Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

© 2005-2019 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