WE STILL HAVE THIS HOLIDAY!

THE BIG STEEL SOLUTION REDUX FOR CARS

great article in the Herald Tribune...

CHANGING MY VIEW

After much toiling,  I've changed my view on free trade.  I've always believed in U.S. isolationism (George Washington,'s concept of No Foreign Entanglement,  Hamilton's famous quote "Trade with everyone--alliances with no one") but I was also a globalization free trade guy.  However,  I read through the history of the Tariff Act of 1816 today and it occurred to me that all four presidents on Mount Rushmore were actually protectionist.  

Further,  until the roaring twenties,  America was largely a self-sufficient farming and industrial nation with virtually no federal income taxes--instead we derived our federal revenue from tariffs on imports.  The roaring twenties saw free trade and had weakened America after the 1929 crash to the point where other countries could afford to retaliate when Hoover raised tariffs on imports by signing the dreaded Smoot-Hawley Tariff Act.  (Keep in mind Hoover also raised taxes) 

WWII pulled us out of the depression, but since the war, America has seen many of its industrial sectors demolished by foreign countries such as Japan, who actually sold televisions at a price that would yield a negative profit for their companies in order to wipe out our American companies in that sector.  The tactic succeeded.  Since then, in 1994 China revalued its currency, debasing it to the point where they became the export king home to countless American (and other non-Chinese corporations).

In short, we are getting hustled by other countries.  Does that make me a pro-Union liberal? Absolutely not.  I am as anti-union as they come and I think unions, indeed, have contributed greatly to the demise of the big 3 automakers.    

Thus, my new view is that I support cutting federal income taxes earned in America from companies operating on American soil to 0%, as well as slashing payroll taxes for the same category and capital gains taxes to low single digits.  In place of this federal revenue, I would be in favor of heavy tariffs on imports.  Note that this plan only works if regulations and union boondoggles are lifted on American companies to let them operate more efficiently.  

 

ANOTHER RISING GOP STAR

Tim Pawlenty, conservative Republican governor of Minnesota (!).  

I've been very impressed with his political views as well as his speaking ability.  I think Pawlenty, Jindal and Palin, along with Congressmen Paul Ryan and Eric Cantor will be the leaders of the GOP for several decades to come.   

SECULAR BEAR?

While we appear to be making a standard reverse head-and-shoulders bottom in the major averages at the moment, the idea that we are off the races is a bit premature.  To be sure, if you believe in long term trends, we have been in a bear since 2000, and the 2002-2007 move was a feeble bull leg and ultimate bear trap.   According to history, the current secular bear could easily last from 2000 until 2017--and it makes sense.  After we get out of this deflationary scare, inflation will be the next enemy what with ultra low interest rates and a never-ending U.S. printing press.  Thus,  if correct policy action is taken (if we're lucky) then we may be able to fight our way out of inflation by 2017 creating an August of 1982 Reagan bull market scenario.  

Remember though, we were very lucky in 1980 to have Reagan cutting taxes, deregulating AND Paul Volcker having the guts to raise interest rates above 20% to break inflation's back.   We should only hope to so lucky this time around...

THE AFTERMATH

Well, if you're reading this then you know last Tuesday was an awful night to be a Republican, let alone a conservative Republican.  Obama has already shown glimpses of governing as a centrist--he's smart enough to know the mistakes Clinton and the Congress made in 1992 as far as overreaching is concerned.  

Still,  Obama was funded heavily by left wing George Soros and many other radicals, so he'll feel the squeeze.  It should be entertaining at the least.  

The GOP is again learning the hard way that moderate Republicans don't win. McCain, hero as he is, joins Ford on this list.   As of now, Bobby Jindal (pictured) is one of the rising stars of the party.  I'm also happy to see Mike Pence become the #2 Republican in the House.  I'll have more on this later...

ELECTION DAY POST

Just voted.

I have to say that I'm really relieved that the never ending election season is over. The past several months, from a political and economic/investing perspective, have been about as much fun as waking up at 5 a.m. to a sheet of ice on your car after sleeping two hours.

This election will be remembered for many things. First and foremost was the complete demise of any semblance of an objective, fair mainstream media--meaning CBS, NBC, ABC, CNN, MSNBC, New York Times, LA Times, Washington Post, Newsweek et all. I'll also remember this season for seeing the real conservatives with conviction and guts like Sean Hannity, Laura Ingraham, Thomas Sowell, Jonah Goldberg among others, as opposed to the sellouts who never really were conservative to begin with: Goerge Will, Peggy Noonan, David Brooks, Kathleen Parker. The latter group of sellouts basically lurched to the left as a sign of protest against the Palin pick. While I can respect a conservative who would rather have seen Mitt Romney or Tim Pawlenty picked, abandoning conservative values and backing Obama--by far the most liberal candidate ever to come this close to being elected POTUS--is unbecoming anyone who calls him/herself a conservative. As of now, I'm referring to Will, Noonan and Brooks as liberal pundits on this blog and in person in public.

Apart from that rant, the numbers look bad for McCain. The general feeling is that everyone is drinking the kool-aid, almost willing to punish themselves by electing Obama just so they can further punish Republicans for the past eight years. In my view, this is a HUGE mistake, but the fact is that America is voting with raw emotion as they did in the October stock market panic. And frankly, you just can't fight against that kind of strong emotion lacking rationale.

As of this writing, I'm hopeful McCain can run the table and pull out Ohio and Florida at the very least, and then pull the upset in Pennsylvania. If he doesn't, I won't be shocked, and I do not think that conservative principles are dead. But I do think if Obama wins and the Dems do well in the Senate races, we are in for a long 2-4 years at least. It could actually get much worse if Obama turns out to be more like Chavez than Jimmy Carter or FDR, but I truly hope it never comes to that.

The reckoning, indeed, will come the morning after the Obama drunken euphoria wears off, and the hangover will feel a lot like a Nanny welfare state.

NEWT'S CLOSING ARGUMENT FOR MCCAIN

in his usual cogent and focused style...