Monday, August 10, 2009

Taipan Daily: Why Obama Loves 10% Unemployment

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Monday, August 10, 2009
Taipan Daily: Why Obama Loves 10% Unemployment
by Adam Lass, Senior Editor, WaveStrength Options Weekly

Last month I wrote of a ray of light poking through the muddle of good, bad and indifferent reports clogging up our view of the horizon. That light is burning even brighter today. In fact, if you are willing to lose your gag reflex, you stand a chance to make 539% gains off it.

Which is a good thing, because the muddle I spoke of is as bad as it ever was. In fact, Washington is doing its best to make it worse.

View the Monthly Net Employment Change Chart

Over the past few days, we have heard that unemployment is up – which is bad – but not up as much some thought it ought to be – which, we are told, is good.

Smooth Words…

Even the CCOTUS (Cheerleader-in-Chief of the United States) has stated that he is pleased, but not satisfied, that unemployment is down to a mind-boggling 9.4%, and goes on to project that job losses will most probably increase again to plus-10% levels in the near future.

You might think that Mr. Obama is supremely concerned about American jobs. After all, he makes regular pilgrimages to employment dead zones like Elkhart, Ind., where he lectures all who listen as to how we do our best to put folks back to work soonest.

But not too soon, mind you.

Why Peter Leza was offered $500,000… and turned it down

Most people would jump at the chance to cash a check for $500 grand… but not Peter Leza. Why? Because he knows a little-known wealth secret that allowed him to turn a measly $500 into $5 million.

So, when an investor offered him $500,000 for a small stake, Peter laughed and walked away. Even more incredible, you have a rare shot at collecting huge gains like Peter did – from the very same secret he used – right now.

…Yet Don’t Expect Real Action Anytime Soon

America has a peculiar relationship with employment. Look back over the past hundred years or so, and you will note that any time unemployment was over 7% come November in a presidential election year, the political party in power lost the White House.

You must discount FDR’s amazing tenacity during the eccentricities of the Great Depression and WWII, mind you. But Herbert Hoover certainly paid the price in 1932, as did George W. Bush’s Republican party in 2008.

Seems like a pretty commonsense idea. Lots of guys lolling about on the corner without hope of work? Fire the president. Seriously, this is one half of the single most reliable electoral predictor out there.

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America’s Dirty Little Jobs Secret

The other half of the formula is a tad less intuitive, but just as important. We also fire the president if unemployment is below 4%. Because when employment demand is too high, most every competent individual (and even a fair portion of the barely competent) can command the asking price of his or her choice.

Now we are talking rampant inflation, my friend, the spinning whirlwind cycle wherein wages and prices chase each other to the moon. Goods shoot out of reach, energy costs skyrocket, corporate profits whither and red ink proliferates… and we fire the president.

Now we’ve come upon the dirty little secret about American jobs. High unemployment acts as a brake on inflation! Here we are, ginning up trillions of new dollars so as to get the economy going again, and yet the Fed seems utterly unconcerned about inflation.

Washington’s REAL plan

Over and over we hear, “We have the means to control it.” Turns out, Washington’s means of keeping inflation in single digits is simple enough: double-digit unemployment!

“But wait a minute: Why isn’t Mr. Obama worried about losing the White House?” you ask. His popularity figures are indeed plummeting madly as we speak. But he doesn’t have to stand for re-election for another three-and-a-half years.

In the meantime, he pours oil on the water in Elkhart, and is free to pour cash into upper- and middle-class pockets the best way he knows how – real estate.

Yeah, that’s right: As we speak, Washington is doing its level best to engineer a new real estate boom as fast as it possibly can.

Here Comes the Next Boom, Same as the Old Boom

View Fixed-Rate Mortgages Chart

A quick scan of the wire service reports on my desk (and several key headlines) strikes the eye. At the insistence of the Federal Reserve, mortgages remain near record-low rates. As a direct result, pending home sales are up for the fifth month in a row. Homebuilders Pulte (PHM: NYSE), DR Horton (DHI: NYSE), Centex (CTX: NYSE) and Beazer (BZH: NYSE) all report seeing daylight for the first time after the long dark night.

But even this is not enough. Washington needs more and it needs it now. Tax receipts are still in the toilet, forcing record-breaking sales of Treasury bonds to fund this incredible wave of public spending.

Most every half-honest consulting accountant has warned that these deficits are untenable. Washington needs the income from a real estate boom in the worst way.

History’s Dirty Limerick

Justice frequently mentions Sam Clemens’ aphorism on history’s tendency to repeat certain familiar cadences. Well, this Washington isn’t rhyming; it’s just repeating itself like some kind of awful stutter.

And so, we read a White House proposal to completely renovate Fannie Mae and Freddie Mac. The mortgage giants would see hundreds of billions of dollars in deadbeat loans stripped off their books and consolidated in a “Bad Bank” that would do its best to collect over the next few years. Or not – no one in Washington really cares, so long as the houses involved stay off the market.

In the meantime, Fannie and Freddie would enjoy absolutely pristine books, allowing them to start all over again the manic cycle of buying up mortgages and repackaging them into multi-tranche bonds.

Is this wise in any way, shape or form? I have my doubts.

Is it happening whether we like it or not?

You betcha!

Intelligence "chatter" reveals an impending Great Red Oil War

Unknown to the mainstream media, an epic struggle for energy dominance 
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But if you act before September 30th, you could bank "war profits" of as much as 18,343% --no matter who wins.

Hold Your Nose, and Dive on In

With that in mind, I strongly suggest you pick up a few shares of Standard and Poors’ Home Builders ETF (XHB:NYSE). My charts are showing an inverse Head-and-Shoulders breakout with a target in the vicinity of $21, a 34% increase over current prices. And once this run is underway, spikes as high as $32 and gains of 104% are certainly not out of the question.

And, so long as we are talking about the return of leverage to the investor’s lexicon, I suppose I ought to mention that share-price rises like that would drive a well-selected XHB call option to gains of around 539%.

Does this make me a collaborationist? Perhaps. But I’ll just bet that some of the revolutionary types around here will feel free to tap me for beer and ammo cash.

Sincerely yours,


Refer to a friend

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