Wednesday, September 28, 2011

The Tea Party vs a Democrat.

A novel idea.

Instead of raising taxes on the “job creators” lets raise the minimum wage -substantially.

Want to get people off of food stamps?
want to broaden the base of federal income tax payers?
want to get people out of poverty?
want to increase personal saving accounts?
want to decrease consumer debt?
want to resurrect housing?

Then Double the minimum wage!

I know all the arguments against raising the minimum- but they don’t apply when inflation -real inflation- has destroyed purchasing power to the degree that it has.

Almost 90 million workers, or 85% of all working Americans earn less than thirty grand a year.
Thanks to inflation, and stagnant wages, most families spend more on food, fuel and shelter than they take in. AKA The working poor.

Food for thought. How many in the tea party do you suppose make less than 30k a year?

Want to see GOP really explode- steer the argument away from taxes and onto the minimum wage.

Some random thoughts on gold, inflation, and the minimum wage.

The minimum wage was introduced in 1955. From 1955 to 1970 a worker earning the minimum could purchase between 40 to 100 gold oz depending on the year.

In 2011, a current minimum wage earner spending their entire gross paycheck- could purchase only 7 gold oz.

I posit that an increase in minimum wage coupled with low inflation is the magic formula to maintain a healthy wealth distribution.

Year- Minimum wage converted to gold

1955- 44 Gold oz

1970- 92 Gold oz

1980- 10 Gold oz

1990- 20 Gold oz

2000- 40 Gold oz

2011- 7 Gold oz

Take note of the 1970’s boom to the bust of the 1980’s. Notice the perceptions drop a minimum wage worker could purchase in gold.

It took the economic boom of the 1990’s to finally see an increase in the purchasing power of minimum wage workers on a par to the 1955 /1970 era.

So many things amount to noise and distraction; I like to look at a few prices to prove my point.

Simply put, the price of gas has doubled since 2000, salaries have not kept us. Official CPI masks the true damage inflation has inflicted upon the populace.

While corporate profits are up for many reasons, two of them are: they pay workers less in inflation adjusted dollars than ever before, and they are able to pass thru inflation costs to consumers who are paid less than the rate of inflation would dictate.

Consumers have had to use the credit card to purchase food, fuel and tires.

Of course some consumers were reckless with credit, but most used credit to pay for the basic necessities.

For the poor and middle class to live off a weak dollar they have had to leverage themselves up to the hilt.

GOP / tea party / conservative and right leaning blogs abhor the minimum wage and will not honestly discuss it in any way- except to say that it is an evil government regulation inflicted upon the “job creators”.

While the picture is bleak- I still think we can get out of this hole.


Friday, September 16, 2011

Netflix was the play!

I’m so frustrated I didn’t get a piece of that action; I was so engrossed in playing Europe that I let Netflix slip right by my fingers.

The way to play high flyers with a lot of chatter (as Netflix has had) it to purchase way out of the money puts for a few cents.
Always purchase near-term puts so that they are cheaper, you have better odds of hitting a jackpot this way and it’s cheaper than playing the lotto.

Just three days ago you could have purchased the weekly 170 put for one cent- today its worth 10 dollars! If you had purchased 10 of these puts for 10 dollars, they would be worth 10 grand today.
As I mentioned earlier, I am a big fan of purchasing weekly puts on high flyers every so often; the payout beats anything else you could cook up with minimal risk.

All it takes for a high flyer is one slipup, one tiny mistake and it will lose 30% to 50% of its market cap almost in one day- huge money makers if you long way OTM puts!

Netflix isn't a buy just yet. The shorts aren't done having their fun yet. At some point it will be a good play for the upturn, but that time isn't just yet. The increased monthly fees are going to start rolling into the bottom line in a big way.

What’s the next Netflix you ask? Apple! Bears are chopping at the bit to take a bite out of that juicy market cap. Without Jobs at the helm they have a huge catalyst, one miss, one screw-up, one gaff and it will go down HARD!

One day, Apple will screw-up, you want to be long cheap puts when that happens.

One final note.
Buying weekly OTM puts on high flier is also a cheap way to hedge your portfolio against huge market corrections.

Wednesday, September 14, 2011

I'm long Germany.

The German DAX is down 30% this year and almost down 40% from its all-time high.

Here is how i am playing it:
I'm short the EURO which could be considered long the US dollar.
I'm Long the German ETF and some other European ETF's. I'm long OTM puts on the European exchanges.

Ordinary citizens in the Euro zone shroud be buying dollars hand over fist just in case the Euro collapses. They either need to be long the US dollar or gold in order to protect their savings accounts and assets, and they need to do it now.


Monday, September 12, 2011

Time to buy the dollar?

Tough to say, but its a good hedge against gold and the Euro.

Don't sell your inverse gold ETF just yet.
Holders of the Euro need to get out of that currency ASAP- where are they going to go?
Gold, Dollars and Treasuries.

Citizens in the Euro zone with savings denominated in Euro's have to be looking at buying dollars or gold just in case the Euro crashes the buying power of their cash holdings.