Inaguration Day

Back on June 6th, in my diatribe against George W. Bush I made a prediction that the Dow would be lower at the end of his presidency than it was at the beginning of his presidency.

However, I miscalculated when his presidency started. I said January 20th, 2000. In fact, George W. Bush became president on January 20th, 2001.

That makes a big difference because the Dow was lower in 2001 than it was in 2000. January 20th, 2001 was on the weekend so the last close before he took office was January 19th, 2001. On that day the Dow was at 10,587.

However, I AM STICKING TO MY PREDICTION! The Dow will be below 10,587 on election day this year.

I'm not really sticking my neck out here, The Dow closed today at 11,453 today, only 102 points higher than my previous prediction. We could cross that threshold tomorrow.

It was another great day to be betting against the American economy. Gold and Silver soared, dollar was down (benefitting my foreign currencies), oil was way up, the markets were way down (benefitting my Bear market funds). However, I must mention that every day the market goes down (both real estate and stock) makes me a little more bullish. I'm not moving into stocks or real estate yet, but we are getting closer. There is still a lot of excess that has to be wrung out.

We've been through this before

This is a print from 1875.

It's funny how people have to keep learning the same lessons over and over - the hard way.

Thanks to Housing Panic for finding this! You can check out his blog on the right.

John McCain is a debt addict

John McCain and his wife, Cindy, have just released their Senate Financial Disclosures

http://www.nytimes.com/2008/06/14/us/politics/14disclosure.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1213719453-ooHy+UQsLIo2G7EQs6+DXQ

The bulk of the McCains’ obligations stemmed from a pair of American Express credit cards that are held in Cindy McCain’s name. According to the disclosure reports, which present information on debts in a range rather than providing a precise figure, Mrs. McCain owed $100,000 to $250,000 on each card.
Another charge card, held by what was described as a “dependent child,” had also accumulated debts of $15,000 to $50,000. In addition, a credit card held jointly by the couple was carrying $10,000 to $15,000 in debt, the filing indicated, at a stiff 25.99 percent interest rate.

Here's the confusing part

In other filings, the McCains have reported total household assets of $24.6
million to $39.5 million. In recently releasing a summary version of her 2006 tax return, Mrs. McCain reported income that year of more than $6 million, some $300,000 of which was derived from her salary as the chairwoman of Hensley, which was founded by her father.

Why in the world would you carry so much credit card debt at high interest rates when you easily have the assets and income available to pay them off. By my calculations, they could save anywhere from $52,000 - $130,000/year in interest charges by paying those cards off! American Express must LOVE the McCains!

That's almost John McCain's gross salary from the Senate (his salary is $167,000/year)! Shoot, after taxes they probably spend all of John's net salary and net pension (from the Navy) on interest payments on these two credit cards! And somehow, $6 million in income isn't enough to keep from accumulating large amounts of debt on credit cards!

This is just one more big question mark in regards to someone who is running for the most powerful office in the land. How can he run as a fiscal conservative when he handles his personal finances so recklessly? This just reeks of irresponsible spending but fortunately they have enough in assets to bail themselves out if they get into trouble.

I can't say the same of most Americans who find themselves deep in credit card debt.

Housing Re-Virginization

I found out something interesting this past week.

Did you know that if you sell your primary residence and are out of the market for 2 years that the IRS considers you a "first-time homebuyer" again?

That's right! I read about this online and called the IRS to confirm that it is correct.

I was directed to Publication 590, page 55

"Generally, you are first-time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquistion of the home which the distribution is being used to buy, build or rebuild. If you are married, your spouse must also meet this no-ownership requirement"

This means that if you sold your house more than 2 years ago, you can take up to $10,000 out of your IRA with no penalties (you do still have to pay income taxes). If there's two of you buying a house, each person can take out $10,000!

The big caveat on this is that

"When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions cannot be more than $10,000."

So, if you already dipped into that well the first time you bought a house, that penalty free withdrawl is no longer available. However, if you only took out $5,000 from your IRA the first time you bought a house, you could take out another $5,000 for the next house.

This is also only for IRA accounts. You cannot do this if you have a 403b or 401k (those plans often allow you to borrow against your balance if you need the money).

Given that I didn't use any IRA money for a down payment on my house back in 1998, I will now be able to use this, if I want to, starting in January, 2009. My next big question is would I qualify for all the various "first-time homebuyer" programs available in Santa Fe?

Please contact a tax advisor for more information about this if you are going to use this strategy.

Why I hate George W. Bush and 3 Shocking Predictions

Ronald Reagan coined a great phrase when running for reelection in 1984. He asked, "Are you better off now than you were 4 years ago?". His reasoning was that if the answer was "yes", then you should vote for him. We all know that 49 states went for Reagan in 1984. What a glorious time to be a Republican.

Asking that question now, I would have to answer "yes" again. Since 2001, my net worth has doubled and then it doubled again. I should be in the rabid, hard core Republican consituancy (you know, the 25%-32% that still think the President is doing a good job or the 19% of the population that thinks the economy is going in the right direction).

Fortunately, I am not in that brainwashed camp. I think this administration has done more harm to our economy, our foreign policy and our laws than any other administration (maybe even all previous administrations, combined).

So where does this venom come from? Point of fact, I never voted for George Bush. I was more ambivalent about him than anything else back in 2000 (not being a big fan of the first George H.W. Bush administration, I wasn't eager for a sequel). In 2004, I was not liking what was going on with a Republican controlled congress and executive branch, so I voted for Kerry in an effort to bring some balance back to the branches of government even though I thought Kerry was a putz.

My turning point happened during Hurricane Katrina. That was when it finally clicked for me that this administration, despite all of it's pandering and efforts to keep us "safe" from the terrorists, was found to be nothing more than one big lie. Watching those people at the Superdome, which was a FEMA designated Hurricane shelter, literally starving and dying on television while our government did NOTHING was enough to send me over the edge.

All that money that was spent on forming the "Homeland Security" department, all the money that was designated to help states, cities and communities "prepare" for a horrible terrorist event was wasted on ineffective, politically connected contractors that never did a damn thing. My biggest issue with Katrina was what would be the difference in Al Queda loaded up some big trucks with high explosives and blew up the levees around the city? The end result would have even been more death and destruction (remember, the city was virtually abandonded when Katrina hit, imagine those floods with it's 2 million citizens trying to get out).

At that point I made a drastic move with my investments. Over the next two years I moved most of my money to investments outside of the American Financial system. I purchased foreign equities, bonds and currencies. I purchased gold, silver and precious metals stocks. I purchased oil, energy and commodity positions as well.

I could see what a falling dollar was going to do to our economy. I could see how a housing bubble was going to devastate our economy once it popped (it was still going strong in 2005). I could see the fraud permeating from the highest levels of government and business and it made me sick.

I found myself betting against the United States and I was rewarded richly for it.

That is why I hate George W. Bush so much. He made me bet against my country. Our country, the shining city on the hill, the last greatest hope for the world has devolved into the bubble chasing, conspicuous consuming, debt addicted, gambling addicted, balkanized society we see today.

Of course, not all of this is President Bush's fault, but his policies made these problems worse during his tenure and that's where I fault him. If you look at almost all of his policies and initiatives they all have the same fundamental problem. He hires politically connected lobbiests to run his various departments and he stops enforcing the laws that are on the books.

Why do we have an illegal immigration problem? Because he defunded the department in Immigration and Naturalization that enforces immigration law on employers. The result of this is the construction, hospitality and agriculture industries were able to hire as many illegal immigrants as they wanted with almost no chance of getting caught. It's the same as outsourcing our jobs for cheap foreign labor.

Why did we have a housing bubble? Because he used the Office of the Comptroller of the Currency (OCC) to stop states from passing any anti-fraud laws against predatory lenders back in 2001-2002. The result is that fraud exploded by both lenders and borrowers because they knew there would be no repercussions. Likewise I can't help but think, in my most cynical thoughts, that the banks encouraged this fraud because they knew when the whole thing blew up, Congress and the President would bail their sorry asses out because they are "too big to fail". I am still holding out hope that Bush vetoes the latest housing bailout legislation that's moving through Congress, maybe he can be redeemed in the next few months.

In Iraq we have notorious contractors like Halliburton and Blackwater who receive billions of dollars on no-bid contracts, with no accountability and are given complete immunity from our government. We also conduct a costly and, in my opinion, neverending war but don't ask the citizens of this country to sacrifice one tiny little thing outside of that small minority of citizens that have actually served in Iraq. Of course, we are still sacrificing at the pump, but instead of that money going to the government to pay for this war (through a gas tax)- it goes to Exxon Mobile and to fund the very foreign governments in the Middle East that hate us and want to kill us. In the meantime, Osama Bin Laden and Al Queda are allowed to reform and regroup unmolested in Pakistan. This is insanity!

There are dozens of other issues (trade policy, dealing with Iran, outsourcing, growing the size of government the most since LBJ's Great Society, government surveillance, repealing Habeus Corpus etc.) where I am in complete disagreement with George W. Bush. Shoot, even things I agree with him on, like privatizing Social Security, were completely bungled by this President. It's like he can't do anything right!

I am not one of those "hate America" or "blame America first" types. However, I do think our country has become the drug addicted son that I am no longer willing to help. This self destructive behavior has to stop or else the country will die. That's right, our country is on the verge of a massive O.D. unless it drastically changes its ways. Unfortunately, the pusher is George W. Bush and nothing's going to change as long as he's in office.

That is also why I am flummoxed by John McCain. I actually supported McCain's bid for the presidency in 2000, but in my eyes he has lost all of his independent and "maverick" credibility during the course of his current presidential campaign. He is parroting the same crap policies that Bush has been forcing down our throats for the past 8 years. It's like he sold his soul to the devil in order to be the nominee. For God's sake, John, you've got to distance yourself from this administration if you have any hope of getting elected

In the end, I offer the following predictions for our President by the end of his term:

1. On January 20, 2000 the Dow was at 11,351. I predict that by election day, the Dow will be lower nominally. Adjusted for inflation, the stock market will have lost 25%+ during the course of his administration.

2. November will see a full scale rout of Republicans at the National, State and Local levels. Karl Roves "permanent majority" dream will come true. Unfortunately, it will be the Democrats who inherit this mantle. The Republicans will become a permanent minority party and may split up (cultural/religous conservatives seem the most likely to start their own party).

3. The Dollar index will sink to 60 before election day (it's currently at 72). That means this President will have overseen a 50% drop in the value of our currency during his tenure.

Mr. President, if I may coin a phrase, you are the WORST. PRESIDENT. EVER. You have been a disaster for this country and we will be a better place once you are gone. I hope you appreciate the scale of your efforts. You destroyed the economy. You destroyed your party. You have failed in nearly every effort you have undertaken as President.

I will be one that cheers on January 20, 2009. Don't let the door hit your ass on the way out!