Saturday, May 17, 2008

Notes on the Week

A few thoughts that have been rumbling through my mind this week:

  • Whatever your opinion on same-sex marriage, the California Supreme Court's decision to overturn the state's ban on it has to be troubling to you if you are at all concerned about democracy and representative government. Sixty-one percent of Californians voted to implement the ban in 2000 - a landslide, in other words. The people had spoken, emphatically. Along comes the Supreme Court on Thursday and, by a majority of one, undoes the will of the people in a single stroke. Which would be fine if the issue was within their jurisdiction. But, of course, there is nothing whatsoever in the California state constitution dealing with marriage in any form; nor were there precedent rulings indicating a right for same-sex couples to marry. In other words, the California Supreme Court had no jurisdiction here. So they did what courts do these days - the made up a right, the majority performing what the dissenting justices called 'an exercise in legal jujitsu' in order to arrive at their decision. This decision, of course, recalls the Roe v. Wade decision on abortion, whereby the courts step in and hijack normal constitutional processes. Prior to that 1973 decision, 50 states were coming up with their own laws regarding abortion; some were restrictive, many others less so. But it was being done through the proper channels, the state legislatures. Roe v. Wade invalidated them all, dreaming up a heretofore unknown 'right to privacy' which encompassed abortion, a right which the justices had discerned, in their sacred wisdom, among 'penumbras, and emanations.' Roe v. Wade radicalized the whole abortion debate, and it continues to this day. The vast majority of Americans are perfectly willing to accept and obey laws passed by their elected representatives, even if they disagree with them. They are less willing to do so when courts set themselves up as mini-legislatures and override their decisions. Over the past decade, the states have been busily coming up with their own arrangements for same-sex partnerships, but the courts have other ideas. The California Supreme Court, with this unconstitutional decision, has guaranteed the same-sex marriage debate will be further radicalized in a fashion similar to Roe v. Wade. If you're of the opinion that same-sex marriage should be legal and you don't really care by which method it was made so, I'll issue my normal warning: just wait until a new issue arrives and you're on the other side. This decision has shined a spotlight onto what is one of this nation's most serious problems - runaway courts. They are a threat to the American republic.

  • The November election will be the first in my life in which I am older than the average voter, and it shows. I was young but I remember the 1970s: I remember the double-digit inflation rates; the double-digit interest rates; the oil shocks; the gas lines; the Soviet ascendancy; the Jimmy Carter malaise. And therein lies the problem; most don't remember. Most Americans, especially the young ones to whom the 1970s are just a page in a history book, are economically ignorant. When presidential candidates talk to them about 'fairness', it all sounds good to them. By fairness, these candidates mean higher marginal tax rates at the upper income levels; higher capital gains tax rates; windfall profit taxes on evil oil companies; and other such productivity-killing measures. These are all 1970s ideas, all tried and failed, miserably. Now, I don't think Obama can be elected. The West Virginia, Ohio, Pennsylvania, Indiana, and Michigan primary results - all the states Obama must win if he is to be elected - show that he has huge problems with blue-collar white voters, the very type of voter who might find the war-hero, straight-talking McCain palatable. But then I didn't think Boss Clinton could be elected in 1992 either. So, a successful political prognosticator I'm not. The markets are clearly worried about Obama and the 'fairness' measures he is running on. They also know that the Bush tax cuts expire in a few years if action is not taken, and a Democratic-controlled Congress matched with a Democratic president is unlikely to take that action. If we get close to election day and it appears that Obama could win, I am seriously thinking about cashing in - selling all my investments and getting 100% into cash. If Obama is elected the markets will certainly take a hit. I'm positioning myself to get out quickly if need be.

  • The energy and commodity booms continue, even in the face of a U.S. slowdown. It makes one wonder whether the old economic measures are still valid. Previously during a slowdown (though we are NOT in recession, no matter how much the media would like the public to believe we are) one would expect energy and commodities to take the hit along with the consumer: with less consumer demand you'd get less demand for oil, gas, steel, materials, etc. But we're in a global expansion now and it seems the fortunes of the American consumer no longer dictate the fortunes of the commodities markets. China and other Asian countries continue expanding impressively; so too India; Brazil is booming; Mexico and other Latin American countries are also on the upswing. So the markets, and especially certain segments of the markets, can continue to rise while the American economy struggles. Along with the need for energy and materials, these countries are also eating better, hence the boom in agriculture: if you invested in corn, wheat, rice, and other grains a few years ago you'd be pretty near rich right now. The stocks of the fertilizer, equipment, and seed companies - Potash, Monsanto, Mosaic, Deere, for instance, have all gone parabolic. So too the companies that ship these goods to market, the railroads and dry shipping companies. Because these expanding economies need infrastructure, steel is also booming, and as a result so too is coal - you need coal to produce coke which is needed to produce steel. There are also new clean coal technologies being rolled out that make coal attractive as an investment. So a good investment strategy continues to be to buy the companies dealing with energy and commodities. I wouldn't chase these stocks though; they're pretty risky at this point. All the good news is priced in. Any bad news and they could tank, and fast. I'd wait for pullbacks on stocks I don't own; I'll ride the ones I do, watching carefully for any change in conditions, or sentiment.

  • Speaking of energy, how about Bush going hat-in-hand to the Saudis this week, begging them to increase oil production? Their response was basically to tell him to take a hike; they'll do what's good for them, thank you. What an unseemly episode. May I make a suggestion, Mr. President? Rather than prostrate yourself at the feet of the Arab princes, how about this: the next time some idiot politician like Barack Obama calls for 'energy independence', schedule a prime-time speech. In this speech, tell the American public we will never achieve 'energy independence' - that is a pipe dream. The most we can do is to become less dependent on foreign sources of energy, and the only way to do that is to increase our own energy output. That means we must drill in Anwar; we must drill off-shore; we must exploit the oil sands territory; we must build nuclear plants; we must increase coal and natural gas production. Solar and wind can be in there too but we shouldn't subsidize any of these endeavors; we should simply take the handcuffs off and let the markets work. Let the most efficient man win. The environmentalists will scream but I think (I hope) that tide is beginning to turn. With energy prices at current levels, the average Joe is beginning to understand that these anti-global warming initiatives are counter-productive; they contribute to rising oil prices and a slowing economy. They are all for a clean environment but when it comes at the expense of real people, their jobs, and their wallets, they begin to think twice. Add to that that most of the measures being proposed, including John McCain's outrageous cap-and-trade program, while killing the economy, will do little to reduce global warming. Add to that that the latest data show that the earth has actually been cooling over the past decade, not warming, and that sunspot activity has actually been decreasing for quite a number of years, and the whole global warming argument begins to crumble. Bush should put all this into a speech and begin to educate and illuminate to the American people the issues and alternatives. Are you listening, Mr. President? Mr. President? Hello......

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