Author Archives: opadmin

December Taper?

Fed leaders are discussing taper-talk now as a result of the latest 7% unemployment data as it offers political cover for such a tapering move. Others suggest the unemployment data is not credible given how misleading the current data can be as so many potential workers have dropped from the employment rolls.

Seems as though Dallas Fed President Fisher has read some of my recent market commentaries. Now that he will become a voting member of the Federal Reserve Board of Governors perhaps his common sense approach should gain a bit of traction.

Mr. Fisher said:

“Against that background, I believe that the current program of purchasing $85 billion per month in U.S. Treasuries and mortgage-backed securities comes at a cost that far exceeds its purported benefits. Presently, there is no private or public company that I know of, including many CCC-rated credits, that does not now have access to sufficient, cheap capital. There is no private or public company I know of that considers monetary policy to be deficient. Instead, to a company, every CEO I talk to feels that uncertainty derived from fiscal policy and regulatory interference is the key government-induced deterrent to more robust economic growth and profitability.

The FOMC has helped enable a sharp turn in the housing market and roaring stock and bond markets. I would argue that the former benefited the middle-income quartiles, while the latter has primarily benefited the rich and the quick. Though the recent numbers are encouraging, easy money has failed to encourage the robust payroll expansion that is the basis for the sustained consumer demand on which our economy depends. It cannot do so in and of itself. Without fiscal policy that incentivizes rather than discourages U.S. capex (capital expenditure), this accommodative monetary policy aimed at reducing unemployment (especially structural unemployment) or improving the quality of jobs is rendered flaccid and less than optimally effective. And as to the housing markets, prices are now appreciating to levels that may be hampering affordability in many markets.”

I think that last paragraph suggests a growing concern within the Fed that the QE programs are being blamed for exacerbating income inequality. If left unchecked that concept could be a danger to the Fed’s independence in an election year like 2014.

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Equities have had a great 2013 to this point and we are now in a period of the year that is traditionally positive for stocks. The risk of a pullback is always present, and with the prospects of tapering it is impossible to predict the extent of any pullback. The implementation of the (Un) Affordable Care Act has been a debacle by nearly all accounts, likely further impacting business confidence. The Fed continues to be extremely accommodative, and inflation readings are putting little pressure on them to change policy in the midst of Janet Yellen replacing Ben Bernanke next month.

While off the front pages for now, the debt ceiling debates will heat up again heading into 2014. While we don’t believe there will be a “grand bargain” and with 2014 being a major political election year, anything can happen.

The most recent contribution to business and consumer frustration from the Federal government has been the implementation of the (Un) Affordable Care Act (ACA). The technology issues were in the spotlight, but there were also issues with consumers getting kicked off their plans unexpectedly; and concerns whether enough young people will sign up; a necessity to make the ACA viable.

With all of this going on, it still appears to us that the Federal Reserve will hold off on cutting back its asset purchases until after the New Year, when the new Fed chair will be installed. However, there is small chance that they could move at their December meeting; leading to the possibility of increased volatility should Fed members start to prepare the market for such an occurrence.

This chart reflects extraordinary bullishness at extremes.

DecemberTaperGraph

J. Brock Hamilton

December 2013

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SELL IN MAY AND GO AWAY

The hottest initial public offering in years, Facebook (FB), was and continues to be a total debacle. We did not participate in the IPO and have not considered the stock as an investment. Facebook continues to decline some 40% from its opening day high. The financial engineers at Morgan Stanley and Nasdaq have lost a great amount of what little credibility they have remaining with small investors.

The May debacles did not end with Facebook. J.P. Morgan Chase (JPM), the largest bank in America, revealed they had incurred $2 billion in derivative losses and reports now have the number exceeding $4 billion. The blood sport of derivatives trading is back and those trading against J.P. Morgan are profiting handsomely. Jamie Dimon, CEO of J. P. Morgan, hinted it might be another year before they are able to unwind their losing derivative bet. We thought the regulators had put an end to those types of leveraged bets Morgan’s “London Whale” had been making. JPM declined 23% for the month of May.

As for the S&P 500, it completed a 20% round trip. Rising 10% from January 1st and then giving it all back as of May 31st. This is now the third year in a row where the market has peaked in the Spring only to be followed by a summer swoon. Oddly enough, if that is happening again it will be for many of the same reasons the market declined during the last two summers.

In Europe, the political and financial engineers have let a bad situation get extraordinarily worse. Greek, Spanish and Italian banks are on the verge of “runs” unless they can be recapitalized. Europeans in these countries are desperately trying to get their money out of these countries. The following is a conversation we read on a blog recently between a U.S. money manager and a Swiss banker in Geneva:

US – Are you guys still seeing boatloads of money coming in from outside the country?

Geneva – Yes, the money is still coming. In the past two weeks the Swiss National Bank (SNB) was forced to intervene in support of the 1.20 peg. The amounts were big, over EUR 20 billion was purchased.

US – What is going on at the borders? Is money still coming in by car?

Geneva – Yes. The border guards can’t search every car. The latest development is that the Border Guards are now searching some of the cars that are leaving Switzerland.

US – Why would border guards stop cars that are leaving Switzerland? What are they looking for?

Geneva – Mules. Professionals who smuggle money. It is very easy for a Swiss to go to a bank and withdraw a large amount of paper money. The mules bring the cash over the border to French and Italians who want Swiss Francs. The Mules also bring Euros into Germany for those who have private accounts in Switzerland who want cash to spend.

US – Is the paper money coming in and out of the country being done in large amounts?

Geneva – Yes this is big, but compared to the bank transfers that go on, or the amounts held in Euro Swiss (rolling FX positions) this is much much larger.

US – Where is the money coming from?

Geneva – From all over the globe, but not the USA. If an American comes in, we just show them the door.

US – Where does the most money come from, France or Italy?

Geneva – In the past few weeks we have seen more inflows from Russians than any other country.

BK – Russians? That’s surprising. What do you attribute this to?

Geneva – It’s politics and economics together. People are afraid.

To end on a positive note, stocks are cheap and getting cheaper. The bond market is dangerously overpriced and should be avoided (maturities over 10 years or greater.) Trillions of dollars are sitting idle in banks and on corporate balance sheets earning a return of zero %. If we can get a change in political leadership in Washington this Fall we think that could provide the needed psychological boost to get investors back into the stock market.

A massive bull market is lurking somewhere in the future. Unless we get a change in the dysfunctional politics in Washington that bull market shall remain elusive. We shall see.

Click here to download the PDF.

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THE FED IS BUYING 61 PERCENT OF U.S. GOVERNMENT DEBT – April 2012

Interest rates continue to remain at miserably low levels, a real Fed penalty on savers, while our National Debt continues to explode higher. We know the Fed has been a big buyer of U.S. Treasury debt but had not realized to what extent. The brief below from the Wall Street Journal, March 30, 2012, gives a little insight as to how busy the Fed was in 2011.

“The conventional wisdom that nearly infinite demand exists for U.S. Treasury debt is flawed and especially dangerous at a time of record U.S. sovereign debt issuance.”

The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis. This not only creates the false appearance of limitless
demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.

Still, the outdated notion of never-ending buyers for U.S. debt is perpetuated by many. For instance, in recent testimony before the Senate Budget Committee, former Federal Reserve Board Vice Chairman Alan Blinder said: “If you look at the markets, they’re practically falling over themselves to lend money to the federal government.” Sadly, that’s no longer accurate.

(DEBT GRAPH)

Ben Bernanke and the Fed governors continue to “print” dollars and bid for U.S. debt as many previous buyers have chosen not to.

This country has accumulated $15.6 trillion of debt with $10 trillion of that added since 2000. The debt ceiling of $16.4 trillion will be breached around October 2012 at the current rate of spending. This should set up an interesting dynamic just prior to the November elections.

On a related matter, Bernanke summed things up nicely in July 2005 when he said: “We’ve never had a decline in house prices on a nationwide basis. So, what I think is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.”

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COOKING DUCKS WITH COGNAC

As most of you know, we lost John in August. Along with the profound personal loss to our family and friends we also lost a talented, eloquent and humorous writer. Over the years his insightful and thought-provoking commentaries brought enjoyment to many, many readers. Recently I was looking at our website www.hamiltonadvisors.com where many of his commentaries are posted and marveled at their very clever titles. Over the years the inspiration for these titles came about for various reasons. Frequently we would be together when someone would say something and a catchy phrase would pop into his head and I might remark “That would be a great title for your next commentary.” In fact his final commentary done shortly before he passed away was titled “Subito Finito.” That came about when we were in the Italian region of Switzerland visiting some friends and one of them used that phrase.

Awhile ago Brock and I were laughing about a story that John recounted several times over the years about a duck hunting weekend with two friends many, many years ago when John was a young man. They had a successful day of duck hunting and that evening cooked a few ducks. No wives were along for this weekend and the three men were inexperienced cooks. A bottle of cognac presented itself and one of the men had the brilliant idea of throwing a little cognac in with the ducks. Sounds good, doesn’t it? Being a little culinary challenged he wasn’t sure of the correct amount so why not err on the generous side? He doused the ducks with cognac! As the evening progressed the three had more than a little cognac themselves and basically forgot about the time until an enormous explosion occurred in the oven which literally blew the door off the oven and splattered smithereens of duck all over the kitchen.

A couple of hours after Brock and I were laughing about this story he called me into his office as he was watching all four of his computer screens showing financial market information around the world – charts of every type -stocks, bonds, currencies, commodities, gold, economic activity, etc., etc. We discussed the current activities of the Federal Reserve Bank and the Treasury. Brock remarked “What the Fed is doing is sort of like cooking ducks with cognac.” Hence, the title of our commentary. What the Fed is doing might sound good but we wonder when something is going to explode. Although we do not possess John’s great talent for writing and cannot begin to fill those shoes we will from time to time attempt to write something interesting and meaningful. The following is our first attempt.

On Sunday night I watched Ben Bernanke on 60 Minutes, an unusual venue for a Fed Chairman as he discussed quantitative easing or “QE2” as it has come to be known. I immediately wondered how many Americans know the name Ben Bernanke or the term “The Fed” or have any idea whatsoever what he or it does. If one were to ask the average American “What is QE2?” the answer would most likely be “A ship?”

The concern over QE2 is deep and widespread. Bernanke attempted to smooth the waters and defend his actions and his rationale for purchasing $600 billion dollars worth of Treasury bonds to keep interest rates low. He even went on to say there could be further easing in the not-too-distant future. The thinking behind all this appears to be that with interest rates so painfully low (Pimco’s Mohamed El-Erian actually called them “confiscatory”) the average investor will be prompted to buy apparently riskier assets such as stocks and then when these stocks rise in price they will feel richer and then go out and spend which in turn helps the economy. Again, sounds good, doesn’t it? When asked about the Fed’s ability to act fast enough to keep inflation from getting out of control Bernanke responded that his degree of confidence in his ability to do so was 100%. Really? Again, sounds good, doesn’t it? Bernanke hasn’t exactly been right lately. Also, our government’s claim that there is no inflation makes us wonder what planet they are living on. Have you looked at commodity prices lately? Here is a sampling of the price increases of a few commodities in the last year:

Corn +49%
Cotton +78%
Sugar +32%
Coffee +40%

On November 19th Andy Kessler’s article “What’s Really Behind Bernanke’s Easing?” appeared on the Opinion page of the Wall Street Journal. In it he makes a good argument as to what is really behind the Fed Chairman’s thinking. Kessler’s explanation is “Without another $600 billion floating through the economy, Mr. Bernanke must believe that real estate (residential and commercial) would quickly drop, endangering banks.” Later in the article Kessler goes on to say: “Mr. Bernanke is clearly buying time with our dollars. If real estate drops, we’re back to September 2008 in a hurry. On Wednesday, the Fed announced that all 19 banks that underwent stress tests in 2009 need to pass another one. This suggests central bankers are nervous about real-estate loans and derivatives on bank balance sheets.”

So, what to do? Kessler’s idea is to detoxify and recapitalize the big banks by moving “the toxic debt onto the balance sheets of the FDIC and Fed, and refloat the banks with fresh capital.” That is a topic for another commentary.

We used to think in millions, then billions and now trillions. So what is a trillion dollars? This is from Art Cashin of UBS: “To get a billion dollars you would have to set aside $500,000 dollars per week for 40 years. And a …… trillion that would require $500 million every week for 40 years. Even with these examples, the enormity is difficult to grasp.”

The first decade of the 21st century has been a difficult one for America – September 11th, two lengthy wars, high unemployment, collapsing real estate prices, foreclosures and bankruptcies, volatile financial markets, a shaky dollar, corruption and runaway greed in government and on Wall Street (nothing new there), and we could go on and on.

A word about gold. Frequently we are asked about it. We began accumulating it when the price per ounce was about $600. We don’t have to tell you what has happened since. Attached to this commentary is a chart showing the price of gold and the S&P 500. Gold throughout history has been a store of value, a safe haven and sometimes a way out of danger. We are seeing today the same rationale for its accumulation as we have seen many times throughout history. In Felix Rohatyn’s most recent book Dealings he begins with the well-known tale of his harrowing escape in 1940 from Nazi-occupied France as a twelve-year-old Jewish boy traveling by car with his mother, grandmother and Polish cook. And what did his mother whom he describes as “ingenious, fearless, and tenacious” have hidden in her toothpaste tubes? GOLD COINS. People around the globe are once again buying gold coins along with gold ETFs in an attempt to protect themselves from a very uncertain world. When one adjusts the price of gold for inflation we are still nowhere near its all-time high. We continue to be bullish on the price of gold.

John was sometimes, actually often, criticized for being a little “doom and gloom” and as we reread this commentary it is pretty gloomy. However, last night Mr. Bernanke expressed great faith in the American people and their resiliency and we tend to agree with Ben on that one. America is a great nation in many ways and there is great comfort in reading our history and the greatness of the individuals who shaped it.

The esteemed author and historian David McCullough was a great and long-time friend of John’s. They went to school together for nine years and were roommates at Yale. David’s affectionate nickname for John was “Ham” and David was probably the only person in the world who could have gotten away with calling him that and better yet, John even liked it!

David’s most recent book is a beautiful little gem titled In the Dark Streets Shineth. Along with the book comes a DVD which is David’s narration with the Mormon Tabernacle Choir. In December of 1941 just days before Christmas and just days after Pearl Harbor (the 69th anniversary of which just happens to be today), Churchill secretly crossed a dangerous Atlantic for a meeting with Roosevelt. On Christmas Eve as a nervous America prepared for war the two leaders addressed a crowd of 20,000 from a balcony at the White House while a beautiful crescent moon hung in the sky. This book is an uplifting story in a time when our country faced great danger and is something positive for families and friends to read as we gather together at this beautiful time of year.

We would like to take this opportunity to wish you and yours a very happy holiday season and many blessings in the New Year.

Most sincerely,

Debbie Hamilton and Brock Hamilton
Hamilton Advisors Inc.
djh@hamiltonadvisors.com;jbh@hamiltonadvisors.com

Click here to download the PDF.

Click below to see our national debt clock:
http://www.usdebtclock.org/#

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SUBITO FINITO!

We have a Swiss friend who loves to use this Italian phrase. Literally it means immediately finished, but the meaning of these two words is instinctively understood even without translation.

The Dow Jones Industrial Averages were up about 225 points on June 2, 2010. Great. But it was down 112 points the day before. Today June 4 at 11:30 AM the Dow 30 Industrials weredown 232. The major market indices have had 1%, 2% or 3% or more swings one way or the other in the majority of trading days over the last month or so. So far 2010 has been a most volatile year.

May was the worst month for the Dow Jones industrial Average since May of 1940. And hedge funds are reported to have taken one of the worst drubbings ever for one month in May.

We are pointing this out with the objective of shedding just a little light on the subject of market volatility and what causes it.

It used to be that when the markets had an unusually strong or weak day, we would ask “what happened?” And there usually would be a somewhat logical answer. If an important event or events would come to the attention of investors, they would be prompted to assess the situation and buy or sell securities based on that assessment.

In those bygone days there were the New York Stock Exchange, the American Stock Exchange and the overthe-counter dealer markets – now Nasdaq. The NYSE was the major of the two Stock Exchanges in this country. Now instead of being one of two stock exchanges it is one of about 50 stock exchanges because of the explosion of new stock exchanges, particularly in the last decade.

Until May Day (May 1, 1975) investors bought and sold stock through their brokers at a fixed, not negotiated, commission rate.

“Listed” orders (meaning stocks listed on the New York or American Stock Exchange) would be given by the investor to his broker who would then send it to the Exchange Floor where the stock was listed to be executed at a set limit or “at the market” with the assistance of floor brokers (two dollar brokers) who then would go to various specialists to execute the order. All stocks had a specialist whose responsibility it was to maintain orderly markets – i.e. minimize volatility – in the stocks for which they acted as specialists.

Stocks not listed on an exchange were bought and sold at negotiated prices by various dealers in the over-the-counter markets, now Nasdaq. It was mainly a very personal system, a very logical system, and it worked very, very well the vast majority of the time for many, many years.

“Mother Merrill” (Merrill Lynch) was even referred to as “The Thundering Herd.”

And when I was with Lehman Brothers in those olden days, the partnership reportedly spent more than $1 million a year to keep their name out of the press. The last thing Lehman Brothers or Goldman Sachs wanted was publicity. They remembered negative publicity they received during the markets of the Depression. Now all is forgotten.

The brokerage firms at that time were partnerships not corporations. Money was made or lost by the partners who, as the owners of the firm, took great pride and responsibility in the reputation of their firm.

The money made today in Wall Street is paid in the form of bonuses to employees, not to the stockholder-owners as was the case with the partnerships.

FAST FORWARD

Today it is estimated that upwards of 70% of stocks traded are being traded every day between computers. That of course is not an exact figure, but it does provide an estimate of how many stocks are being traded by customized computer software and black boxes — not by human hands or, more importantly, by human minds. Approximately 30% of trading is then divided among individual investors, institutions, hedge funds, mutual funds and so on.

This system does not always work well and is the root cause of a great deal of the extreme volatility in today’s markets. It has nothing to do with our concept of investing. It may be good for Goldman Sachs and its ilk, the large hedge funds and others in that game. (Goldman Sachs reported in a filing with the Securities and Exchange Commission on March 1, 2010 that it had made at least $100 million in net trading revenues on 131 days last year – equivalent to once every other trading day.)

An example of what computer trading can do for you: On Thursday, May 6, 2010, shortly after 2:30 PM, the Dow Jones Industrial Average began to wobble and lost 998.5 points including a 500 point fall in a matter of seconds. It finally closed down 347.8 points for a mere 3.2% decline on the day. On the next day, Friday, the Dow Jones managed to swing through a 350 point range to close down 115.49 points or 1.1%.

The Global Edition of the New York Times reported on Saturday/Sunday, May 8/9 2010 concerning Thursday’s, May 6th’s, Flash Crash: “Federal agencies began inquiries after more than $700 billion in value was erased in an eight-minute span. ‘The regulatory authorities are evaluating this closely,’ U. S. President Barack Obama said at the White House.” Today, June 4, 2010, there are still no satisfactory answers as to what caused the May 6 Flash Crash. Do you think a similar crash could happen again?

Subito finito!

It was reported in that same article: “Increases in automation and competition have reduced the NYSE and Nasdaq’s volume in securities they list from as much as 80% in the past decade. Now, less than 30% of trading in their companies takes place on their networks as orders are dispersed to as many as 50 competing venues, almost all of them fully electronic. Twenty years ago, fewer than 10 exchanges competed for all U.S. equity trades.”

We have been waiting, without success, for some clarity for the public’s benefit concerning what is known as “High-frequency trading.” This is an operation where trading firms with supercomputers buy data from stock exchanges. They use that data to purchase millions or hundreds of millions of dollars worth of stocks and then sell them, often instantaneously, without the transactions being disclosed.

“While legal, the practice pushes the envelope of what is fair, critics say, and raises questions about the advantages some fast-moving traders are gaining in the market.”

Today’s computer trading programs have, in our opinion, very little connection with reality and virtually none with the well-being of the individual investor. And we haven’t even mentioned the “Dark Pools” where massive trading takes place away from all exchanges.

The individual investor’s instincts correctly tell him that, at the very least, the markets are not a level playing field -most certainly not tilted in his favor.

We suspect the only reason for these activities’ being legal is that laws making them illegal have not yet been written. This is where money and politics are inextricably tied to today’s markets. In order to have these practices continue to be legal, it requires a great deal of money, much of which finds itself ending up in the pockets of the politicians.

We quote from the June 4, 2010 issue of the Wall Street Journal.

“Critics call the practice the modern-day equivalent of looking at share prices listed in tomorrow’s newspaper stock tables today. ‘It is a rigged game,’ Sal Arnuk, cofounder of brokerage firm Themis Trading, said Wednesday at a Securities and Exchange Commission roundtable discussion in Washington, referring to the trading activity, which some call ‘latency arbitrage.’

The people involved in the securities dominating electronic trading business are definitely not looking out for you. But why would anyone think they would be?

We don’t ask “what happened?” anymore. There is almost never a plausible answer.

SUBITO FINITO! and Good Luck!

John W. Hamilton
June 4, 2010

Click here to download the PDF.

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CHICKENS COMING HOME TO ROOST

It is been a long hard struggle, but the economy is showing signs of life.

Unemployment, however, continues to be an extraordinarily difficult problem, especially if one looks at the number of those who have been out of work for more than six months and the underemployed. Those numbers show that “real” unemployment is still closer to 17% than 10%.

Interest rates are beginning to increase which will be very good news for investors who would like to receive more than a pittance on their money funds and decent returns on quality bonds.

Interest rates are increasing in the marketplace despite the fact that the Federal Reserve continues a policy of virtually zero interest rates hoping that flooding the country with money will help the economy and therefore the employment situation. That has not worked well so far, and the doctrine of unintended consequences continues to be in effect. In other words these policies could very well have the same unintended consequences that got this country into the mess in the first place.

Mr. Greenspan, former head of the Federal Reserve, is presently trying to defend himself against charges of causing, or at least failing to prevent, the economic meltdown before the US Financial Crisis Inquiry Commission. Many think his easy money policies caused the “Bubble.” Greenspan said on April 7: “I was right 70% of the time, but I was wrong 30% of the time.”

The question is whether the same mistakes are being made all over again. This time by Fed Chairman Ben Bernanke. Zero cost money ultimately results in Bubbles and Inflation.

From time to time we look out for “Chickens coming home to roost.”

Now is an appropriate time because there seem to be an awful lot of chickens in the neighborhood. The Greek chicken, for example, has actually managed to run out of money. The socialist Greek government has given away more money than the government has. They want the Germans or some sort of EU plan to bail them out. Note: If the Germans do not come through and generously give the Greeks the money to keep them from defaulting, the Greeks will be very upset with the Germans.

People on welfare become extremely upset not with themselves but with their caretakers if they fail to grant every wish when the chickens come home.

Meanwhile there has been a run on Greek banks as over €10 billion deposits have been lost in the last two months, and interest rates on Greek bonds have been skyrocketing. For example, yields on Greek bonds on several occasions were 450 basis points higher than on comparable German bonds during the week of April 5, 2010.

There is a question as to whether there will be takers for new Greek bond offerings that the country must issue in order to pay off its maturing bonds and avoid the first default by a European Union member. Despite this the Greeks are prohibiting hedge funds from buying new bonds. We wonder if hedge funds would ever buy the bonds to cover their short positions? No, not possible. How foolish of us to even have that thought!

Ultimately we suspect there will be some sort of workout for the Greek chicken with the European Union as the EU is greatly concerned about other members (larger chickens) who will soon be coming after the Greek blowup with similar but larger problems. Not surprisingly, the same causes will produce the same effects.

The English chicken is marching toward its socialist nirvana, and there are warnings by credit agencies that English sovereign debt could lose its AAA rating in the fairly near future. The American chicken is following the English chicken as the government competently and persistently borrows more than it can pay repay. There is talk of the US losing the highest ratings on its Treasury bonds, and we have heard of instances where certain high-grade corporations have been able to borrow at rates less than comparable treasuries.

The US sadly continues to issue more paper bonds and more fiat/paper currency. The gold market is taking note of this, and gold is presently selling around $1160/ounce. Serious talk continues about the dollar losing its reserve currency status. China’s thoughts?

The Citigroup chicken keeps coming back again and again. Chuck Prince, a lawyer who had served as general counsel and who was Sandy Weill’s right hand man for 10 or so years, and Robert Rubin former Treasury Secretary and Citi director, were testifying on Thursday, April 8, 2010, before the US Financial Crisis Inquiry Commission as to how the bank under their supervision managed more than $50 billion in losses that ultimately led to a $45 billion government bailout. Citigroup after all has been deemed to be “too big to fail.” One can tell it’s size by looking at the salaries received by these most apologetic superstar executives.

According to the April 9, 2010 Financial Times Mr. Rubin testified yesterday: “Almost all of us involved in the financial system… missed the powerful combination of forces at work and the serious possibility of a financial crisis. We all bear responsibility for not recognizing this, and I deeply regret that.”

We do not know precisely to whom the former Treasury Secretary was referring when he said “We all bear responsibility…”

We don’t bear that responsibility, and we did not miss “the powerful combination of forces at work and the serious possibility of financial crisis.”

Chickens are coming from Los Angeles, the state of California, and the states of New Jersey, New York and Michigan to name a very few. Chickens are coming from everywhere. The money is gone, and the chickens are coming home. They are bringing a message that cannot be misunderstood.

The chickens will continue to multiply and keep coming at us as long as governments, states, municipalities do what they do best — spend more money than they have and rely on us, the taxpayers, to bail them out. And that ain’t chicken feed!

John W. Hamilton
April 10, 2010

Click Here to download the PDF.

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“When You Come to a Fork in the Road, Take It!” – Yogi Berra

We have seen a lot of roads, and we have seen a lot of forks, but we’ve never seen such a stupendous Fork as we are seeing in today’s markets.

There has been a lot of buying of stocks by the ever present speculators, of course, and there are also huge bets being laid down in the form of stock purchases and equivalents by investors who feel they have “missed the boat.” Many of those are hedge fund managers and others whose incomes are determined by the annual/short-term performance of the funds they manage.

All this is fine as these are the types of decisions that cause markets to go up and down. The buyers and sellers are caught up in a constant struggle just like the Bulls and the Bears. This reminds us of the largest and most impressive bronze we have ever seen of a giant Bull and a giant Bear locked in a ferocious struggle-to-the-death located at the entrance to the New York Stock Exchange Luncheon Club. We are sure you have all seen pictures of this battle which has gone on for centuries.

Yogi Berra’s advice is worthy of attention as the Fork in the markets has one branch supported by the above-mentioned bulls while the other branch is followed by investors who “cannot connect the dots.” They cannot reconcile today’s stock prices with the reality of the economy and its outlook. They look for the long-awaited economic recovery and come to the conclusion that while there are positives, there is still no clear-cut direction.

This morning, October 2, 2009, the Labor Apartment reported job losses were accelerated to 263,000 in September bringing the US unemployment rate to a 26-year high of 9.8%. This was the 21st consecutive month of losses on the job front. Some calculate that the “real” unemployment rate approaches 15%.

Steven Stanley, chief economist for RBS Securities (sort of a bull) said: “We are more inclined to view September as a temporary setback than as a signal that the decelerating trend in job losses has stalled out. It is far too early to be pulling the alarm on this nascent recovery.”

On the other hand, Harm Bandholz of UniCredit Research (sort of a bear) said: The weak employment report lessens hope for a sustainable recovery. Once the impact of the inventory cycle and the fiscal stimulus has run its course, gross domestic product growth will slow down eventually again.”

Democrat Vice President, Joe Biden, said “Job losses would have been far worse without the stimulus.”

Republican John Boehner who leads the House said “We are headed for what appears to be, at best, a jobless recovery. That is not what the American people were promised.”

Once again it is obvious that every coin has two sides and that when we come to Yogi’s Fork we should take it.

Housing sales have been improving. That is a most welcome sign. Two significant reasons are 1) that the $8,000 tax credit given to new homebuyers has been an important stimulus and 2) the fact that the prices of homes have fallen significantly. A possible small problem: the stimulus tax credit will be expiring shortly and many are trying to get in under the wire. Will the market stay strong after the stimulus is gone?

Of course we all remember the car buying incentive of a month or so ago known as “Cash-for-Clunkers.” That stimulus also seemed to work well albeit at a tremendous expense for the American taxpayer. Some of us even wondered how car sales would fare not too long after the program was terminated. Now we have an idea.

The Financial Times reported this morning, October 2nd: “US car sales close to year low. Expiry of clunkers scheme hits demand – GM and Chrysler are heaviest casualties…. US car and light truck sales came close to plumbing new 2009 lows in September, with weak consumer demand exacerbated by the expiry of cash-for-clunkers scrappage incentives and unusually low inventories of some popular models. The heaviest casualties were General Motors and Chrysler, the Detroit car makers that restructured under bankruptcy-court supervision this year. GM’s sales dived by 45% from September 2008, an unusually strong month and by more than a third from August. Chrysler was down 42%…. Total industry sales dipped to an annual rate of about 9.2 million units last month, from 14.1 million in August and 12.6 million in September 2008.”

That’s sort of bearish news especially when Ford Motor stock rose sharply in the last few days due to high annual auto sales expectations. How solid are those expectations?

We will not comment at this time on the weakness of the US dollar and many other issues that lead us to continuing caution with a stock market which we do not believe has the fundamentals to support its recent levels. We continue to have a conservative intermediate-to-longer-term view of investing and continue to believe that “Water still runs downhill.” For a company to have its market valuation double, for example, from $10 billion to $20 billion, it seems that there has to be relative improvement in the underlying fundamental business and outlook for that company. Many companies in recent months have reported higher earnings on lower revenues… not stronger fundamental business. “Pie in the Sky” stock prices, as a result of corporate cost cutting, may work for a while but generally end in tears.

We remember a few years ago when there was a big push to buy stocks because the pundits told the little people that it would not be long before we would run out of stocks. Better get them now was the advice, and many stocks went up sharply — for a while anyhow. But then, as nature would have it, water started running downhill and the whole “buy stocks because there’s going to be a shortage of them and we’re going to run out” theory collapsed and ended in tears for many.

On September 11, 2009 the Wall Street Journal had a front page article: “Harvard, Yale Are Big Losers in ‘The Game’ of Investing” authored by John Hechinger.

Hechinger wrote: “It’s a tie in the Harvard-Yale investment game. Both schools were thrown for colossal losses.

“The universities on Thursday said their endowments, higher education’s two largest, each lost 30% of their value in the year ended June 30 (2009). Combined, the pair of investment pools shrank by a staggering $17.8 billion. “Declines in the endowments have forced the two schools to cut budgets and delay plans to expand facilities and hire staff, as even the country’s top colleges are being forced by the financial crisis to retrench. The pain is being felt widely across higher education.”

(A copy of this most interesting and relevant article will be supplied upon request.)

Our advice is to take a step back next time you are tempted to think that the gurus/geniuses who run large pools of money have all the answers and are exempt from the laws of Common Sense.

What happened with many of the world’s largest money managers in the last year and a half is that they became exempt in their own minds from having to remember the basics and from having to play by the rules. Their egotism and greed trumped the simple reality of the Tortoise and the Hare.

Question: Water will always run downhill, but when it gets to the Fork which path will it take? Answer: It will follow both paths until one of them begins to run uphill. We believe the same should be true for investment decisions…. Particularly if one wants to avoid 30% losses.

John W. Hamilton
October 2nd, 2009

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ROUND AND ROUND SHE GOES — WHERE SHE’LL STOP, NOBODY KNOWS!

We are now into September, the “Cruellest” month, at least as far as stocks go, and after some impressive gains the stock market has been most indecisive recently. In our experience rising prices in stock markets cannot and will not be sustained for long without a sound foundation, i.e. without sound business, fiscal and monetary behavior.

On August 7th we wrote: Obama says ‘worst may be behind us’ on recession – AP. On August 7th the Labor Department announced that the US jobless rate “declined” to 9.4%, a mark it hit in May when that same number was at an almost 26- year high. On September 4th the Labor Department announced that “Employers cut jobs in August at the slowest pace in a year, but a jump in the unemployment rate to a 26- year high of 9.7% reinforced worries that a weak labor market could weigh on consumer spending and the vigor of the economic recovery. Teenage unemployment hit 25.5% the highest since the government began keeping records in 1948. ” WSJ Sept. 5-6, 2009

While the overall economy seems to be improving to some degree, many sectors continue to show little or no signs of improvement.

We repeat from last month: “The biggest game in Washington and Wall Street today is to predict whether the “recovery” will take the shape of an L, a U, a V, a W or something that will look like your cellar/attic stairs. This country and the rest of the world desperately need a strong recovery. But is a recovery really guaranteed? If so, by whom?”

The economy in this country and abroad is improving to the degree that its decline is slowing. The Federal Reserve’s August 11th and 12th meetings were more positive, according to the minutes. They “showed Fed Chairman Ben Bernanke, and his colleague’s striking a much more hopeful note about the economy’s prospects compared with an assessment made in late June. Many Fed officials saw “smaller downside risks.” A number expected the pace of the recovery to pick up in 2010, but there was a variety of expectations about the strength of the recovery due to questions about how the consumer will behave.

The American consumer has been the engine of economic growth for a number of decades, and the consumers’ ability or willingness to spend this country’s way out of recession is, in our opinion, the key to the timing and strength of the recovery. Consumer spending is impossible for the man or woman who is out of a job; it is problematic for the person who thinks that he may not have a job in the near future. Those who cannot pay their mortgages, car payments or credit cards are not likely to be much of a help as far as spending America’ way back to recovery, let alone to a vigorous recovery.

The 27 EU finance ministers who plan to meet in Pittsburgh on September 24th and 25th for the G20 Summit have agreed that recent signs of Europe’s recession bottoming out, while welcome, were not enough to justify rapid removal of emergency measures still in effect. Wouter Bos, the Dutch financeminister, warned: “We will need to think about exit strategies, because in the end the huge deficits will threaten the euro.”

We recall hearing that here in America because of huge deficits threatening the dollar. At any rate, they put a cap on European bankers’ compensation as one small step for mankind.

Announced on Friday, August 21, after the markets closed on summer weekend, was “$2 Trillion Higher Deficit Projected. The new projection is for a cumulative 2010- 2019 deficit of $9 trillion instead of the $7 trillion previously estimated. The new figure reflects slumping revenues from a worse economic picture than was expected earlier this year…. Ten-year forecasts are volatile figures subject to change over time. But the higher number will likely create political difficulties for President Barack Obama in Congress and could create anxiety with foreign buyers of US debt.” New York Times, August 21, 2009. Read: could create anxiety with foreign buyers of US dollars, still the World’s Reserve Currency.

For a very long time we have been extremely concerned about the value of the US dollar. The reasons are clear, and there are many. We believe short-term fluctuations in the stock markets are trumped by the value of the currency. The value of the US dollar should be of concern to everyone as it directly and immediately affects each of us. Just as the “recession” will not disappear until the “credit crisis” is properly worked through, your financial future will not be stable until your currency is stable. The fact that you may accumulate more dollars becomes less and less relevant as those dollars have less and less value. And that is what is happening at an alarming rate and which has the potential of accelerating exponentially! Where she’ll stop, nobody knows!

The simple truth about immense government debt (the US’ current and projected debt, for example) is that it cannot be paid off except with hyperinflation. The government is fully aware of this.

There are still people alive in Germany, who lived through the hyperinflation of the Weimar Republic; how it brought Hitler to power and ultimately was the cause of World War II.

Cheap money is the debtor’s best friend and the creditor’s worst nightmare. Skyrocketing interest rates that accompany hyperinflation will make us look back quizzically at the days when the Federal Reserve gave the banks money for free.

It appears that others have been contemplating the present and future value of the dollar lately as gold last week traded up to almost $1,000 an ounce and closed at 994.58 on Friday, September 4th.*

John W. Hamilton
September 6th, 2009

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A Very Few Examples of Today’s Challenges

July 10th, 2009: This day is one for the history books as General Motors, for many years the world’s largest industrial company, emerged from its Detroit ashes as America’s new Phoenix bird for the purpose of once again becoming a power in the automobile industry. The largest stockholder of this now private company is the US Government, which owns 61% of the company’s stock along with other major stockholders — the UAW (the United Auto Workers Union) and Canada. It has been renamed Motors Liquidation Company.

In April 2000 the original GM, the world’s largest automaker and one of the world’s largest corporations – a company without which we probably could not have won World War II – traded at an all-time high of $94 per share. Today its stock is worthless, shedding light on the validity of the “Buy and Hold” strategy of investing. At least we have learned one more axiom about investing that we should put away for another day.

On www.motorsliquidation.com there is an Important Notice stating “Management continues to remind investors of its strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios.”

The former GM shares, renamed as mentioned above, Motors Liquidation Company, are unlisted and have been declared worthless. Today, July 10th, old GM’s shares (GMGMQ) are trading up almost 40% at $1.15 a share in the over-the-counter market, on volume of 74,814,700 shares. We admit that we just don’t get it. (Very shortly after writing the above, trading in the worthless Old GM stock was halted. There is no trading in the securities of the reborn/Phoenix company as it is entirely privately held. GM stock is now gone forever.)

We are curious to see if the government will be able to show its prowess in managing the new GM powerhouse back to its former Michael Jackson-like stardom. This will be necessary in order for the company to repay $50 billion of debt to the US government – us – which the company said it will do by 2015. This exercise undertaken by Washington will show how accurate those are who say big government cannot run big business. Actually, it is beginning to look like Washington will have many opportunities to show us how numerous businesses should be properly run.

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On July 9, Bloomberg reported: “American International Group Inc. [AIG], the insurer bailed out four times by the government, will likely have no value left for private shareholders after repaying the US…. Our valuation includes a 70% chance that the equity at AIG is zero,” said Joshua Shanker, an analyst at Citigroup. “Shareholders may have no value left if AIG is forced to sell its assets and can’t command prices that exceed the insurer’s liabilities, a scenario that has a 60% chance of occurring, according to Shanker. He said there is also a 10% chance of insolvency, which may also wipe out investors.”

Bloomberg goes on to report: “the government’s rescue includes a $60 billion credit line, $52.5 billion to buy mortgage-linked assets owned or insured by the company, and an investment of as much as $70 billion. You may recall that several years ago AIG was the largest insurance company in the world. Now it is in large part owned by the US government, and analyst Shanker has declared that its shares may well be worthless. It is of interest that several days ago AIG declared millions of dollars of bonuses for executives for 2008. New bonus proposals will be forthcoming in a few more months. This is another opportunity for big government to show the world how to run a big company.

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Oh by the way, one of many other companies where the US government now owns a substantial percentage of the stock is Citigroup. The US will own 34% of Citigroup’s shares, and while we do not have exact figures as to how much money Citigroup has borrowed from the government, we believe it’s liabilities to the US taxpayer exceed $300 billion. In the last few days Citigroup has undergone its third major executive shakeup in 2009 which leads to some confusion as to when Citigroup’s debts will be repaid, if ever.

It is also noteworthy that Citigroup raised its interest rates on its credit cards before the new federal rules become effective. The Financial Times (July 1st) reported “Citigroup has sharply increased interest rates on up to 15,000,000 US credit card accounts. Just months before curbs on such rises come into effect, in a move that could fuel political anger at the treatment of consumers by bailed-out banks.” The article continued. “People close to the situation said that City, which is about to cede a 34% stake to the US government as part of its latest rescue, had upped rates on between 13,000,000 and 15,000,000 credit cards. It cobrands with retailers such as Sears and Macy’s. Citi’s rate increases emerged on the day the government proposed legislation to create a new regulator with sweeping powers on consumer protection.”

The rate increases were retroactive, and Carolyn Maloney, Democratic representative for New York, told the Financial Times . “It’s hard to tell if rate hikes on existing balances being put in place now are the result of prior bad business decisions or getting in under the wire of the new law. Regardless, retroactive rate hikes are ’unfair’ and deceptive – and that’s the Federal Reserve talking, not just Congress.” We add “Nice going City. At least you don’t deviate from your former business standards and ethics. How much do you owe now, and when will it be paid back to the US taxpayer?” If you hear Citigroup’s answer before we do, please let us know. We have a continuing interest!

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Finally, don’t overlook California: The state that would be the world’s eighth largest economy if it stood alone. California began its fiscal year last week without a budget. California is now paying its employees with IOUs since it has run out of money. On July 10th it was reported that, among others, Bank of America, Wells Fargo and JP Morgan were not accepting the state’s IOUs printed because of its $26.3 billion deficit. The California economy continues to suffer an economic slump due to a collapse in housing, unemployment exceeding 11% and welfare and social service spending well in excess of its income. Why wouldn’t a bank, accept a California IOU? When we last checked, we noticed that most banks still aren’t accepting Confederate money either.

Our friends in California are far from alone as they continue to spend more money than they are taking in. Apparently another 30 or more states are getting ready to follow California’s example. A few that have been mentioned include Massachusetts, New Jersey, Pennsylvania, Ohio, Michigan, Nevada, Arizona and on and on. These disasters have snowballing effects with regard to their citizens and businesses that immediately affect the stock and bond markets in the country as a whole.

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All of the above and volumes more are true. We could not make it up. The relevance to the financial markets is the fact that the Credit Crisis is nowhere near being solved, and as a result, the economy continues to flounder. In our opinion, the economy continues to deteriorate with no end in sight. The Administration seems to be on the edge of announcing a second Stimulus Package as the first has obviously not worked. One of the many small problems with such a proposal is the fact that the US government, like California and her sister states, simply does not have the money. Other proposed major programs with which we are all familiar will require untold sums of money for implementation. There is a great deal of agreement that some of the goals could significantly benefit our society, but the problem continues to be their funding. What will they ultimately cost and how will they ultimately be paid for? Again, if you hear the answers to those questions before we do, please let us know.

The average citizen is aware that economic and financial conditions are worsening. He is sitting back watching the parade go by. He realizes that his borrowing power is extremely limited and has long been aware that he can no longer use his home as an ATM machine. Could he be one of those to push the unemployment rate to 10%, 11% or higher? Perhaps worse, he has begun to realize that not even the inspirational politicians he formerly believed in have the solutions. He has simply stopped spending “Until things get better.” When the markets can figure out when things will get better, they will get better.

John W. Hamilton
July 13th, 2009

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UNTYING THE GORDIAN KNOT – 2009 AD versus 333 BC

Greek mythology held that the person who untied the Gordian Knot would rule all of Asia. The person who unties today’s Gordian Knot will rule the World – not just Asia – as did Alexander the Great, who defying topological logic, decided to “Cut to the Chase” despite the fact that no one had claimed the puzzle was unsolvable. He solved the problem his way, and we will have to solve it our way.

Well, even Warren Buffett had a rough 2008 as Berkshire Hathaway’s stock was down about 30% for the year, and its book value per share was down 9.6%. It proved to be his worst year ever. An admirable characteristic of Mr. Buffett’s is that he will own up to it. Even the “Sage of Omaha” is human.

It has been said that Mr. Buffett was held hostage by his strong belief that stocks should be bought and held. Although we believe that the 2008 markets’ experience largely discredits that theory, the Sage has always maintained he is unconcerned by short-term market movements because of his long-term outlook. This is a luxury that is not practical for everyone as indisputably proven in the last year and a half. We are also a bit curious as to what “long-term” really means for someone who is 78-years old.

These comments are not meant as a criticism of Mr. Buffett; they are simply a reminder that he also has human frailties and that there is no such thing as a perfect formula for investing.

Exxon, IBM and Johnson & Johnson, to name only a very few, have been excellent long-term investments whereas General Motors, Chrysler, Citigroup, American
International Group, Lehman Brothers*, Fannie Mae, Freddie Mac, Pan American World Airways and one of the most widely held common stocks ever – Pennsylvania Railroad – have not. Investments, like orchids and children, require constant supervision.

*Note that bankruptcies are not necessarily “bad” for everyone. “Weil, Gotshal & Manges LLP earlier this week asked a federal bankruptcy judge in New York to sign off on a $55.1 million payment for its work representing Lehman”. And that is just for the quarter. “Mr. LoPucki estimates that Weil stands to bring in more than $200 million in fees by the end of the case. That would exceed the next-highest debtor counsel fee, the $159 million that Weil earned during the Enron bankruptcy. A Weil spokesman did not respond to a request for comment.” Wall Street Journal, April 16, 2009.

Any guesses as to Chrysler and possible General Motors bankruptcy fees?

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With regard to today’s stock markets, we believe they should be approached with a great deal of caution because despite several recent and most welcome rallies, the fundamentals necessary to support a sustainable bull market are not yet visible.

Furthermore, as pointed out in our last letter, percentage gains while numerically correct can be misleading. Citigroup, for example, traded as high as 54.77 in January 2007 and as low as 1.03 in March 2009. Citigroup’s shares closed on May 1st at 2.97 – — an increase of 1.94 or 188% above its low. It is reported that the bank may still need an additional $10 billion or more to meet the government’s Stress Tests.

The traders and investors who have cash yielding next to nothing have been “trying out the waters” in these extremely volatile markets because the economy has not been falling as fast as it had been.

The reality is that over a period of many years the US consumer has been the engine of economic growth in the United States and the rest of the world. At this time it is very difficult for the consumer to borrow money and virtually impossible for him to take more equity out of his home. In other words, he can no longer use his home as an ATM machine. His credit card is maxed out; and, people on unemployment ordinarily do not have much discretionary income. These are a few of the reasons why the American consumer is not spending, and why he is no longer the engine of US and world growth.

Until the economy and the credit markets are reversed these conditions will continue. That is the reason the US economy has contracted violently – declining 6.1% in the first-quarter — nearly matching the 6.3% decline in fourth-quarter of 2008. These two quarters’ contraction was the worst in more than 60 years.

This chicken and the egg problem accounts in large part for the complexity of the economic problems. We are reminded of the Knot.

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President Obama and his administration are attempting to spend America’s way out of these problems thus producing the largest deficits in this country’s history. The questions now are not only whether this strategy will be successful but at what price the rest of the world will be willing to buy the US dollar.

Issuance of exorbitant amounts of dollars and dollar equivalents will ultimately produce not only a weaker dollar – “Monopoly money” – but also the likelihood of severe inflation. It’s only a matter of time.

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On April 24, 2009 the Financial Times reported: “China reveals big rise in gold reserves. China has quietly almost doubled its gold reserves to become the world’s fifth-biggest holder of the precious metal, it emerged on Friday, in a move that signals the revival going on after years of fading importance.” The FT continued: “…the head of the secretive administration of foreign exchange, which manages the country’s $1,954bn ($1.954 trillion in American English) in foreign exchange reserves, revealed China had 1,054 tonnes of gold, up from 600 tonnes in 2003.”

“Paul Atherly, Beijing-based managing director of Leyshon Resources, said that even after the latest purchases China had a very small percentage of its reserves in gold, far below the US or other developed countries.

“Those [gold] holdings are still too low in terms of the size of its economy and the growing significance of its currency.”

Since the US is a financial hostage as a result of its debt held by China, we wonder if they know something that we do not.

We think not. There is no question as to the direction the Chinese are taking. It’s not a tough call, and it is the strongest signal we think we can ever recall. Do you know where your currency is or the direction it is headed? The issuance of more paper money will only hasten the outcome.

Buying property is one alternative to owning currency and on that front there is good news for prospective buyers. On April 21st the price of the Helmsley estate in Greenwich, CT was reduced by $50 million in one fell swoop. This reduction, probably the largest ever for any U.S. house, lowered the offering price to $75 million from the original $125 million when the 40-acre property was first put on the market a little over a year ago.

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Some observations regarding China’s relevance today from an address “The Dragon Rising” given at the Virginia Military Institute in April 2009:

“England doubled its Gross Domestic Product in 48 years, starting in 1780. The US took 47 years to double starting in 1839; Japan 34 years from 1885, South Korea in 11 years from 1966 with America’s help, but China doubled its GDP in 9 years from 1978, and then doubled it again by 1996 in 9 more years. From a third world country to the world’s 4th largest economy in 28 years. This is unprecedented in world economic growth.”

“It’s assumed that within 10 to 15 years China’s global metal consumption will be 50% larger than the US. A change of this magnitude in finite global commodity demand and trade will have vast political consequences. China is developing intimate partnerships with countries worldwide and is creating ownership interests in critical commodity production and exploration. The US has not developed any long-term strategy for managing the overwhelming consequences of China’s new and ever growing ownership positions”

“China’s promises to move toward democracy are solely for the benefit of business relations with the US. Neither the majority of the Chinese people nor the Chinese government has as any intention or desire for creating a democracy.”

“China is developing a foreign-policy and military strategy to protect its access to and the transport of their vital raw materials. China is producing a very large Navy to protect shipments of oil from the Middle East, iron ore from Latin America, and liquefied natural gas from Australia.

“The Chinese advisors to China’s President Hu Jintao say that today China needs the US economically more than the US needs China. But by 2015, only five years from now, China will have economic parity with the US. We will then need China
economically as much as China needs the US.”

The author concludes: “That will be the prime mover for the tectonic shift in the world balance of power which will take place in the next 20 to 30 years.”

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We recall that it is an ill wind that bloweth no man good and will continue our efforts to unravel today’s Gordian Knots in these most challenging times. This time we will need a really sharp sword!

John W. Hamilton
April 7, 2009

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