Jay Taylor: Turning Hard Times Into Good Times

8/16/2011: Dow 1,000/Gold $4,000 Revisited with Ian Gordon


click here for audio HOUR #1 HOUR #2

Best Opportunity In 30 Years?

What The Money Spent In Iraq And Afghanistan Could Have Bought At Home In America

With talk of trimming the defense budget floating about Washington, lawmakers are eager to nail down what's being spent where but despite their best efforts, answers are proving hard to find.

Stars And Stripes reports that as of May 2011, U.S. efforts in Afghanistan and Iraq totaled $9.7 billion a month, or roughly the entire annual budget of The Environmental Protection Agency.

While the total amount spent on the two wars could range anywhere from $3.7 up to $5.2 trillion, depending how much the Pentagon pulled from its base budget, even small chunks could power many efforts at home.

• The amount the U.S. spends in Afghanistan and Iraq each month could run the entire State Department for four months.
• For the cost of one month in Iraq and Afghanistan, NASA could have launched the space shuttle five more times.
• Medicare's 2003 expanded drug benefits for seniors that will cost $385 billion over 10 years could be paid for with 40 months of Pentagon spending in Iraq and Afghanistan.
• Two years of air conditioning for troops in Afghanistan at $38 billion could provide 40 years of federal Amtrak funding.
• Five years of fuel for vehicles, generators and aircraft in Afghanistan at $10.3 billion could have paid for the 2010 EPA budget.

Even the most basic estimates can be deceiving. From October 2010 to May 2011 the U.S. military bought 329.8 million gallons of fuel in Afghanistan at $1.5 billion or $4.55 a gallon. Reasonable at a glance, but that number doesn't reflect transportation costs to and around combat zones, injuries, deaths, medical treatment, and rehabilitation -- all of which drive the cost to hundreds of dollars per gallon.

Even as the wars wind down, costs are rising. It now costs the U.S. $694,000 to keep each servicemember in Afghanistan, up from $667,000 in 2009. In Iraq, the cost has gone from $512,000 in 2007 to $802,000 this year.

The irony to the increased costs is the military now has a smaller, less well-trained force, and older, run-down equipment as it buys materiel that's vastly more expensive than what it's replacing.

Insiders Bullish On Commodities : AKS, APC, CHK, D, TIE

Large daily market corrections have made for some perceived buying opportunities for investors. Insiders at several companies in the commodities space have been particularly active in recent trading sessions. Here are five stocks that have experienced significant insider buying activity during this period of extreme market volatility.

Pedal to the Metal
After watching shares of AK Steel Holding (NYSE:AKS) free fall to the tune of 42.2% over the course of the past month, insiders decided enough was enough. On Tuesday of this past week, the CEO and an Executive VP combined to purchase almost $280,000 worth of company stock. The purchases occurred at prices ranging from $7.96 to $8.09 per share.

The stock has been in a downward spiral ever since the company missed analysts' estimates on its Q2 earnings late last month. Despite the "miss," AK Steel managed to report a 12.3% year-over-year improvement in net sales. The company benefited from higher average selling prices, although it expects pricing to experience a slight downtick in Q3.

Another basic materials play that has seen some major insider activity is Titanium Metals (NYSE:TIE). Since the beginning of August, insiders have bought $8.6 million worth of the company's stock. The purchases have occurred at prices ranging from $13.65 to $16.30 per share. TIE shares are down 17% for the past month ago.

Re-Energized
Early last week, the CEO and a director for Chesapeake Energy (NYSE:CHK) combined to buy more than $3 million worth of CHK shares at prices ranging from $27.46 to $29.00 per share. The purchases came even as this stock has been holding strong.

Chesapeake is fresh off a Q2 that topped analysts' expectations and amounted to a 65% top line improvement from the prior year quarter. The company is running on all cylinders as oil production is up 62% from a year ago and a new discovery in the Utica Shale has recently come to light. CHK shares are up 5.1% over the course of the past month.

Two other energy companies that witnessed notable insider purchases were Anadarko Petroleum (NYSE:APC) and Dominion Resources (NYSE:D). A director for Anadarko picked up close to $200,000 worth of shares in a price range of $65.03 to $66.11 per share this past Tuesday. The CEO, CFO and a director for Dominion have collectively bought more than $685,000 worth of common stock this month. APC shares have fallen 5.8% in the last 30 days while D shares have slid 1.3%.

The Bottom Line
It may be some time before the volatility in the commodities space and the markets in general begins to settle down. In the meantime, the topsy-turvy conditions have helped spur insider-buying action. These five stocks have seen some of the most notable action and may be worth a close look for investors looking to establish or add to commodity positions.

Lew Rockwell: Death of the Dollar

40 years ago today former President Nixon was fighting inflation and overwhelming war costs and with that he ended the last remnants of the gold standard. At that time Nixon claimed he was defending the dollar but his critics said it was one of the most damaging decisions in modern economic history. Are we feeling the effects of this decision four decades later? Lew Rockwell, chairman of Ludwig von Mises Institute, tells us who’s to blame for the death of the dollar.

Leverage on Wall Streets Drop to Low of 2011

I would consider this a new positive all things being equal, as the nasty selloff we have had apparently has caused quite a bit of margin calling at the institutional level. Not surprising with the 'whoosing' down action we saw on 3-4 days over the past two weeks. More remarkable is how quickly Wall Street levered right back up post 2008-early 2009 but I guess its not surprise when The Bernank puts a green light on speculation and easy money.

Why is this a net positive? Again, all things being equal - when the institutions lever back up, that's new buying power that will re-enter the market.

• Investor credit at Wall Street brokerages is falling by the most in a year as the Standard & Poor’s 500 Index suffers its biggest losses since the bull market began. Borrowed money in accounts at 61 New York Stock Exchange firms has fallen 4.6 percent, the biggest drop since June 2010, according to a July 22 statement from New York-based NYSE Euronext. Leverage slipped to the lowest level of 2011 last week, according to Morgan Stanley’s prime brokerage.
• The decline at NYSE firms followed a 36 percent increase to $320.7 billion in eight months, the biggest expansion since 2007. (yeah! QE2 - a green light to speculate at will!)
• Lenders have been calling in loans since April, when the benchmark gauge for American equities began a plunge that has wiped out more than $2 trillion in value. “People tend to lever up in bull markets. When you look at risks in these markets, when there’s more downside risk than upside in the short term, people don’t want to amplify losses.”
• Net hedge-fund leverage slumped to its lowest point this year at 49 percent of balances as of Aug. 10, according to an Aug. 12 note from Morgan Stanley’s prime brokerage. Last year, it reached its lowest point on Aug. 31 at 41 percent, (the week QE2 was 'hinted' at strongly be The Bernank at Jackson Hole, WY)
• “People are dumping equities, emerging market equities, things seen as risk assets, and alongside with that we’re seeing leverage being taken down.
• Margin debt at NYSE firms peaked in July 2007 at $381.4 billion, a 41 percent increase from the level in November 2006. The S&P 500 reached its record high of 1,565.15 on Oct. 9, 2007, then tumbled 57 percent through March 2009.
• Margin debt climbed to its previous high of $278.5 billion in March 2000. (notice a pattern?) The S&P 500 also peaked at a record that month before entering a bear market in which it lost 49 percent through October 2002.

16 Statistics Which Prove That The American People Are Absolutely Seething With Anger

According to a whole host of polls and surveys, the American people are incredibly angry right now. The American people are hopping mad at the government, the American people are hopping mad about the economy and the American people are hopping mad about the direction that this country is headed. Never before in modern U.S. history have the American people been this angry. There is vast disagreement about what the solutions to our problems actually are, but what everyone can agree on is that the American people are absolutely seething with anger right now. The statistics that you are about to read are mind blowing. We used to be such a happy country. Once upon a time we were one of the happiest places on earth. But as the economy has fallen to pieces anger has been steadily growing. If something is not done to turn the economy around eventually this anger is going to erupt in frightening and unpredictable ways.

The American people are not equipped to handle hard times. We are incredibly spoiled. Most of us have only known good times, and most of us have been taught that we will have endless prosperity all of our lives because we live in the greatest nation on earth.

Well, "the greatest nation on earth" is about to get a massive wake up call. We are up to our eyeballs in debt and we are bleeding jobs, businesses and wealth at an astounding pace. Our economy is dying right in front of our eyes, and most Americans have been so "dumbed-down" that they don't even realize what is happening.

But what most Americans do know is that things are "bad" and they want someone to "fix" things. They know that something is "not right" and they want things to go back to the way things used to be. The longer it takes for things to return to "normal", the angrier they are going to get.

The following are 16 statistics which prove that the American people are absolutely seething with anger right now....

#1 A new Washington Post poll has found that a whopping 78 percent of Americans are dissatisfied "with the way this country’s political system is working".

#2 That same poll found that only 26 percent of Americans believe that the federal government can solve the economic problems that we are now facing.

#3 Gallup says that Barack Obama's job approval rating has hit an all-time low of 39%. (more)