Best of the Week
Most Popular
1.The Greatest Stock Market Crash Of Your Life Is Just Ahead… – Warns Harry Dent - GoldCore
2.Budget 2016: Borrowing, Lifetime ISA, House Prices, Economy, Syria, Brexit and Stocks - Nadeem_Walayat
3.Gold Price Intermediate Top - Clive_Maund
4.Brussels Terror Attacks, Death of the European Union, BrExit Wake up Call - Nadeem_Walayat
5.Stock Market Maybe This Time is Different? - Tony_Caldaro
6.UK House Asking Prices Break Above £300k! Housing Market Paralysis - Nadeem_Walayat
7.A Big Reason Why Silver Price Is Set To Soar - Hubert_Moolman
8.The Financial Crisis Has Just Begun; Is The American Dream Is Over? - Chris_Vermeulen
9.Gold Stocks Spring Rally - Zeal_LLC
10.GLX, GLDX, Baby Gold Bull Market Stillborn? - Rambus_Chartology
Last 7 days
Stock Market Strong Elliott Wave Relationship is Developing - 29th Apr 16
Fed's Kaplan: Brexit to Factor in US June Interest Rate Decision - 29th Apr 16
Silver Miners Strong in Grim Q4 - 29th Apr 16
Is Silver a better bet than Gold in the Near Future? - 29th Apr 16
How to Use the CoT Report in Gold Investing? - 29th Apr 16
Sri Lanka is Intriguing: Areas to Consider for Value Investing - 29th Apr 16
Gold “Chart of The Decade” – Maths Suggest $10,000 Per Ounce Says Rickards - 29th Apr 16
Are We or Are We Not in a New Gold Bull Market? - 29th Apr 16
Silver: The “Five Year Plan” and the Great Leap Forward - 28th Apr 16
Michael Hudson: The Wall Street Economy Has Taken Over The Economy and Is Draining It! - 28th Apr 16
AUD/USD - Trend Reversal or Just a Bigger Pullback? - 28th Apr 16
A Gold Revaluation Could Transform Your Financial Status - Overnight - 28th Apr 16
Monetary Policies Misunderstood - 28th Apr 16
Gold Bullion vs Gold Miners - 28th Apr 16
OECD Suggests BrExit Would Cut Net Migration by 1.2 Million by 2030 - 28th Apr 16
MP Naz Shah Punished for Tweets Made During Israel's Genocide of Gaza Palestinian People - 28th Apr 16
Global Recession in 2016 and Beyond - The Obvious Evidence - 27th Apr 16
Why Gold Bugs Need to Stop Listening to The Fear Mongers and Start Thinking for a Change - 27th Apr 16
BlackRock’s Fink: Fed to Raise Interest Rates by Quarter Point ‘at Best’ - 27th Apr 16
Gold More Productive Than Cash?! - 27th Apr 16
Donald Trump Will Fire Janet Yellen and Be Trapped - 27th Apr 16
Money Saving Gardening by Propagating Roses From Cuttings - Propagating Rose Plants Over 2.5 Years - 27th Apr 16
Facebook Censors Pro Trump and Negative Hillary News - 27th Apr 16
This is the Era of the Democrats and Your Taxes are Going Up - 27th Apr 16
Long Awaited Gold Price Breakout - 26th Apr 16
Crude Oil Price Double Top or Further Rally? - 26th Apr 16
Madness in the Crimex Gold and Silver Trading Pits - 26th Apr 16
Britain's Prospects: GBP and BREXIT - MAP Wave Analysis - 26th Apr 16
CRB, Gold, Oil, Cotton, Coffee - 7 Must See Commodities Charts - 26th Apr 16
Gold Price Target is $3,000 and Silver is $75 per Ounce - 25th Apr 16
Parameters for a Stock Market Sell Signal-in-the-making - 25th Apr 16
Stock Market Dangerous Divergence - 25th Apr 16
Gold Miners Nub is the Sweat of the Sun - 24th Apr 16
US Dollar Price Forecast - 24th Apr 16
Stock Market Upside Objective Reached - 24th Apr 16
Why Leftist Greeks have more reasons than Liberals to favour Entrepreneurship and Support Entrepreneurs - 24th Apr 16
The Dow Jones is a Catalyst for Misplaced Stock Market Optimism - 24th Apr 16
Why Russia Harasses U.S. Aircraft and Ships - 24th Apr 16
Stocks Bull or Bear Market Rally? - 23rd Apr 16
A Bright Future for Solar Power in the Middle East - 23rd Apr 16
Silver Commitments of Traders – Halloween is Arriving Early This Year - 23rd Apr 16
Good News, Bad News, Both Favor Gold And Silver - 23rd Apr 16
Mish's Sure Fire Proposal to End Japanese Deflation - 23rd Apr 16
Mish Shedlock: “EXCUSE ME MR. PRESIDENT, IS THAT A JOKE?” - 23rd Apr 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Catching a Falling Financial Knife

Machine Gun Economics

Politics / US Politics Feb 25, 2013 - 06:46 PM GMT

By: Investment_U

Politics

Andrew Snyder writes: The soldier’s hands never moved from the butt of the machine gun as his patrol slowly passed by. And yet nobody in the camo-clad group would make eye contact with me. It was a sign their duty was symbolic – true killers wouldn’t mind the life behind a person’s eyes; they only see a target.

But the patrol did its job. As the soldiers drove off into the dusty Mexican countryside, I was intimidated. I knew the government controlled the streets. And somebody was willing to kill to keep it that way.


The episode in Mexico last week brought the same emotions trudging through my head that I felt during a research tour through Argentina last year. But down there, the killers don’t roam the streets. They take political office.

Argentina’s oh-so-socialist leader Cristina Fernández de Kirchner turned 60 on Tuesday. We bid her a feliz cumpleaños, but we question how many candles to put on the cake. Using the same home-baked equation her government uses to gauge the national inflation rate, Kirchner becomes the world’s most powerful five-year-old.

The age seems to fit. If you’ve been following news of the southern hemisphere, you know the Argentine president just did something really childish.

She locked grocery prices for 60 days.

You see, Argentina’s inflation rate is somewhere in the neighborhood of 25%. (However, the government’s math puts it at just 10%.) So to keep her populist voters happy, she told the likes of Walmart (NYSE: WMT), Disco, Jumbo and other large supermarket chains to stop boosting their prices.

Yep… machine gun economics. That’ll fix it.

We know it won’t work. And I’m sure she knows it won’t work. But Kirchner is a politician, so she does what all politicians do… whatever gets the most votes.

I hate to borrow someone else’s thoughts, but Forbes contributor Paul Roderick Gregory says it too well not to pass it along:

“Cristina Kirchner’s Argentina illustrates an alarming trend. Her government has expropriated major foreign investors, falsified statistics, destroyed central bank independence, used the nation’s currency reserves for political payoffs, and faces default. Yet she was easily reelected, just as her neighbor Hugo Chavez, whose gross mismanagement of Venezuela’s economy may be unmatched in Latin America. Barack Obama was reelected in the United States despite the worst recovery of the postwar era. All offer populist programs, which seems to buy them a pass at election time.”

This isn’t a swipe at any particular party or political mindset. It’s a shot at all politicians. They’re all as guilty as the fat kid sitting beside an empty cookie jar.

It’s why I argue you absolutely can’t afford to let political rambling infest your portfolio.

Take, for instance, the looming budget cuts from Washington on March 1. Let me remind you that the “meat-cleaver” reductions we face in less than two weeks are the lingering results of Congress’ version of compromise… from the 2011 debt-ceiling fight.

We are still dealing with this nonsense (and all the uncertainty it spawns) for one simple reason… Politicians live on votes.

They will never bite the hand that feeds them.

Populist Pleasure
It’s the reason Kirchner stole YPF from Spain’s Repsol (OTC: REPYY) last year. Gasoline prices in the country were rising because YPF was sending its supplies to Chile (where less regulation led to higher profits). So the Argentine president seized the company.

Now the government decides where the energy flows.

And votes are also the reason that, despite sitting on the fourth-largest shale deposit in the world, Mexico is on par to become a net energy importer by 2018.

Most folks don’t realize it, but the Mexican government (which hires the men with the big guns) gets roughly a third of its annual revenue from the sale of oil. But that creates a big problem for the state-owned oil producer, Pemex.

With the government picking the company’s pockets for its political needs at a faster and faster clip, Pemex has had trouble funding fresh exploration projects. As a result, the world’s No. 7 oil producer has seen its crude output decline about a quarter in the last decade.

There’s clearly a need for outside help. But a set of fine politicians added a clause to Mexico’s constitution in 1938 that says only the state is allowed to search and drill for oil and gas.

If Mexico City doesn’t make major changes, the country will be a net oil importer in five years.

But if the government allows outsiders to come in… Well, they’ll likely need a few more guns in the street to keep the unions and their workers at bay. The voters won’t be happy.

My point with these examples is simple. One way or another, the government controls the streets. It doesn’t matter where you live. I could pull similar anecdotes from any country on the planet.

It’s the nature of the beast.

It’s an important lesson right now, because later this week, we’ll be up to our eyeballs in political rhetoric. Nobody from the Right or the Left will miss an opportunity to get their talking points in front of their constituents as the budget-cut debate heats up once again.

Their goal is to show us they are in charge. It’s the American version of machine gun politics.

But just like the highly armed soldiers I came across last week in Mexico, the politicians in Washington will refuse to make eye contact – their words are purely symbolic.

As investors, we can’t let the hyperbole intimidate us. American markets are about to swim into another wave of opportunity-inducing volatility. But good companies will still make money… even in Argentina and Mexico.

In other words, don’t be intimidated by the government’s heavy artillery.

Just nod and let the guns pass by.

Good investing,

Andrew

P.S. Looking for your next three-bagger? Our friends at The
Oxford Club recently discovered such an opportunity in a little-known energy company operating outside of the United States. In fact, it owns 18% of the world’s natural gas supply, with a current value of $299 billion. It has the world’s largest transportation network at over 160,000 km. It has shipping operations that span the globe. And somehow, nobody’s talking about it… yet.

For more about the company, click here.

Source : http://www.investmentu.com/2013/February/machine-gun-economics.html

by ,, Oxford Club Investment Director Chairman, Investment

http://www.investmentu.com

Copyright © 1999 - 2012 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife