislation, similar to the current administration, it did not end the Great Depression. The economy never fully recovered from the depression until World War II. So if it didn't work then, why should we expect it to work now.

Adding to Long Term Holdings

With the big drop in the market on Monday, I'm taking advantage of the lower prices to pick up some extra shares in AT&T and General Electric. Both stocks are part of my long term holdings. AT&T for their great dividend payout and General Electric for their long term prospects. GE does pay a dividend, but not near the amount they used to pay. Still, I think they have great, long term prospects.

Now the government is talking about taxing health care benefits in the workplace. Hey, Obama! What happened to, "95% of Americans would see their taxes reduced."???? Did you mean South or Central Americans, because I'm just not seeing it. I'm seeing increased taxes and not much stimulus from the "stimulus package." First it was a massive tax increase on tobacco products, affecting mostly poor and middle class taxpayers, then the talk of taxing sugary products (again affecting mostly poor and middle class), now health care benefits???? Have the people in Washington taken complete leave of their senses? I'm beginning to believe so. I'll spell it out so even they can understand: Increasing taxes, in ANY FORM, hurts the economy, the recovery and the U.S. taxpayer.

On a brighter note, today's market is expected to go higher, after Monday's big sell-off. Like I mentioned in an earlier post, I'm not expecting to see any more big moves with the market until the fall. We may have a few small rallies and some drops through the summer, but I'm not expecting anything big.