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The War on Cash!

The Super-Committee is Dead, Long Live the Debt!

Politics / US Debt Nov 22, 2011 - 10:34 AM GMT

By: PhilStockWorld

Politics

Best Financial Markets Analysis ArticleIn case you are voting in the next election – here are 12 people to get rid of.  Much as I may blame one party over another for this failure, they all deserve what’s coming to them for A) Pretending they were going to accomplish something and B) For not now getting up and making very strong statements denouncing the corruption in politics that make it impossible for Congress to do the Nation’s business anymore.  


In case you happen to be a Fox News viewer, I will try to keep this VERY simple because, as it turns out, we now have definitive studies that prove Fox News MAKES YOU STUPID.  Of course, it is possible that only stupid people watch Fox News but I know many people who think they are smart and watch Fox News so I have to blame Fox News here as do researchers at Farleigh Dickenson University who found "The results show us that there is something about watching Fox News that leads people to do worse on these questions than those who don’t watch any news at all."   As I can tell you from raising my own children to be good citizens:  

The biggest aid to answering correctly is The Daily Show with Jon Stewart, which leads to a 6-point decrease in identifying the protesters as Republicans, and a 12-point increase in the likelihood of giving the correct answer. "Jon Stewart has not spent a lot of time on some of these issues," said Cassino. "But the results show that when he does talk about something, his viewers pick up a lot more information than they would from other news sources."

Watching Fox News, by the way, led to an 18-point disadvantage (out of 53% of all respondents) in being able to answer questions like "Were Egyptians successful in overthrowing Hosni Mubarak" or "Has the Syrian uprising been successful" but that was a Fox viewer’s area of expertise compared to having a clue of what is going on in American politics other than "Obama sucks."  Tied with Daily show viewers for best informed were NPR supporters but, sadly, only 21% of Americans get their news from NPR and only 18% from the Daily Show while 64% list Fox News as one of their frequent news sources.  

In another study, World Public Opinion, a project managed by the Program on International Policy Attitudes at the University of Maryland, conducted a survey of American voters that shows that Fox News viewers are significantly more misinformed than consumers of news from other sources. What’s more, the study shows that greater exposure to Fox News increases misinformation.

So the more you watch, the less you know. Or to be precise, the more you think you know that is actually false. This study corroborates a previous PIPA study that focused on the Iraq war with similar results. And there was an NBC/Wall Street Journal poll that demonstrated the break with reality on the part of Fox viewers with regard to health care. The body of evidence that Fox News is nothing but a propaganda machine dedicated to lies is growing by the day.

In eight of the nine questions below, Fox News placed first in the percentage of those who were misinformed (they placed second in the question on TARP). That’s a pretty high batting average for journalistic fraud. Here is a list of what Fox News viewers believe that just aint so:

  • 91 percent believe the stimulus legislation lost jobs
  • 72 percent believe the health reform law will increase the deficit
  • 72 percent believe the economy is getting worse
  • 60 percent believe climate change is not occurring
  • 49 percent believe income taxes have gone up
  • 63 percent believe the stimulus legislation did not include any tax cuts
  • 56 percent believe Obama initiated the GM/Chrysler bailout
  • 38 percent believe that most Republicans opposed TARP
  • 63 percent believe Obama was not born in the U.S. (or that it is unclear)

The conclusion is inescapable. Fox News is deliberately misinforming its viewers and it is doing so for a reason. Every issue above is one in which the Republican Party had a vested interest. The GOP benefited from the ignorance that Fox News helped to proliferate. The results were apparent in the 2010 elections as voters based their decisions on demonstrably false information fed to them by Fox News. 

OK, sorry Fox viewers, I will stop now but the reason I think it is important to point this out is that, if Fox is misinforming you about the political situation in this country – what makes you think you aren’t being misinformed economically as well?  Ah, now you see my point (if you haven’t been watching so much Fox that your brain has melted, of course) – not only does Conservative media warp your view of political reality and cause you to make poor voting decisions but that same misguided view of the World could also be causing you to make poor investing decisions as well – now do you care?  

What you BELIEVE about the economy, our Government, China, Europe, Congress, the jobs situation, taxation, etc. etc. matters A LOT in forming, not only your investing decisions but the decisions you make while you hold a trade – whether to stick with a position or panic out – for example.  

If you are not getting the best information from your news sources – then how can you expect your investing decisions to be accurate? Is it a mere coincidence that investors have lost Trillions of Dollars since Rupert Murdoch took over the Wall Street Journal?  My lawyers say I should conclude that maybe it is but – I’ll report, you decide…

I always tell Members it is very important to spend at least 25% of your time reading sources that totally disagree with you (and, for most of our Members, articles like this fill their quota!).  Following my own advice, I end up watching a lot of Fox myself but, thankfully, because I also watch and read other sources – I can clearly see it for the BS it is.  Sadly, the same "quality" of information has been creeping into the WSJ as well – yet it is still the premier source of Financial Information in the World.  That’s what Murdoch got for his $5Bn – CREDIBILITY.  It is interesting to note though, that NWS has already written off half of that goodwill after just 4 years – founded in 1889, that’s a lot of credibility to burn through in just 4 years!  

I would never say don’t read the WSJ – in fact, it’s great to have both Fox News and the Journal to refer to because the investors who do use those sources (and haven’t lost all their money yet) are EXTREMELY non-critical as a group and pretty much just react to whatever they are told by their "trusted" sources.  Much as the same way we watch Cramer so we can see where he is herding his sheeple so we can bet against them at the top. 

By all means use these "valuable" "news" sources – but PLEASE recognize them for what they are.    

Cutting through the noise and finding the true value of stocks, bonds, commodities etc. should be the ONLY concern of investors – not whether or not their political agenda is "winning" at any given time.  Right now, we should all be concerned about the deteriorating Global Economic Outlook, highlighted by this morning’s 20% drop in the US Q3 GDP Estimate (2nd), now 2%, down from 2.5% 

Leaving the MSM behind – rather than focus on the drop, let’s focus on the up 2%.  Our economy, all $16,000,0000,000,0000 of it, is 2% bigger ($320Bn) than it was last year.  "Wait a minute," a non-Fox viewer may say "doesn’t that mean that, on average, Corporate America is doing BETTER this year?"

Now, you would need an NPR viewer to figure this out but the fact that our GDP is UP 2% and the S&P is flat – means that if you have companies that are underperforming the S&P and don’t have particular special problems like MS (down 51%), THC (down 35%), GNW (down 55%), BK (down 40%), BTU (down 45%), WFR (down 62%), CNX (down 23%), JNPR (down 41%), SCHW (down 36%), AA (down 40%), GS (down 46%) and WHR (down 45%) – then perhaps there are some investing opportunities to be had here.  

WHR is a nice one, for example.  At $48.49, they are down over $30 since last Thanksgiving but, as far as I know, people still like to wash and dry their clothes using machines – it’s not a fad!  WHR’s sales have been steady for the past 3 years but their profits have improved substantially, dropping their p/e to 8 based on expected 2012 earnings of $6.32 per share.  You know, it’s one thing to bet WHR isn’t worth 15x earnings or 10x earnings but 8x is getting kind of silly, don’t you think?  

Not only that, but we can hedge our entry into WHR further to cover an even bigger dip.  The company pays a $2 per share dividend, so we don’t want to miss that but we can take advantage of the high VIX by selling the 2013 $45 calls for $10.20 and the 2014 $40 puts for $8.50 for a net entry of $29.79/34.90 so, if called away at $45, you make a 50% net profit PLUS the $2 dividend or, if WHR hits 2014 under $40, you run the risk of owning 2x your initial entry at net $34.90, which is 30% below the current price. 

Obviously, if you think WHR will go lower than $34.90 (and we can assume the S&P will drop a good 20% along with it to around 950 or lower) – then why would you be buying stocks in the first place?   But, if you were browsing the gun rack at WMT and didn’t have the urge to buy a gross of automatic rounds to defend you bunker – then constructing trades like this with some of your sidelined cash could be a very wise move.  

When we combine hedged entries like this with additional hedges, like the EDZ spreads we took in Member Chat recently or the Dow spreads we’ll be taking today if we can’t hold 11,500 (our line for shorting the Futures, along with oil (/CL) at $97.50).  On the whole, we were bullish into yesterday’s close because I felt that the GDP would be more or less in-line and, even if it isn’t – we have the Fed Minutes later and the tea leaves should be able to be interpreted as bullish BECAUSE of the weak GDP report.  

The Fed MUST act – the consequences of not acting could be watching things go so bad that action will no longer be effective – that would not be rational and, in the end, most people act rationally, even politicians – well, other than Republicans, of course, but we don’t blame them – they’ve been watching Fox….

Phil

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www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2011 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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