Out of the Woods?


Upstate MI

(Some of You May Recognize where I was this Weekend…)
All is well at last, the Kabuki Theater entertainment has ended and we can all expect bright sunshine and free cherry-bomb popsicles for the remainder of the summer!

Or not?

It’s hard for me to see this as anything but a temporary positive, as it looks to be another boot of the increasingly cumbersome can “down the road,” once again.    Some of you may have noted that the plan calls for some $2.2 trillion in spending cuts over the next decade.  That may sound like a lot, but one must look at the way Washington politicians (and their scoring body, the Congressional Budget Office [“CBO”] ) define “cuts” before we can analyze that number.   Unlike you and me, who “cut” our own budgets by reducing spending, Washington defines a “reduction in the planned growth of spending” as a “cut.”  What does that mean in practical terms?

Let me give you an example to illustrate:

Some of you may recall my comment the other day on Fly’s blog that if Washington decided today to merely freeze current spending at 2011 budget levels over the next ten years, that would be defined by the CBO as a $9.9 Trillion “cut” in spending over that period.  Why?  Because the CBO looks at current Congressional spending plans like a layman might a five or ten year lease rate– they build regular increases into spending over the specified period.   In other words, the thought that a budget might NOT increase is almost unheard of in Washington.

In fact, it’s so unheard of, that the very “cuts” they are bandying about today are merely decreases in spending growth, not real “cuts” at all.  And since we can’t even afford spending at current levels, this means the “deal” brokered today over much jawboning and posturing doesn’t mean “jack all” with regard to actual deficit reduction, and it means absolutely squatola with regard to the overall burgeoning debt position of the United States Government.

Today, Congress is patting itself on the back for putting a finger in the dike like the famous Dutch boy of legend, but they are ignoring the gaping chasm appearing in the seawall 50 meters to the right.

Combine these last weeks’ complete waste of time in addressing the ongoing debt problems with the continuing reality of the Obama Recession, neatly laid out by the U.S. Commerce Department’s Bureau of Economic Analysis (“BEA”) just last Friday in a report stating that last quarter’s anemic annualized GDP growth rates of 1.92% had to be revised to an even more atrocious 0.36% annualized rate, and I’d say that we are deep in the crapper here, folks.

Leave the ongoing unemployment woes aside, the fact is that we were able to escape the consequences of our debt profligacy in the past by growing our way out of the problem.   As the above paragraph states, that ain’t happening here.  What’s more, if the Obama Administration continues with it’s plans to foist  Obamacare on lower value-added employee bases (read: “unskilled work forces”) and also continues with it’s heavy handed regulatory and “green” initiatives, unemployment is going to get worse before it gets better.

With these set of parameters, what choice, really, does Bernanke have, but to whip the printing presses into a frenzy to stave off Depression Era deflation?  And for how much longer does that strategy work in conjunction with our hemorrhaging debt problem?

When does the child (likely a Chinese child) finally cry out: “Look! The Emperor is not wearing any clothes?”

Let’s see what happens tomorrow, but I continue to like TBT, unless some madness grips the bond markets.  Gold and silver may take a hit here, on the “all is well” euphoria, and maybe even in the double whammy when everything starts selling off later tomorrow or this week.  I actually bot some NUGT and DGP on Friday, thinking the veil will be dropped a little bit on the Emperor when this deal gets done.   If I’m wrong, I’ll dump that extra, post-haste.

Oh, and I’m keeping GSVC, because the Fly is never wrong over the long term.



48 Responses to “Out of the Woods?”

  1. What will be your tell in unloading NUGT?

  2. do you ever read Richard Koo (nomura) economic notes? Great stuff.

  3. That whole state is a postcard.

  4. You ever read Niall Ferguson? Its a pity the finest minds nowadays aren’t in government.


  5. Yogi & Boo Boo

    Looks like my backyard…

    • Which state?


      • Yogi & Boo Boo

        Connecticut. In the woods.

        • We just flew into Bradley last week on our way to Maine and then NY (don’t ask)… I went to school up I-91 a little bit, and it’s been a while since I’ve tooled around in that area, so it was nice to be back. We were driving around the Loomis-Chafee area… lots of old crap around there, kind of cool.

          Sure beats those shitty cities.


  6. Fly is never right even when he’s wrong…. Oh wait, wut?

    Anyway, I am in GSVC too. I got in a bit too deep during this swoon, plan on cutting back a bit as it recovers.

  7. same as it ever was. the only thing that changed, we got ripped off in the market last week is all. lets bail the titanic using a mcdonalds coffee cup,thats what 2 trill is.

  8. I have a glimmer of hope that one day this country will right itself and stop spending itself into oblivion. Consider that in less than two years the debate has actually turned against the statists and big government. When pundits and media and leftists spend as much energy as they have vilifying the Tea Party and conservatives then I know something positive is happening. Granted the theater of the last week is ultimately a joke. The country is in big trouble. But at least we are talking about the debt and deficit. At least there are some willing to talk about the problems like Paul Ryan, Raul Labrador, Rand Paul and Marco Rubio. These gentlemen are the future of limited government and fiscal discipline in this country. They, along with the Tea Party, also scare the shit out of the left which I love.

    • Thanks, already love all those guys, save for Labrador, whom I had not heard of until you just mentioned…

      Turns out he’s the Congressman for Coeur d’Alene (CDE)! How could I have missed that?

      Now I love him too.


      • Have a look at Meet the Press from this past Sunday. He was on the panel. Total ownership of the room.

  9. Walden pond right? Did you also visit Boston?

    • Skirted Boston about a week back, but no, that’s not Walden.

      It’s really one of the most beautiful places in the country in summer (like Maine), but not so hot in the winter, unless you like snowmobiling.


  10. angel swamp tennessee.

  11. Boy, that’s a tough one. There are so many beautiful places like that all over New England.

  12. Somewhere in the Adirondacks ?

  13. Hmmm. Last guess before I give up. Wolf Lake?

    • Yikes, that’s way too far north. Hells, son, I’m a warm weather type… I don’t like to go that far north even in the middle of summer…global warming or no!

      Not to far off, longitudinally, though.


  14. Au Sable river?

  15. Mr. Cain Thaler

    Iargo Springs?

    I’m not going to lie, Jake, you just took a picture of every large river/lake in northern Michigan.

  16. hey Jake,

    What do you think of NG?

  17. Yogi & Boo Boo

    You guys need to use google image search. Just drag the image into the search and you can identify almost any pr0n star people use as avatars, or vacation hideaways for that matter.

    • Okay, so where is it?


      • Looks like a spot on the Platte River i’ve paddled in the Sleeping Bear dunes. I don’t jump in many conversations but i do appreciate your wit and wisdom and your take on the markets and metals.

        • Thanks. I meant for Yogi to tell us how google images tells us where something is just from the picture. I tried it but it didn’t work.

          You may be right about the exact spot… I just took the pic from Traverse City images, for which that would qualify I think.


  18. Yogi & Boo Boo

    @Jake – I didn’t get the “left out” comment about Bartlett. When you have a chance, please explain. I was familiar with his history.

    • He got crossways with NR a couple of years back and went kind of renegade. Now he’s the left’s favorite “convert.”

      Go figure.


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