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  • Obama’s Decision: Millions More on the Dole

    In 1996, President Clinton and the Republican-controlled Congress passed sweeping new welfare reforms. In doing so, they included strict regulations that required welfare recipients to work (or actively look for work). And they made it clear that "work" did not include such things as bed rest, exercise or personal past-times. The welfare rolls plummeted in the years following 1996, and the program was hailed a great bipartisan accomplishment.

    But on July 12, President Obama’s Health and Human Services Department issued an administrative order to the states that reverses the work requirements contained in the welfare law. Many believe this action is illegal, and it will almost certainly be litigated in the courts. But in the meantime, this order guts the work requirement in the 1996 welfare reform law and will allow millions more Americans to qualify for welfare benefits.

    On another note, the number of Americans going onto Social Security Disability Insurance in the 2Q of this year greatly outpaced the number of new jobs created in the economy for the first time. By April of this year there were a total of 10.8 million on disability, the highest ever. Likewise, there are more Americans than ever before on food stamps - 46.4 million as of March. Ditto for the number of Americans living in poverty - an estimated 15.7% of the population.

    These are very depressing numbers. The media tells us that this is all because of the weak economic recovery and continued high unemployment. The weak economy is certainly a big part of the problem, but could there be other factors involved? Could it be that the current administration in Washington wants more Americans to be dependent on the government? I will address this question at the end of today's wide-ranging E-Letter.

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  • Buy Low, Sell High - Any Questions?

    There's no doubt about it, investors are scared. After soaring upward in the first quarter of 2012, the S&P 500 Index has now plunged based on worries about the US recovery as well as continued Eurozone woes. Many investors are paralyzed on the sidelines while others are seeing their buy-and-hold portfolios look more like a roller coaster than an investment portfolio.

    However, there is an investment strategy that has the potential to take the market's lemons and make lemonade. Renown investor, Warren Buffett, follows a value-style investment strategy and has done so successfully for many years. For such investors, market uncertainty can actually mean opportunity to scoop up the stocks of good companies at discounted prices.

    This week, I'm going to review value investing and how it can bring some stability and growth potential to a portfolio. After that, I'll introduce you to Yacktman Capital Group, a value-style money manager right in our backyard here in Austin. Yacktman has improved upon Buffett's approach to value investing and we are excited to offer this emerging manager to our clients. If you are out of the market or heavily invested in buy-and-hold strategies, you owe it to yourself to check out Yacktman's Concentrated Composite Strategy.

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  • Is The Economic Recovery Stalling?

    Economic reports in recent weeks have been disappointing overall, and there are growing concerns that the economic recovery may be slowing following 3% GDP growth in the 4Q of last year. Thus, all eyes will be focused on this Friday’s first report on 1Q GDP. Only a month or so ago, some worried that the 1Q GDP number could come in below 2% due to the slowdown in inventory rebuilding this year. But as you’ll read below, most pre-report estimates for 1Q GDP are north of 2%.

    Whatever the GDP number is on Friday, there is a feeling that the economic recovery is stalling a bit. Some of the same spoilers that interrupted the recovery in 2010 and 2011 have emerged again this year, raising fears that the winter’s economic strength might dissipate in the spring and summer.

    In addition, the Fed Open Market Committee is meeting today and tomorrow. Since we won’t see the policy statement from the meeting until tomorrow, we can only speculate as to whether the Fed discussed any new stimulus at this meeting. I still don't believe that QE3 is off the table. I’ll give you my thoughts below.

    Finally, a record 5.4 million workers and their dependents have signed up to collect federal disability checks since President Obama took office. Many unemployed apply for disability benefits as soon as their unemployment benefits run out. There are now a record 10.8 million Americans on disability. This is a real travesty on so many levels!

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  • The Worst Economic Recovery in a Lifetime

    I hope everyone reading this had a memorable Independence Day holiday. We certainly did with lots of family and friends at our home on Lake Travis, and with lots of cooking on my part (but unfortunately, no fireworks this year due to the severe drought in Central Texas). July 4th is one of my favorite national holidays.

    Due to the short week, I have elected to reprint a surprising new study that has just been released by the Congressional Joint Economic Committee (JEC). The JEC is a bipartisan committee including 10 Senators and 10 House Representatives, evenly divided between Republicans and Democrats. The JEC’s main purpose is to make a continuing study of matters relating to the US economy.

    The latest study from the JEC, which was developed at the request of two Republican members of the Committee, compares the current economic recovery with previous recessions and recoveries. The conclusion: economic conditions are worse today than in any recovery since at least World War II.

    Because the study was commissioned by two Republicans, the analysis includes some partisan statements, unfortunately. However, the data and charts in this study are accurate, and this is the worst economic recovery in at least 70 years. I have written often this year about this disappointing economic recovery, and this relatively brief analysis sums it up very well. It is reprinted in its entirety below, including over a dozen charts and graphs, so it will print longer than usual.

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  • On the Economy and Investment Dos and Don’ts

    There's an old riddle about how far you can walk into the woods. The answer is "half-way," since after that point you're walking out of the woods. Recent economic reports remind me of this riddle in that they seem to be indicating that we're walking out of the woods but there are still a lot of trees in our way. In this week's E-Letter, I'll discuss the positive signs that the economy may just be coming back to life. However, I'll also mention some of the not-so-good economic news that lets us know that we're definitely still in the woods, and may be there for some time.

    After that, I'm going to respond to some "instant advice" that I recently found in a financial publication. I always cringe when I see articles in financial magazines and on websites counseling readers to do this or that with their investments without knowing all of the underlying facts and circumstances that are unique to each person. I think you'll find it to be interesting reading, especially if you find yourself in one of the situations described.

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  • How This Economy Recovery Stacks Up

    IN THIS ISSUE:

    1.  Comparing This Recovery With Previous Rebounds

    2.  Putting Obama’s Record Spending in Perspective

    3.  My Two-Cents Worth on the Upcoming Elections

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  • Why the Economic Recovery is So Slow

    IN THIS ISSUE:

    1.  Latest Economic Forecasts Don’t Look Great

    2.  The Economic Recovery Has a Long Way to Go

    3.  Consumer Spending Faces Strong Headwinds

    4.  Americans Living in Poverty Hits New High

    5.  Lastly, My Thoughts on Inflation & Gold

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  • Has the Liberal Economic Experiment Failed?

    Introduction

    Monday holidays always cut into our writing time, so this week we have elected to reprint one of the more interesting articles I have read recently.  I think you will like it unless you are a big Obama fan, in which case, you’ll probably find it disappointing.  In any event, I think this piece is spot-on as we close in on the mid-term elections.

    Following that article, I will update you on the performance of Hg Capital’s Long/Short Government Bond Program which has continued its winning ways in 2010 following its record year in 2009.

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  • CBO: U.S. Debt Crisis On The Horizon

    Introduction

    The non-partisan Congressional Budget Office (“CBO”) released a very troubling new report in the last week of July. The new report is entitled “Federal Debt and the Risk of a Fiscal Crisis” and warns that we will face financial calamity if we do not get our massive budget deficits under control.

    The CBO report points out that the national debt, which was 36% of the gross domestic product three years ago, is now projected to be 62% of GDP at the end of fiscal year 2010 on September 30. And it continues to ratchet up every year thereafter, even in the CBO’s “baseline” (more conservative) projections.

    The CBO specifically warns that our out-of-control deficits could lead to the ultimate debt crisis when buyers of Treasury securities lose faith in the government’s promise not to default on these most trusted financial instruments. No kidding!

    I have been writing about the perils of increasing our national debt year after year since back in the 1980s when I criticized President Ronald Reagan for doing so, and every president since him. The concern was that in 20-30 years, the ultimate debt crisis would come. Guess what: it’s now been 20-30 years, and even the CBO now warns that the day of reckoning is on the horizon.

    This week, I’ll summarize the latest CBO report. After reading about it, you need to think seriously about how you will protect your assets when the day comes where US Treasury securities are no longer trusted – think sharply higher interest rates! This will be a continuing theme in the weeks and months ahead.

    But before we jump into the latest troubling CBO report, let’s take a quick look at the latest economic reports, most of which have not been favorable. It has been several weeks since I wrote about the economy specifically, so let’s get caught up.

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  • The Economy & This Rocky Recovery

    For the most part, the economic reports over the last month or so have been positive, including last Friday's 1Q GDP increase of 3.2% (annual rate). Most economists agree that the recession hit bottom in the middle of last year, and we have now seen three consecutive quarters of positive GDP growth. Yet while it would seem safe to conclude that the Great Recession is over (for now), economic growth will be handicapped all year by the continued housing crisis. Home foreclosures continue to increase at a record pace, including an unprecedented 367,056 properties in March alone. Thus, it is quite possible that the 3.2% growth rate in the 1Q will be the best we see all year. We will take a look at most of the latest economic reports in this issue, as well as the rapidly growing problem in home foreclosures.

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  • On The Economy & The CBO's Credibility

    I felt really bad about sending out last week's E-Letter in which I predicted that we will face another serious financial crisis and perhaps another depression sometime in the next several years. But later that same day, the latest poll by Fox News/Opinion Dynamics showed that 79% of registered voters believe that an economic collapse is still possible. 84% of Republicans, 80% of Independents and 71% of Democrats all agree that the worst may not be over. Obviously, there are a LOT of Americans that agree with me that Obama's trillion-dollar deficits and the skyrocketing national debt represent the biggest threat to our economic and financial futures.

    This week, we take a look at the latest economic reports, most of which suggest that growth this year will fall well short of the 5.6% rise in GDP in the 4Q. We also review the recent actions in the stock and bond markets, both of which have had their share of surprises. And finally, we will review how the non-partisan Congressional Budget Office 'scores' major pieces of legislation in terms of their overall cost. You may be surprised to learn that Congress can game the system and get just about any CBO score they want - as was the case with ObamaCare.

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  • Why the Economy May Disappoint in 2010

    This Friday we will get the first report on 4Q GDP, and most forecasters expect it to be a very good one. While most forecasters believe the economy rebounded strongly in the 4Q, largely due to inventory rebuilding, these same analysts are lowering their estimates for growth in 2010. Why is that? Mainly because consumer spending is not rebounding as many had expected. With unemployment remaining above 10%, most consumers are worried about the future, as they should be. This week, we take a look at the latest economic reports, and I bring you one of the best articles I have read regarding how we got in the mess we're currently in. It all should make for an interesting letter.

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  • Economic Recovery vs. Rising Unemployment

    This Thursday, all eyes will be on the 'advance' estimate of 3Q GDP, and most analysts expect it to be positive and confirm that the US economy emerged from the recession in the July-September quarter. Yet even if the GDP report is positive on Thursday, we all know that the unemployment rate (currently 9.8%) continues to rise and is likely to go up for at least several more months.

    If the government counted everyone who is unemployed, or is working part-time because they can't find a full-time job, the real US unemployment rate was 17% as of the end of September. So even if the recession 'officially' ended in the 3Q based on this Thursday's GDP report, this economy is far from out of the woods. And if the dollar continues to fall, even more dire consequences (ie - a double-dip recession) are likely to follow. It's a lot to cover in one letter, so let's get started.

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  • On the Economy & Obama's Trillions

    Most (but not all) of the economic reports over the last month or so have been positive, and more and more forecasters now believe that GDP growth will be slightly positive in the 3Q. Unfortunately, we don't get our first 3Q GDP estimate until the end of October. The latest GDP estimate for the 2Q was unchanged at -1.0%, which was better than expected. I will cover the latest encouraging (and not so encouraging) economic news just below.

    Next, on Friday, August 21, the Obama administration quietly announced that the White House Office of Management & Budget revised upward its long-term federal deficit projections to fall in line with those of the Congressional Budget Office. The White House finally admitted that its economic assumptions were too optimistic - to the tune of $2 trillion over the next 10 years. So now it's official - even President Obama admits he will more than double the national debt in the next 10 years, which will likely lead to another financial crisis.

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  • Recession May End But Growth Prospects Low

    Last Friday's better than expected GDP report has caused many forecasters to declare that the recession is ending. While I would say that it is still too early to declare that the recession is ending, the latest data strongly suggests that we've seen the worst of this recession and the credit crisis. Even if the recession is ending, economic growth going forward is likely to remain disappointing since the unemployment rate will continue higher for some time to come. We will look at the latest economic numbers and draw some conclusions as we go along. We will also look at the latest survey of over 100 large hedge fund managers and what they predict for the economy, stocks, interest rates, etc. It all should make for interesting reading.

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