What is the Fiscal Cliff and what should consumers do?

The Fiscal Cliff is obviously a multi-faceted, complicated concept that has no "best" solution. The fiscal cliff is basically a safety default option that will decrease the deficit in 2013 by automatically implementing spending cuts and tax increases. Isn't this exactly what both parties and the most of the public want? The problem is to do so will surely mean a recession of some sort as the market has to realign itself to the new normal of less government spending. Our government, through many different channels, has been propping up many businesses for a long time and the bills for that lifestyle are finally coming due.

I compare this to my own college career. I was a sharp fella with lots of potential, but being from a middle-class family in order to go to college I borrowed money. 

Later I found out that I could borrow above the amount for tuition and lived a higher lifestyle than I otherwise should have during college. Being a borrower that is not worried about the future, as most college students and our federal government have the propensity to do is a lot of fun. Instead of working and saving, I was able to enjoy the college lifestyle of drinking and partying, sometimes to excess. I think the same could be said about many government programs. Although the education I was borrowing to receive was a worthwhile investment, the borrowed money I was spending to go on spring break was not. Our elected officials must discern between the two. What is an investment and good for the future, and what is superfluous and a wasteful use of taxpayer dollars?

When the cuts come, and they will eventually, it will be painful, just as it was when my student loan bills came due. I lived in cheap housing, drove an old used car, and didn't have cable, because I had to pay back my student loans. The U.S. citizenry will get the same lesson. The question is should we take the medicine now or shall we defer it until later. We shall see.

Media outlets are quick to point out taxes on the wealthiest citizens as the main point of contention between Republicans and Democrats, but there are other issues affecting the political gridlock surrounding the fiscal cliff. Both sides know that raising taxes alone will not solve our problems, nor will society be able to stand the sort of cuts necessary to solve our problems. The other issues are whose districts are going to be most affected by the cuts, whether they come via the fiscal cliff and "taxmegeddon" or they come through some brokered deal between our two parties. It is amazing that Congress can keep a straight face as they claim to want to address our long-term deficit problem while simultaneously working to avoid any essential action.

If we go over the fiscal cliff, consumers can expect bad news. If they work for a government entity or a private business who sells to the government they should expect to feel the bad news. Taxpayers can expect to pay a larger sum of their income toward the reckless spending of the past. Allowing market forces to rebalance would allow for a swift correction and then a return to stable growth, even perhaps ushering in a cyclical bull market by 2014 to 2015.

If, on the other hand, we avoid the fiscal cliff with a last-minute stopgap, most likely meaning Washington, D.C. has kicked the can down the road, the fiscal cliff will only be far higher and far more dangerous later. But make no mistake; it must be dealt with eventually. Consumers can expect inflation. The government will continue doing what it has been doing and with the help of the Fed it will slowly but surely monetize the debt, which punishes the savers and retired folks and it also punishes future generations as they will be the ones that have to deal with the mess our government has swept under the rug for the time being.

The risks are great no matter which choice we follow, to go over the cliff or avoid it. As for general advice, the old saying diversification is the only free lunch has never been truer. Because there are so many risks to be worried about the only prudent way to manage it is to be as diversified as you can afford to be. This, of course, will vary depending upon your wealth, but seeking professional guidance on how to be properly diversified is the wisest thing a family can do in these uncertain times.

A post about someone else's post.

   I haven't written in while, but the recent post from Cardinal Dolan To Christ Through His Churchs  inspired me to compose my own thoughts. First let me say this guy gets it. Almost makes me want to be a Catholic. No offense to my many Catholic friends including Kirk Freeman but its a lot of hoops to jump through, but with this return to a more traditional stance, if the whole Catholic Church embraces it while other churches go the way of the world I may have no choice.  Nonetheless this entire piece is brilliant, he captures what I have been feeling for some time in the section about liberty:

"we now face a chilling reduction of liberty to libertarianism.    For some, this means a selfish callousness to the needs of those beyond our own little world, a stubborn claim that we only need tend to ourselves, nobody else, even those in need.  For others, this libertarianism means we have the unfettered right to do whatever we want, wherever, however, whenever, with whomever we want, unchained from any limit placed by ethics, morals, faith, or reason.  No divinity, no church, no faith, no natural law, they say, has any claim upon our urges and drives." 

   35 and under are almost all in this classification. That is why I have said many times our political parties must return to their liberty roots or face dying a slow death as less and less people care about what they have to say and who they represent.  The Church is already seeing it, a recent pew research center poll said that nearly 1 in 5 no longer believe in God, they aren't Atheist, so much as they simply do not care and I think its because they do not want anyone to rule over them.
   Its unfortunate I can not speak to all of them as I believe there is far more Liberty in Christ than they have been told. Yes we follow rules and should try to live a Holy life, but we do so out of love not out of fear, and there is a big difference between those two options. Somehow the church, you and I if you still consider yourself part of the church, must find a way to share this good news with people. We must love the sinner, and yes hate the sin, but first and foremost love the sinner.
   He closes his post discussing a very troubling aspect of this new belief system; as more and more people, lose what Cardinal Dolan speaks of this "ought" to do, the seams of society begin to stretch. A lawlessness of morals will eventually lead to a lawlessness in society. We saw the same thing occur during the Roman Civilization, and the Church held what was left of society together after its fall, I do not doubt that it may be called upon again to do the same.

Betting on America...With Whose Money?

It is campaign season and so with every bit of financial news both contenders for the highest office in the land use the numbers to their advantage. This past Friday the Employment Situation Report was released by the Bureau of Labor Statistics. This is a major report that comes out usually the first Friday of every month and can affect the stock market in a huge way! This is mostly because the news is very timely as its data consist of the previous month. Furthermore, the report itself is rich with details about the job market and household earnings, so many believe that this report can give a glimpse into the future. It’s quite elementary to see that if this report shows wages and salaries are lower, or fewer people are working, spending will drop off and businesses will suffer.

President Obama’s economy has not taken off as he said it would. He has had nearly 4 years to propel us toward an economy of hope and change, but in the end I personally believe he is over his skis. When questioned about the jobs report Obama said, “That’s a step in the right direction.” I can’t help but disagree and here is why. In June the working population grew by more than 180,000 people, so in order to just break even we would have needed to create 100,000 more new jobs than the 80K reported by the BLS this month.

Luckily for the Obama administration many workers are falling out of the workforce and that helps the overall picture of unemployment. You see according to the BLS you must be actively looking for work in order to be considered unemployed. So if someone gives up looking, they are no longer considered unemployed, and Obama rejoices! The unemployment rate would be much higher if workers were not falling out of the workforce. Consider the following fact from this recent report, there are now 1.82 million more people not in the labor force than there was just 12 months ago. Instead of getting new jobs many people are evidently either giving up or signing up for disability. As more workers joined the federal government’s disability program in June than obtained new jobs according to the Social Security Administration.

Whose future is at stake?

So as Barack Obama rides across the county on the tax payer dime in a bus made in Canada, his bus tour slogan, “Betting on America” has me wondering just whose money is he betting with? As a Young Republican I can’t help but worry that it’s my daughters’ future he is gambling with. It upsets me to see these job reports and to know that the main cause is an out of control Federal Government who makes it far too difficult to be in business. I long for a return to smaller and smarter government just like we see the state of Tennessee doing under the leadership of Gov. Bill Haslam. This November’s election has so many important issues, but one of the most important is making sure we get America back to work. I know that the Young Republicans of Rutherford County will be working hard to ensure our future is brighter by getting Mitt Romney elected president and I encourage all people to join us in this endeavor.

Check out the data yourself here:

www.stats.bls.gov/

www.ssa.gov/policy/docs/statcomps/ssi_monthly/index.html

(Cross posted on The Rutherford County Young Republicans Club Blog http://rutherfordyr.blogspot.com/)

You can follow Gabriel on Twitter @InMurfreesboro 

Is that Uncle Ben's helicopter I hear over the horizon?

In the release of the HSBC (HBC) Flash Purchasing Managers Index, the earliest indicator of China's industrial activity fell to 48.7 in May from a final reading of 49.3 in April.

It marked the seventh consecutive month that the HSBC PMI has been below 50, indicating economic contraction, a.k.a. economic slowdown.

For weeks now I've been sensing the growing possibility of a coordinated monetary stimulus effort by the central banks of the U.S., Europe and China. 

If quantitative easing is required in China's robust economy, can you imagine how much more it's needed in the stagnant economies of Europe and the U.S.? So here's the plan on how to profit from the reaction to the eventual monetary stimulation and massive injections of capital (and increased monetary velocity) that is coming sooner than later from Ben Bernanke and the other central bankers around the world.

Begin with assets that will go up as a result of the weakening of the paper currencies. It's not rocket science, but whenever we've had Federal Reserve style quantitative easing, the symbols of wealth preservation went up sharply in value.

Here's a 5-year chart of the SPDR Gold Share ETF (GLD). You can see where economic stimuli and Quantitative Easing (QE) began in late 2008. QE1 was announced at the end of August 2010 and QE2 kicked in the spring of 2011. Each time it fueled gold's ascension higher and higher.

Two interesting ways to profit from the coming rebound in both gold and silver is to consider these two ETFs: theCentral Fund of Canada (CEF) and the ASA Gold and Precious Metals (ASA).

As the Central Fund of Canada web page makes clear, the purpose of CEF is to make it relatively easy to invest in both gold and silver in a tradable, priced-per-share basis. Over 95% of the money invested is split between gold and silver bullion, with the remaining 5% kept in cash for redemptions.

The fund's gold and silver bullion is stored in "the highest security rated treasury vaults at a Canadian Chartered Bank on an unencumbered, allocated and segregated basis".

That means there's real gold and silver behind the net asset value of each share of CEF. It's not co-mingled with other bullion and, as far as we were told, it is insured and fully inventoried.

As of May 24, the share price is selling for a 1.2% discount to its net asset value. So with each share you'll be able to participate in the rise of both precious metals, and they WILL rise IF aggressive monetary stimulation is implemented.

The ASA Gold and Precious Metals ETF is a unique breed of "self-management" investment trust.

The firm invests in publicly-traded stock markets across the globe. It primarily invests in stocks of companies engaged in the exploration, mining or processing of gold, silver, platinum, diamonds, or other precious minerals. ASA was founded in 1958 and is based in San Mateo, California.

On the ASA home page we learn that "the Company provides investors a vehicle to invest in a portfolio consisting primarily of the stocks of companies engaged in the exploration, mining or processing of gold, silver, platinum, diamonds or other precious minerals.

"It may also invest in gold, silver and platinum bullion or securities that seek to replicate the price movement of gold, silver or platinum bullion."

So investors in ASA shares get the leverage of precious metals equities and the lowered volatility of owning the bullion.

The good news for potential investors of ASA is that the current share price of $22.74 is also selling at about a 1% discount to the net asset value of the company's shares.

More speculative investors may also consider deeply discounted small- to mid-tier producers of gold and silver.

Two examples would be IAMgold (IAG) -- which is currently selling at a P/E ratio of around 5 and pays a 2.6% dividend -- and Silvercorp Metals (SVM) -- which has risen over 17% in the past week, has no debt, over $154 million in total cash, and pays a 1.7% dividend to boot.

Expect plenty of volatility with precious metals and the above-mentioned companies. Seven months from now the prices of gold, silver and these companies may make today's prices look amazingly low.

Disclosure: At the time of publication, Gabriel Fancher was long GLD and looking to add CEF.

DEBT LIMIT - A GUIDE TO AMERICAN FEDERAL DEBT MADE EASY.

Guess what I'll be showing my students next week?

We do need term limits

In response to this article in the dnj.
Vice mayor: Council needs experience, not term limits
I'm willing to vote for guys that have served far too many terms like Toby Gilley and Chris Bratcher, but that doesn't mean I am not for term limits. I hope that our city council will address this issue soon and have the courage to put term limits in place because its the right thing to do.

People in power are rarely ever for term limits, they say let the people decide. But everyone should know incumbents have an advantage in political races, and trust me, people in power know this. One must ask the question why someone feels the need to hold the same position for 20 plus years, is it the power? Is it the money? Because if its to help the people, you could do that by staying active once you leave office. I think its important that people serve and then find good people to replace them. I can sum up my opinion with "Politicians are like diapers, they must be changed often, and its usually for the same reason."

A Lack of Leadership

The House of Representatives unanimously rejected an alternative budget proposal based on President Obama's 2013 budget plan, no one, not even one democrat voted for this plan. How could a leader who, according to the media, is so popular, not get even one vote for his budget? 

It really isn't a surprise, Obama's budget plans have a poor track record in Congress over the last year. In May 2011, 97 senators voted against a motion to take up his 2012 budget plan, with 3 not voting at all, so not even one senator voted for his budget then and I doubt they will any time soon either. 
Make no doubt about it, we have some big issues we must deal with, number one in my opinion, is the budget because it relates to our national debt. I know that in my own house living with and without a budget is an issue, and when we do not have a plan, it gets worse. Of course its not as much fun when we are on a budget, I do not get to enjoy the loco tacos at Taco Bell, and I have to pack my lunch, but its what we must do, small sacrifices, in order to reach big goals. The same applies for out Federal budget. 
We must live within our means. Maybe I should say that more loudly, WE MUST LIVE WITHIN OUR MEANS! Because as my daddy used to tell me, the band must be paid after a night of dancing. Eventually the bills will come due. Most likely it will be my generation that will have to deal with these issues because those currently in charge refuse to deal with it. As I told Congressman Scott Dejarlais, I'm tired of seeing them kick the can down the road. In twenty years, if we make it that long, we will be facing the same issues Greece, Spain, Portugal, and Italy are now facing. It would be easier to make changes now, over a period of time, than to have to make them overnight at some date in the future. 
But to do that it will take bold leadership. Leadership that can not be presently found in the White House or anywhere else in DC. Even the Ryan plan is not bold enough, but it is a step in the right direction. We can only hope that any step, even a small one, is taken soon.  

5 phone calls to make this year

In a single afternoon I saved myself over $1000 over the next 12 months. How you may be wondering? I called people I am already doing business with, and have been with for a very long time and did the following three things. 
I negotiated the fees and rates by saying, "I'm a great customer and I'd hate to have to leave but there are some other companies offer better rates, and then I'd ask them what they could do for me.


In a lifehacker.com article I first heard about this and the recommended you break the ice by asking a routine question, like, "I just wanted to confirm you received my bill on time." Then, highlight how long you've been a customer: "Can you tell me, how long have I been a customer? Do your records show that?"

At this point, it's time to ask for a rate reduction. Use this phrase: "Times are tough." Also, if you've done your homework, you can say, "X company is offering a better deal. I'd hate to have to switch just over a few bucks. What can you do for me?" If they won't budge, ask to speak to supervisor, or the customer retention department, who have the power to make changes. 

The question most pose at this point is will it always work? No, in fact it took me a couple of tries, but in the end I found that a few minutes work on the phone saved me and my family a pretty good bundle of cash.

 For your convenience, here are the direct numbers to call.

1. Cell phone (very easy)

• Verizon Wireless: 1-800-922-0204
• ATT Wireless: 800-331-0500
• Sprint: Dial *2
• T-mobile: 800-T-MOBILE

2. Gym membership (difficult)

• Gym Olympus  (615) 895-0604 
• Anytime fitness  (615) 893-9464
• MAC  (615) 396-0999
• Gold's Gym  (615) 895-8162

3. Cable (very easy)

• Comcast: 800-266-2278
• Direct TV: 1-800-494-4388

4. Credit Cards (depends)

• See phone number on back of your credit card

5. Car Insurance (depends)

• Geico: 800-861-8380
• AAA: 866 539-8033
• Allstate: 866 704 9900
• Progressive: 800-776-4737
• State Farm: 855-733-7333
• Cigna: 800-244-6224
• United Health: 800-328-5979

If you have any success let me know by posting a note here in the comments section. 

Op Ed on the Occupy Murfreesboro Movement

A friend of mine and I went down to the Occupy HQ to speak with them. I was wondering like many others whether the occupy movement will stick around long enough to actually develop any coherent ideas for fixing the US financial system, or will it just continue to be a disorganized expression of the frustrations many Americans hold? 
The Occupy group calls for social justice, but too many times this is a code word for socialism. Taking from one party and giving to another, the redistribution of wealth, may increase the portion of the economic pie that the least may posses, but it also shrinks the overall size of the pie as well. 

 In the United States we enjoy a standard of living that most of the world envies. In fact the Occupier who claims to be the 99% when compared to the rest of the world is actually part of the 1%. Our poor and hungry do not starve to death, nor do most die of preventable disease, because of the overall high standard of living all people, both rich and poor enjoy. 
The Occupier calls for an end to capitalism, but I’m convinced that it was not capitalism that has caused our current problems, but the lack of capitalism. Many of the occupy movement call themselves socialist, but I think the real socialist are the government officials who continue to bail out big banks and obstruct the free market from doing what it does best. (allocate scarce resources) The government for too many years has been in the business of picking winners and losers. It’s unfortunate that most Occupy protesters feel that the solution to the problem of the government picking winners and losers is for the government to just switch sides and make some corporations the losers while others win.  Why not get the government out of this business all together and simply make sure that equal rules are followed allowing the chips to fall where they may? 
The message that this Occupy movement has been missing, but has been clear to me from day one is that there is a growing income inequality in our country, and even though I disagree with most protesters about the cause of it. They argue that it is the unfair advantage corporatists enjoy, whereas I’d argue it is years of poor immigration policy and a fiat money supply. Nonetheless, its very evident that our economy can not be sustained in the same fashion as it has been for the past 40 or so years.  Maybe the election in 2012 will help right these wrongs, but I fear that it will not, and the proverbial can will continue to be kicked down the road again.