Forecasts & Trends

The United Nations recently formalized a broad set of global taxes and penalties that it wants to impose on developed nations in the Northern Hemisphere, and especially the US. The UN wants to raise some $400 billion annually to send to lesser developed nations in the Third World. And the kleptocrats at the UN want to implement these huge new taxes by the end of this year while President Obama is sure to be in office.

These new taxes include a 1% income tax on all billionaires worldwide, a tax on all financial transactions (stocks, bonds, etc.), a tax on currency transactions, a carbon tax on developed nations, a tax on commercial airline flights from the US to Europe, a tax on oil and gas extracted offshore, a global tobacco tax, etc. Oh, and one more: control of the Internet.

Since the UN does not have the legal authority to impose these taxes, it will attempt to structure these new taxes as "treaties" with member nations. US treaties are signed by the President and ratified by the Senate. The House of Representatives has no say when it comes to treaties. The question is, would President Obama sign such a treaty? And would the Senate ratify it? I would like to say no.

You need to read the information I have included (and documented) in today's E-Letter carefully and consider it seriously before the election on November 6. We cannot allow our country to be subjected to UN defacto control vis-a-vis these onerous taxes. Above all, we cannot allow the UN to control the Internet. There is a choice in the upcoming election, and we need to speak loudly!

Today we delve into the complicated topic of "debt deleveraging." For many years, I have warned that our massive explosion in federal debt (up 50% just since Obama took office) would one day stifle economic growth. Obviously economic growth is currently stifled, what with the weakest post-recession recovery in decades. But the question remains as to whether our massive national debt and trillion-dollar budget deficits are the main reason for the disappointing recovery.

Consumers continue to deleverage – that is, paying down debt instead of spending more – because they fear for their jobs and the likelihood that we may be headed for another recession next year. This whole concept of deleveraging is foreign to many Americans – what is it?; how long will it continue?; and what does it mean for the economy, etc.? With the help of a very good article in U.S. News & World Report, I hope to answer those questions for you today.

But first we take a quick look at the latest economic reports. Let's get started.

The Federal Reserve announced a new round of quantitative easing (QE3) last Thursday at the end of its latest policy meeting. While the announcement was widely expected, Fed Chairman Bernanke had some surprises in store. He announced that the Fed will buy $40 billion in mortgage backed bonds every month until the economy gets better. When will that happen? No one knows. So the latest round of QE is unprecedented in that no one knows how long it will last or how much money the Fed will have to print.

To me and many others, this is a sign of desperation on the part of the Fed. Depending on how large QE3 turns out to be, it could spark the next round of inflation. Even worse, QE3 may not work just as QE1 and QE2 didn't work. Some argue that this unprecedented move by the Fed is an effort to get President Obama re-elected. Yet we are continually reminded that the Fed is non-political. What we do know is that Bernanke is out of a job if Romney wins. So one wonders.

Today we will analyze the Fed's latest move, the logic (or lack thereof) behind it, why it is dangerous, why it is unprecedented and lastly, why QE mainly helps only the wealthy. It should be an interesting letter.

September is often a bad month for the stock markets, historically speaking, and this year it could be especially turbulent. In addition to all the uncertainty about the weak US economy, there is uncertainty about what the Fed may do just ahead and what, if anything, will be done to address Europe’s recession and debt crisis. In addition, there is the looming presidential election which no doubt will go hyperbolic this month.

We begin today by looking at the situation in Europe, now that the August vacations are over. It remains to be seen if European leaders can make good on their promises earlier this summer – I doubt it. From there we look at the latest US economic reports, which were a mixed bag. Next, we consider Fed Chairman Bernanke's speech last Friday and the probability of QE3 when the Fed next meets on September 12-13.

We end today with some of my thoughts on the Republican National Convention last week, which I thought was very good. It remains to be seen how the Democrat Convention will go. I find it very odd that Hillary Clinton will not be there at all. And finally, I once again recommend that all of you go see "2016: Obama's America" movie. It's not what you think it will be.

I would wager (with odds) that very few Americans understand just how mind-bogglingly enormous $1 trillion is. The analogy I will share with you today will knock your socks off! It certainly did mine.

Yet our government is running trillion-dollar annual budget deficits like it’s no big deal. And it’s not just Obama – the first trillion-dollar deficit, which was incurred in FY2009, was actually the result of President George W. Bush’s budget, one of the few legitimate things Obama really inherited from “W.”

I begin today by summarizing a recent eye-opening analysis - a great video, actually - that concludes that our continued trillion-dollar deficits will send us into the abyss. I realize that this is nothing new to many of my readers, but we need to continually remind ourselves how we are willingly and knowingly sending our country into economic and financial ruin.

You will definitely want to watch this video and forward it on to others!

We begin by looking at last Friday’s unemployment report for July. The government reported that the economy created 163,000 new jobs in July, which was a big increase over the last three disappointing months. Yet the report also bumped the national unemployment rate from 8.2% in June to 8.3% in July. We will look into the details of the report as we go along.

President Obama continues to push for a tax increase on families making over $250,000 starting on January 1. The debate for months has centered on whether or not this tax increase will result in widespread job losses. Well, a new study from the accounting firm Ernst & Young has answered that question definitively – at least 700,000 jobs will be lost if Obama gets his way.

Finally, a little-known law passed back in 1988 requires companies with 100 employees or more to give at least 60-days notice to their workers if they know in advance that an event is coming that could lead to widespread layoffs. We all know about the so-called “fiscal cliff” that is coming on January 1 if Congress doesn’t do something to stop it.

So the question is, will we see mass layoff notifications just days before the presidential election? The Obama administration is doing everything it can to avoid this, but the law is clear. I'll explain what's at stake as we go along today.

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.

As all of my readers know by now, I'm a political junkie. I love bringing parallels between politics and investments to your attention, since the two are very interrelated. Today, we're going to discuss how a cliche coined to help win an election can be useful to Treasury bond investors.

There's no doubt that Treasury bonds are at historically high prices, making them quite risky for the future. However, there are ways to make money when bond prices go down, which is where I think bond investors need to be concentrating right now. In other words, when I ask myself where potential Treasury bond opportunity lies, the answer comes back: "It's the short side, stupid."

Even so, bond-king Bill Gross found out that there was still some upside for Treasury bond prices when he exited the market in 2011 and missed out on some good gains. What's needed is an investment that can go both long or short, depending upon the market environment. Today, I'll introduce you to just such an investment - the Equity Alternative Program. Since its inception in 2007, Equity Alternative has produced an annualized gain of over 19%, net of fees. You'll definitely want to check this Advisor out in more detail.