The Top 12 Indicators that the Economy is Bad

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Jun 032009
 

The top twelve indicators that the economy is bad:

12. CEO’s are now playing miniature golf.

11. I got a pre-declined credit card in the mail.

10. I went to buy a toaster oven and they gave me a bank.

9. Hotwheels and Matchbox car companies are now trading higher than GM in the stock market.

8. Obama met with small businesses – GE, Pfizer, Chrysler, Citigroup and GM, to discuss the Stimulus Package.

7. McDonalds is selling the 1/4 ouncer.

6. People in Beverly Hills are firing their nannies and are learning their children’s names.

5. The most highly-paid job now is jury duty.

4. People in Africa are donating money to Americans. Mothers in Ethiopia are telling their kids, “finish your plate; do you know how many kids are starving in America ?”

3. Motel Six won’t leave the lights on.

2. The Mafia is laying off judges.

And the number one indicator is:

1. If the bank returns your check marked “insufficient funds,” you have to call them and ask if they meant you or them.

Obama’s Court Pick, Sotomayor, Keeps Gun Stocks Soaring

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Jun 022009
 

Without knowing it, Obama is making Sturm Ruger & Co and Smith & Wesson too big to fail!

President Obama’s nomination of federal appeals court Judge Sonia Sotomayor to replace retiring Supreme Court Justice David Souter heralds yet another victory for gun-makers. Yes, you read that right.

Let me explain.

While most investors have been rightly focused on the crisis in the markets and economy lately, some Americans have been focusing on other political issues, namely the Second Amendment.

They wonder, will the Obama Administration and new Supreme Court nominee Sonia Sotomayor put the right to bear arms in jeopardy? Clearly, many think so, as evidenced by an increase in gun sales and an associated rally in gun stocks.

Indeed, two of my favorite gun stocks, Sturm Ruger & Co. (RGR) and Smith & Wesson (SWHC), rallied Thursday on the news of Sotomayor’s nomination. But it’s not just Sotomayor’s nomination that has been lifting the gun-makers. The recession has helped, too.

Buying protection

You wouldn’t think a recession as deep as the one we’ve been experiencing would be a boon to gun sales, but many citizens are arming themselves expressly because of the recession. You see, the recession has brought massive budget cuts to many municipalities. That means less fire and police protection. In response, gun sales are on the rise.

My response to this undercurrent is to recommend stocks that take advantage of the increase in gun sales.

Two of my favorite stocks to buy now make guns.

Sturm Ruger & Co. (RGR) is one of the leaders in the space, producing products across the firearm spectrum. The company is enjoying growing sales at a time of recession due to the political undercurrent. I rate the stock an A or Strong Buy.

Smith & Wesson (SWHC) was made famous by Clint Eastwood’s, “Dirty Harry” character. Some poor management decisions helped push SWHC to under $2 per share prior to the election last November.

But post-election, the stock has doubled in value. I expect more of the same until the administration can definitively ease concern regarding the Second Amendment.

I rate SWHC a B or Buy.

Another benefactor of the boom in gun sales is the sporting goods retail space. I have a good friend that owns a very small independent sporting goods shop. He can’t keep enough gun products on the shelves.

That bodes well for sporting goods superstore, Cabela’s (CAB). Retail sales have struggled during this recession, but gun sales are easing the pain for CAB. That, combined with expectations of economic recovery, have pushed CAB to pre-financial crisis levels.

I rate CAB a B or Buy.

The market is treading water due to the tug and pull of the inflation and deflation camps. The gun story though seems to be on a straight shot higher. Investors can benefit by following that trend.

Source…

Ethanol’s Grocery Bill

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Jun 022009
 

It doesn’t take a genius to figure out that using food for fuel is an incredibly stupid idea.

The Obama Administration is pushing a big expansion in ethanol, including a mandate to increase the share of the corn-based fuel required in gasoline to 15% from 10%. Apparently no one in the Administration has read a pair of new studies, one from its own EPA, that expose ethanol as a bad deal for consumers with little environmental benefit.

The biofuels industry already receives a 45 cent tax credit for every gallon of ethanol produced, or about $3 billion a year. Meanwhile, import tariffs of 54 cents a gallon and an ad valorem tariff of four to seven cents a gallon keep out sugar-based ethanol from Brazil and the Caribbean. The federal 10% blending requirement insures a market for ethanol whether consumers want it or not — a market Congress has mandated will double to 20.5 billion gallons in 2015.

The Congressional Budget Office reported last month that Americans pay another surcharge for ethanol in higher food prices. CBO estimates that from April 2007 to April 2008 “the increased use of ethanol accounted for about 10 percent to 15 percent of the rise in food prices.” Ethanol raises food prices because millions of acres of farmland and three billion bushels of corn were diverted to ethanol from food production. Americans spend about $1.1 trillion a year on food, so in 2007 the ethanol subsidy cost families between $5.5 billion and $8.8 billion in higher grocery bills.

A second study — by the Environmental Protection Agency’s Office of Transportation and Air Quality — explains that the reduction in CO2 emissions from burning ethanol are minimal and maybe negative. Making ethanol requires new land from clearing forest and grasslands that would otherwise sequester carbon emissions. “As with petroleum based fuels,” the report concludes: “GHG [greenhouse gas] emissions are associated with the conversion and combustion of bio-fuels and every year they are produced GHG emissions could be released through time if new acres are needed to produce corn or other crops for biofuels.”

The EPA study also explores a series of alternative scenarios over 30 to 100 years. In some cases ethanol leads to a net reduction in carbon relative to using gasoline. But many other long-term scenarios observe a net increase in CO2 relative to burning fossil fuels. Ethanol produced in a “basic natural gas fired dry mill” will over a 30-year horizon produce “a 5% increase in GHG emissions compared to petroleum gasoline.” When ethanol is produced with coal burning mills, the process “significantly worsens the lifecycle GHG impact of ethanol” creating 34% more greenhouse gases than gasoline does over 30 years.

Both CBO and EPA find that in theory cellulosic ethanol — from wood chips, grasses and biowaste — would reduce carbon emissions. However, as CBO emphasizes, “current technologies for producing cellulosic ethanol are not commercially viable.” The ethanol lobby is attempting a giant bait-and-switch: Keep claiming that cellulosic ethanol is just around the corner, even as it knows the only current technology to meet federal mandates is corn ethanol (or sugar, if it didn’t face an import tariff).

As public policy, ethanol is like the joke about the baseball prospect who is a poor hitter but a bad fielder. It doesn’t reduce CO2 but it does cost more. Imagine how many subsidies the Beltway would throw at ethanol if the fuel actually had any benefits.

Source…

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