Best of the Week
Most Popular
1.RED ALERT: Paris Terror Attacks - What to Expect Next - STRATFOR
2.Paris Terror Attacks, Death Pangs of a Dying Religion, and Impact on BrExit EU Referendum - Nadeem_Walayat
3.Paris Terror Attacks, Islamic State Attempting to Spark Civil War in France - Nadeem_Walayat
4.Three Shocking Charts That Prove Gold Price Rally Is Coming - Sean Brodrick
5.Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - Mike_Shedlock
6.Africa Population Explosion - Why Europe's Migrant Crisis is Going to Get A Lot Worse - Video - Nadeem_Walayat
7.Gold Mining Stocks May Be The Buy Of The Century - Jeff_Berwick
8.Grandmaster Putin Beats Uncle Sam at His Own Game - Mike_Whitney
9.BRICS? No, CRISIS - Raymond_Matison
10.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
Last 5 days
Stock Market Consolidation Week - 29th Nov 15
A Black Friday for Gold Prices - 29th Nov 15
Politicians Driving The World Towards War - Fourth Turning - 29th Nov 15
Stock Market Down Monday, Gold Price Bottoming? - 29th Nov 15
Turkey Downs Russian Jet to Draw NATO and US Deeper into Syrian Quagmire - 28th Nov 15
Stock Market Quiet Week as Primary 5 Continues - 28th Nov 15
Black Friday, Weekend for Europe's Migrants - 28th Nov 15
HUI and Gold - Who's Leading Whom? - 28th Nov 15
Gold And Silver - No Ending Action, But End May Be Near - 28th Nov 15
Social and Cultural Distress Dividing The Nation - Fourth Turning - 28th Nov 15
Sheffield Houses Prices 2015, Best Estate Agents As Rated by Buyers and Sellers - 28th Nov 15
Stock Market Top Valuations, at a Critical Juncture - 27th Nov 15
The Top Shopping Opportunity on Black Friday - 27th Nov 15
Economics Is About Scarcity, Property, and Relationships - 27th Nov 15
UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - 27th Nov 15
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15
Investors Watch Out For The Auto Industry… - 24th Nov 15
BEA Revises 3rd Quarter 2015 US GDP Economic Growth Upward to 2.07% - 24th Nov 15
Stock Market Supports Are Being Broken - 24th Nov 15
Is Gold Price on the Verge of a Breakout? - 24th Nov 15
Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - 24th Nov 15
Silver Price, COT, US Dollar Updates and More - 24th Nov 15
UK Regional House Prices Analysis - Video - 23rd Nov 15
Crude Oil Swinging For The Fences - A 20 to 1 Option Play - 23rd Nov 15
US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - 23rd Nov 15
UK Regional House Prices, Cheapest and Most Expensive Property Markets - 23rd Nov 15
Stock Market Rally Losing Momentum? - 23rd Nov 15
Will Gold Price Drop Below $1000 Soon? - 23rd Nov 15
Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - 23rd Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

Machine Gun Economics

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

By: Investment_U


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,


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 :

by ,, Oxford Club Investment Director Chairman, Investment

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:

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

© 2005-2015 - 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

Biggest Debt Bomb in History