Posted on 10/11/2005 11:06:55 AM PDT by churchillbuff
It’s dawning on wall street that George W. Bush may be the first president since Lyndon B. Johnson who believes that we can have a guns-and-butter federal spending policy without creating a serious inflation spiral, if not outright government bankruptcy. At least LBJ, to his credit, believed that there were limits to profligacy and that taxes had to be raised. Not President Bush. He’s making Johnson look like a fiscal conservative, what with his insistence on waging a war in Iraq that’s costing $177 million a day and rebuilding New Orleans by taking on a monstrous load of federal debt.
For the longest time, because Bush is a Republican, we on Wall Street simply didn’t believe that he could be a reckless spender. We knew only two paradigms: You either spent less and cut taxes or you spent more and raised taxes. Both courses at least presumed some sacrifice at some time. Not Bush’s plan. He’s gone on both the biggest spending binge and the lowest taxation course in U.S. history, which, alas, will produce gigantic liabilities down the road. Of course, he’ll be back on the ranch by the time his successor will have to deal with his inflation and currency debasement. Our only hope that financial disaster won’t strike sooner lies with the Chinese, who actually fund our deficit by buying our Treasuries—$242 billion worth, or 12 percent of all foreign holdings. If the Chinese decide to be good communists and stop buying our bonds, the Feds will have to raise rates to attract new investors and the reaper will be at our doorstep with interest rates more akin to those of South than North America. Right now, it’s not a problem. But in a year or two or maybe less, I perceive that the government will throw a bond auction and nobody will show, including the Chinese, until rates shoot up dramatically.
Stoptime By Sarah Wildman It’s the ultimate New York careerist dream: Work (and play) now, conceive later. Has science finally made it possible? The promises and pitfalls of putting your eggs on ice.
A Hard Landing By Duff McDonald JetBlue proved that profits and good service were not impossible in the airline business. But it sure wasn’t counting on jet-fuel prices soaring this high — or a recent mechanical scare that raised questions about its entire fleet.
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THE IMPERIAL CITY Backward, Christian Soldiers! By Kurt Andersen Why must intelligent design be stopped? Because this—God forbid—could be the moment when the theocratization of America makes a real advance.
The Bottom Line The Gold Parachute Or, how to stop worrying and save yourself from the president’s profligate spending and stubborn insistence on no new taxes.
By James J. Cramer It’s dawning on wall street that George W. Bush may be the first president since Lyndon B. Johnson who believes that we can have a guns-and-butter federal spending policy without creating a serious inflation spiral, if not outright government bankruptcy. At least LBJ, to his credit, believed that there were limits to profligacy and that taxes had to be raised. Not President Bush. He’s making Johnson look like a fiscal conservative, what with his insistence on waging a war in Iraq that’s costing $177 million a day and rebuilding New Orleans by taking on a monstrous load of federal debt.
For the longest time, because Bush is a Republican, we on Wall Street simply didn’t believe that he could be a reckless spender. We knew only two paradigms: You either spent less and cut taxes or you spent more and raised taxes. Both courses at least presumed some sacrifice at some time. Not Bush’s plan. He’s gone on both the biggest spending binge and the lowest taxation course in U.S. history, which, alas, will produce gigantic liabilities down the road. Of course, he’ll be back on the ranch by the time his successor will have to deal with his inflation and currency debasement. Our only hope that financial disaster won’t strike sooner lies with the Chinese, who actually fund our deficit by buying our Treasuries—$242 billion worth, or 12 percent of all foreign holdings. If the Chinese decide to be good communists and stop buying our bonds, the Feds will have to raise rates to attract new investors and the reaper will be at our doorstep with interest rates more akin to those of South than North America. Right now, it’s not a problem. But in a year or two or maybe less, I perceive that the government will throw a bond auction and nobody will show, including the Chinese, until rates shoot up dramatically.
What if that happens? What if our fiscally clueless president really does keep spending at a rate that far exceeds what our government can take in at these low tax rates? What happens if the president’s acolytes and the Pollyannas in Treasury keep believing that we can grow our way, fairy-tale-like, out of this jam? You can bet that when you cash out your nest egg of nice U.S.-based mutual funds and solid common stocks, your dollars will fit nicely into a wheelbarrow designed specifically to cart worthless currency to the bank.
Or you can take matters into your own hands and build a portfolio around these five imminent-Bush-disaster stocks. Be the first on your block to immunize yourself against what may turn out to be the most financially reckless president in history with these anti-inflation equities designed to profit from our president’s unbelievably foolish Panglossian profligacy.
Any portfolio designed to counter government-mandated inflation has to be bedrocked in gold, and there is no gold outfit that can rival Goldcorp, known as Gigi on Wall Street for its GG symbol. Gigi is on pace to produce 1.1 million ounces of the precious metal this year, with a finding cost of $60 per ounce (significantly lower than the industry standard). While Gigi is wildly profitable with gold at $465—you didn’t know gold had shot up that much lately? Well, what did you expect with this deficit?—I figure gold could reach $1,000 if the Chinese stop buying our paper. Once the levee to the Treasuries breaks, the easy high ground worth gaining will be gold. Gigi’s got no debt and is incredibly well run—the only gold stock you will ever need. Oh, and like all the companies in this portfolio, it’s not based in the United States, so it’s less tied to the health of the U.S. economy and the strength of the dollar. What a godsend!
When paper gets debased, you can’t have enough minerals, gold or otherwise, in your stock basket. That’s why I think you should shell out $160 a share for Rio Tinto, the world’s largest mineral seller—it produces silver, copper, iron ore, coal, diamonds, and even zircon (what New York society may be stuck wearing if government spending stays unchecked). Minerals keep their value during periods of inflation, and Rio Tinto has become the chief supplier for China’s industrial revolution.
No wonder no one will let him manage money anymore.
Aside from the obvious liberal bias in the MSM and the continuation of the 2008 presidential campaign with no announced candidates except the usual Bush bashing, how does Congress get away without blame for runaway federal spending?
I like the Gold idea and have done quite well over the last several months. However, help me here, I thought Congress authorized and spent the money?
They don't -- which is why I'm fearful that the GOP may lose one or both houses of Congress next year. [And while the MSM is plenty biased, pointing out that spending is out-of-control under Bush is NOT an example of bias, it's a simple reporting of fact]
Yes, Congress and Bush are equally to blame. Unfortunately, both Congress and Bush are Republicans, so that's not going to help the GOP in next year's elections.
Cramer should invest in Ritalin.
Gold is a good long term buy proving that Cramer, like a stopped clock, is ocassional correct.
It'll be 500 by January, and three digits by 2006.
BTW, gold has gone to 477 since he penned this article. Put the link to this free ticker on your desktop, if you want to see gold soar against world currencies.
Only Bush? Not biased reporting? Doesn't that define bias?
he's pumping the frenzy to get top dollar. If he's pumping it, he's getting out. I do not like that bum.
Besides, regardless of what Cramer says, I can see with my own eyes that inflation is running much higher than what the gov't is telling us...
We need a couple clarifications here.
First, the President is not "waging a war in Iraq". The USA is waging a global religious war to the death against islam. Iraq is one of many fronts in this war that the muslims started, in 1979. Second, the President is not "waging a war in Iraq" - the USA is waging war. I sure would like it if people could get that straight.
Supply Side Shocks - Inflation on the Rise - Investors Take Warning
http://www.financialsense.com/fsn/BP/2005/1001.html
Without Katrina, the federal budget deficit would have been a very low (lowest among major economies) 2% of GDP.
The real problem is 1) boomers retiring and killing the medicare and social security systems for which the democrats are putting their head in the sand and obstructing every attempt to reform them and 2) the trade deficit which is mostly about too many laws and regulations in the US to manufacture stuff here.
If this loudmouth says buy, then shorting gold is probably a great play right now. If Cramer had any true investment insight, he'd be managing money instead of shouting through my television. He also needs to do something about what is left of his hair.
ping
Whoops, I meant 4 digits by 2007.
2006 is only 2.5 months from now!
Cramer is not saying anything that the FED is not saying. That federal spending can reignite inflation, but if one looks at oil acting as a "tax" on consumers, it is not likely that sellers will be able to ask for more. And workers? can they ask for higher wages in this environment? I don't doubt that interest rates will continue their rise, I just wonder out loud if all the blocks are in place for rapid inflation or whether Bush will find ways to cut some spending.
BTW, I used to listen to these guys when they said buy, until I realized I was buying what they were selling. GLD did jump today.
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