NEGATIVE CORRELATION

12 comments

Posted on 2nd September 2013 by Administrator in Economy |Politics |Social Issues

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Oops!!!

How inconvenient for the liberal control freak douchebags.

If they are too dimwitted to understand the meaning of negative correlation, I’ll explain it for them. The more legally owned guns there are in a community, the LESS violent crime. Meanwhile, in the liberal shithole paradises of Chicago, Philly, Camden, New Orleans, Baltimore…… the strict gun laws have done their job.


… and finds… 

Indeed, “data on fire‐arms ownership by constabulary area in England,” like data from the United States, show “a negative correlation,”10 that is, “where firearms are most dense violent crime rates are lowest, and where guns are least dense violent crime rates are highest.”11 Many different data sets from various kinds of sources are summarized as follows by the leading text:

[T]here is no consistent significant positive association between gun ownership levels and violence rates: across (1) time within the United States, (2) U.S. cities, (3) counties within Illinois, (4) country‐sized areas like England, U.S. states, (5) regions of the United States, (6) nations, or (7) population subgroups . . . .12

Oh darn.

It’s not a very difficult read and, IMHO, well worth your time.

If you care about objectivity, that is.

Now let’s add in another ugly little fact — we’re now talking about Obama intending to initiate violence against a nation which may, if undertaken, in fact be aiding terrorist-affiliated rebels.

It’s time to ask these would-be-Mussolinis an uncomfortable question:

Since we have the facts cited in the above paper — that there is a negative correlation between civilian firearms ownership and crime — exactly what is the real reason these very same politicians want to restrict civilian firearms ownership?

A Slice Of Life From Chester, PA

11 comments

Posted on 2nd August 2013 by Stucky in Economy

We all know how bad things are in Detroit, Chicago, and other Big Shitties.

But it’s just as bad in Everytown, USA. Linh Dinh, a Vietnamese immigrant, is a pretty good observer and writer of every day life.

Chester, PA sounds like a lot of small towns in NJ.

==============================================

Chester on the Edge

by LINH DINH

Traveling by train to Philadelphia, going North, you will pass by Chester, PA, a city that has been in decline for more than half a century. Founded in 1682, the same year as Philadelphia, Chester was a major manufacturer of US Navy ships from the Civil War until World War II. It also made ammunitions and automobile parts. Despite its relative small size, with a peak population of 66,039 in 1950, Chester was an industrial powerhouse.

In 1926, Mrs. Marin Garvey won a $160 washing machine for coming up with an enduring slogan for her city, “What Chester Makes Makes Chester.” This was fashioned into a huge electric sign that impressed countless rail passengers until 1973, when it was dismantled. Who can forget the sight of Mr. D’ancona taking down the S, T, E and R? Many have sobbed to this day. Though Chester no longer produces anything, saves babies and premature corpses, the same slogan adorns bright blue banners in its mostly derelict downtown. Entire buildings are abandoned and falling apart, its windows boarded up with graying plywood or left hollow. Others have first floors occupied by gasping businesses offering cheap clothes, wigs, way too expensive sneakers or Obama posters and T-shirts. “WE WON!” “HOPE WON!” “YES WE DID!” On sidewalks, black marketeers offer incense, body oils, bead necklaces, underwear and sox. The Cambridge Restaurant has been put out of its misery, thank you, Lord, for I sure won’t miss their home fries, but Italian Brothers is still hanging on. They do make decent hoagies. It is claimed that Chester’s Catherine DiCostanza made the world’s very first in 1925, to feed a starving gambler ambling over from Palermo’s Bar down Third Street.

Lots of Italians back in the day, as well as Irish, Poles, Jews and Ukrainians. With Chester’s industries gone, they have mostly scattered. Recently, though, I walked by a downtown store front and saw all white people inside, a truly rare sight in contemporary Chester. It turned out to be an art opening, with tentative or frustrated watercolors and oils of a snowy pine tree, a pensive cat, a covered bridge or Cubistic jazz musicians… On pedestals, lumpy ceramics. A shy, charcoal nude lounged on a smudgy, charcoal sofa. A man waved at me to come in, so I did, “Hey, what a surprise to see an art opening! Is everybody here from Chester?”

“Not all of us, but we live nearby.”

A woman appeared, “Did you sign our guess book? Come, come, sign our guess book.”

As I printed my first name, though, she said, “We do have a suggested five dollar donation.”

I have attended many art openings, from Soho to art school, to suburban old ladies’ watercolor society, but I have never encountered an admission fee, and five bucks also mean two Rolling Rocks at the Gold Room, one block over. Seeing me cringing, the lady added, “It’s for the wine and cheese.”

“Forget it, forget it,” I crossed my name out, and walked out to her “No! No!” At many art openings, you do see hungry art students, an odd bag lady or a clearly homeless guy stuffing their faces with cheddar and crackers while draining Yellow Tail Shiraz or Duck Pond Chardonnay, so the five buck fee may be a measure to prevent undesirables from crashing this schlock fest.

What made that art bad wasn’t so much execution but orientation. Rootless, it was indifferent to its surroundings, that is, it didn’t pay attention to Chester, didn’t care at all for it. No art is worthless if it reflects in any way its place of origin, so no painting, photo, poem or short story about Chester can be bad if it reveals any aspect of this place, but to do this, one must first pay close attention. Folk art is never without charm and interest, but much of cosmopolitan art is mediocre since it is removed, in time and distance, from its original moment of inspiration. This cosmopolitan art may be partly salvaged by its backwoods dilution, distortion or bastardization, however, but the pleasure is likely mild, the humor unintentional. Seeing a show of Canadian Impressionist paintings in Ottawa, I remember thinking, Why? And would you care for Thai Suprematism, Ugandan Constructivism or Fijian Neo Geo? With globalism unraveling, we can return to the local in each sphere of our lives, and that means a revival of regionalism in all the arts. We’ve been jerked about by the distant media long enough, teased and dictated by distant cultural centers. It’s time we observe and listen to what’s right in front of us.

It was a Saturday evening, but Chester’s main drag, Avenue of the States, was mostly empty. Even fifteen years ago, there would have been many shoppers, or loiterers, at least. Now, there was hardly a parked car to break in. On both sides of the street for an entire block, there was only one business open, Huddle Barbershop. On this scorching night, two box fans were kept on high. The owner/barber would work until 10PM, at least. In his window, a flyer with “Get To Know Your Candidates. ‘Let’s Get Back To Progress,’” with the faces of two smiling, suited yet unnamed individuals, one man, one woman, with the man much taller.

Wanting to meet, or at least see some people, I decided to go to the Gold Room. On the way, I walked past the old Excelsior Saving Fund, with its sign reduced to “UND.” The Gold Room is large and cool, with three pool tables and five televisions. Once settled at the bar, one will notice two shelf altars featuring incense, the Vajaradhara and a beer-bellied Chinese God of Wealth, so is the owner Asian? No, just a black Buddhist. I came in as the daytime bartender was finishing her shift. Walking out, a middle-aged white guy hollered, “Your husband must be a wonderful man, because you are a wonderful lady!” She smiled, naturally. Minutes later, she said to some young guy, “Ah, you look wonderliscious today! That’s a new word. I’m gonna patent it!” Then she complimented some giggling and boobiliscious apparition, hovering at the far end of the bar, backlit by a Southern Comfort light from heaven or hell, “You’re so sexy. I can just hug you!” A man in his late twenties then chimed in with a false note, I think, “I’d love to spend money on both of y’all.”

This verbal orgy finally stopped with the new bartender, but she also gushed in her own way, with a low cut dress that flaunted a glittering, burning skull on her buttocks, and “MISFIT” in bold black on her back. What a pun, eh, with a skull as pelvic girdle, or dead head as live bottom, with the anus where mouth should be? “From my booty, death will rise,” she emitted wordlessly. “You may think you’re staring at my ass, but you’re just seeing your own cracked skull, sucka. I mean, sugar.”

Thirty-years-old, Misfit was born in Chester, but left at 17 to work in a home for retarded people in Williamsport, in the idyllic Poconos. It didn’t pay very much, but it got her out of Chester. After nine years doing that, however, she took a $950 course to become an emergency medical technician, that is, an ambulance attendant, for which she was paid less than $2,000 a month, take home, then she was let go. She tried hard, but couldn’t land a similar job anywhere else, so she settled for this bartending gig. Misfit admitted that business was also down at the Gold Room, and no one she knew was doing well, “But we’re in a recovery nationally, right?”

“No,” I said, “and it’s only going to get worse.”
“You think so?”
“Yes, I travel all over the country, and it’s the same shit all over, and everyone I talk to says they’re not doing well. Well, eight or nine out of ten, anyway. Almost no one is doing well.”
“So what should we do?”
“You just have to cover your own ass, that’s all.”

I should have said, “You just have to cover your own skull, that’s all,” or better yet, “We just have to cover each other’s flaming skull, that’s all.” As the only bar in downtown Chester, the Gold Room should survive for a while, so Misfit’s job is probably safe, but like many people these days, she must be willing to switch jobs at a moment’s notice, do something entirely different to survive. The word career has become nearly meaningless. We have all become career improvisers.

At someone else’s mercy, we can fit in momentarily, but from their careful, cost-cutting calculation or sudden, inexplicable whim, we become misfits again, for that is what we are. We’re not misfits as fashion statement, but essentially. Try as we might, we cannot adjust ourselves dexterously enough to our rapidly shifting surroundings, of which we have no role in shaping. In Flannery O’Connor’s “A Good Man is Hard to Find,” there’s a misfit who says, “I was a gospel singer for a while […] I been most everything. Been in the arm service, both land and sea, at home and abroad, been twict married, been an undertaker, been with the railroads, plowed Mother Earth, been in a tornado, seen a man burnt alive oncet.” He has also killed, robbed and been jailed, and though everything has happened to him, nothing matters, because nothing makes sense. Sounds familiar?

You think you’re a housepainter? Wrong! A secretary? Wrong! A nurse? Wrong! A professor? Wrong! A pipe fitter? Wrong! A dock worker? Wrong! Though nothing adds up, one still has to eat daily, so one solution is to become a mass murderer, if only in an auxiliary capacity. At Concord and 7th, I saw a flyer in a torn plastic sleeve, stapled to a light pole:

US MARINES

WE HAVE EDUCATION OPPORTUNITIES
NON COMBAT JOBS AVAILABLE
FULL TIME (ACTIVE DUTY) OR PART TIME (RESERVE PROGRAM)
FULL BENEFITS TO START/ FAMILY COVERAGE
DO THINGS THAT OTHERS ONLY DREAM ABOUT DOING

BETTER YOUR FUTURE, CALL OR TEXT SERGEANT WILLIAMS

To kill or be killed is here presented as improving oneself and one’s family, as sheer survival, for in trading in one’s freedom, humanity and conscience, one will get adequate health care and nutrition, maybe even a home in a safe environment. To attain these basics, however, one must first become a berserker. Kill! Kill! Kill! I In Harrisburg, I had encountered a National Guard poster:

There are all kinds of moments you’ll experience where you serve the people of your community in the National Guard. If you’ve got it inside you, this is your time to act.

The accompanying image showed soldiers standing outside a suburban home during some kind of rescue mission. This is very reassuring, for they are not threatened in any way, nor are they menacing anybody. They’re not kicking down some foreigner’s door and terrorizing his family, and most importantly, they’re not getting their nuts blown off seven or eight time zones away. As a National Guardsman, you’ll only be rescuing your neighbor’s siamese from some midget tree, this poster was implying, and you’ll be home in time to watch your dreadful Phillies.

I wanted to get away from downtown Chester, drink in a neighborhood dive and hear, or overhear, what those folks have to say, so I decided to go to the Love People Lounge on Highland Avenue. I had no idea what that neighborhood was like, but I had seen this bar from the train, many times, and had always wanted to walk in because of its irresistible name. When I got there, though, I found out that it had been closed, with even its sign removed. Oh well, I thought, let’s find another place to drink, so I started walking.

In many distressed cities, as in Detroit, Gary, East St. Louis or Camden, to walk into the unknown is to be a reconnaissance scout or a suicide, not so much a tourist, and Chester has a violent crime rate more than four times the national average, and it was sunny that day, meaning perfect for a mugging, but also ideal for a pleasant walk, and I was getting very thirsty for a Colt 45 or a Yuengling, so I kept walking. In truth, it wasn’t half bad. I passed Give Me Suga, an inviting Caribbean joint serving jerk chicken and oxtail. I saw people sitting on their porches or steps, and two pudgy, middle aged men, one black, one white, sprawled on folding lawn chairs beneath a bouffant tree. Every so often I’d see a desperate sign offering a home for less than $20,000, cash, and presently I came to another house that looked abandoned, with no glass in its windows and its door boarded up, but there was a newish Direct TV dish attached to its wall. Is it possible that someone was watching a movie on demand, say, Titanic or The 40 Year Old Virgin, while lying on a bare mattress, with a half finished bag of Cheetos next to him? In winter, snow drifts into the gaping windows as he cheers our hapless Flyers. Since it is dark, and nobody’s outside, no one who’s up to any good anyway, he can comfortably piss from the second floor, his dick en plein air, as they say. With tall grass and weeds besieging, and no air conditioning or heat, this home is a rough-and-tumble, back to nature dwelling, a cabin in the woods, except no bears will attack you here, only men down to their last quarter or fix.

There were no lit beer signs at the front, so Sporty’s West End Cocktail Lounge didn’t even appear open, but I could hear the hum of the air conditioning, so I opened the door and walked in. Sporty and his bartender seemed a bit startled to see me, but everything was cool as I sat down and ordered a bottle. It was just after 1PM, and I was the only customer. For the next two hours, the only other patrons only sneaked in to buy a six-pack or can to go. As she left, a woman in her late 40’s shouted to Sporty, “Make some money now!”

“I’m with you on that!” Sporty then returned to his video game, with its thin, whistle like gun shots constantly discharging. Video blood splattered as he charged through his enemy, shedding corpses by the wayside. There was a pool table and five televisions, all left on, with the biggest one showing an episode of “Have Gun—Will Travel.” A sneaky Chinaman was caught reading other people’s mail, then later, some mustachioed crank snarled, “Who cares what any woman wants.” During a firefight, a bullet merely grazed a man’s elbow, causing him to rub it.

In most working class bars at this hour, you’d find old men, at least, and perhaps contractors who have finished their work early, but here, like I said, I was the only drinker. Dangling from the drop ceiling were stars, astroids and a round cornered piece of cardboard urging me to “CELEBRATE.” I noticed the young bartender had on a snug tank top, and a pair of black and white shorts, showing some sort of African design. There were signs all over the walls:

FOUR THINGS YOU CAN NOT RECOVER
1- The stone after the throw….
2- The word after it’s said….
3- The occasion after it’s missed….
4- The Time after it’s passed….

A BIG LATINO NITE
Featuring A Ethnic Diversity
For A Rollicking Good Time

A ATLANTIC CITY BUS TRIP $25

NO LOITERING PERMITTED
In This Establishment
If You Don’t Have A Drink
Or If You’re Not In Line
To Play Pool.

FEDERAL PRISON
CONVICTED FELONS & DRUG DEALERS BEWARE
1 GUN = 5, 10, 15 YEARS OR MORE
NO PAROLE
OPERATION CEASE FIRE
REPORT ILLEGAL GUNS 1-800-ATF-GUNS

On the last was an illustration of a prison cell, with the silhouette of a man sitting on a cot, his head down. Across from him, an open toilet and toilet paper. A large handgun hovered outside the prison bars.

There was also a group portrait of movie gangsters, with Al Pacino’s Scarface in the middle, hoisting his badass M-16A1, then, high up on the wall, an image of Martin Luther King and Obama, their heads merging into one another, with “I HAVE A DREAM” on top, and “I AM THE DREAM” on the bottom. In almost every black bar, you’ll find images of Obama. At Scotty’s, near my South Philly apartment, there’s an Obama shrine complete with red tinsel, foil flags and a string of tiny lights resembling condomed pricks or aerodynamic milk bottles, all surrounding a sacred likeness of our Chief War Lord and Patron Saint of All Banksters.

Hardly loquacious, Sporty finally grunted that the bar was empty because it was the end of the month, “Come back in a couple days, there’ll be people here.” Running out of beer money is hardly the poor’s biggest concern these days, for towards the 28th and 29th, the fridge may have long been empty, not to mention that pile of ignored bills, some still in their envelopes, unopened. Soon, the cable may be shut down, then gas, electricity and water, in that order. Chester is already half shut down.

Martin Luther King spent three years in Chester, and graduated from Crozer Theological Seminary in 1951, and outside the Crozer Library, there’s a large bronze bust of King. On another visit to the Gold Room, I met a woman who said she was born on King’s birthday, “And that’s very special to my family, because King was such a special man, you know.”

“I’d say he’s more important than any American in the last 50 years.”

“I’m very glad you think so,” she smiled.

I could feel myself getting a bit worked up, “Obama ain’t shit compared to King! King threatened them, and that’s why they had to kill him. King wanted to change this society. Obama doesn’t want to change shit!” I stared hard into her eyes. “If they’re propping up Obama now, that can only mean Obama is serving them! He serves them!”

“I agree with you,” she said, “I’ve always felt the same way. I’ve always known they had to kill him. Oh Lord, I think I’m going to cry. I’m going to cry!”

http://www.counterpunch.org/2013/08/02/on-the-edge-chester/

POVERTY

3 comments

Posted on 1st August 2013 by Roy in Economy |Politics |Social Issues

From my 79 year old bullion dealer at www.coloradogold.com. He had a string of ice cream parlors and a string of movie theaters in Filthydelphia as he calls it. He sold out for reasons Jim has enumerated.

Poverty

July 31, 2013

The various “wars on poverty,” which have gone by various names, but started with FDR, and have continued ever since, is a disgrace, and blight on our once free nation. John 12:8 has Jesus saying that “The poor will always be with you,” and that is absolutely true. Throughout history, and not just ours, but every nation in history, there have always been the poor. A famous Jewish proverb states that, ‘poverty is half laziness.’ It is impossible to eliminate poverty, because every human that ever lived, has different characteristics, brain power, social levels, birth situations, heredity, race, and all live under various governments, and historical situations. POVERTY CANNOT BE ELIMINATED! FDR, in his second inaugural address said, “I see one-third of nation ill-housed, ill-clad, ill-nourished.” That was over 75 years ago, and in spite of hundreds of billions spent, it’s still that way. Welfare and government handouts, has destroyed the moral fabric of America, and bankrupted us. Forty four years ago, Kentucky journalist John Pearce wrote, ” I don’t think it ever occurred to any of us, that the New Deal legacy would be a welfare system that today supports millions who have neither prospect nor intention of earning their own living.”

All the wars on poverty are merely handouts by governments to garner votes for the party who gives largess, and it’s usually Democrats, but not always. All the government welfare ‘programs,’ (is there a more horrid word than ‘programs?’), are merely taking from the haves, without their permission, and bestowing unearned largess on those who are deemed to be poor, by ridiculous standards. The more money they print, the less it is worth, thanks to deficit spending, wars, and what seems to be hundreds or thousands of ‘programs,’ which steal from us all, by reducing the value of our dollars. When government gives to some, it has to take away from others. As a current bumper strip reads, “Fairness isn’t giving my money to lazy people.” Or: “Don’t spread my wealth; spread my work ethic.” Or: “Government doesn’t work. Please return my taxes.” Or: “Republicans work hard so you don’t have to.” Or: “I’m Republican, because we can’t all be on welfare.”

Wars on poverty, merely ruin the recipients, be it 2 years of unemployment handouts, public housing, food stamps, Medicare Medicaid, or hundreds of handouts too numerous to even count. Statistics show that unemployed people begin to look for work, when the two years of benefits are up. They’d look immediately, if they lost their jobs and had no handouts. Why look for work, if you get more money by not working, than if you work? Why work to feed yourself, if government gives you food stamps? Why work for housing, if you get free housing at public housing projects? Why worry about feeding your kids, if you can make a career out of having many illegitimate kids, and getting a handout for each one? There are thousands of usually fat, worthless, lazy, female, public housing residents, who have made a career of raising a dozen or more fatherless kids, and being supported by government. The kids will turn out as their mother turned out, and that is criminal, lazy, gang members, usually.

Temple University in Philadelphia is in a bad neighborhood, surrounded by public housing. Attendance is withering, because of the rapes, robberies, muggings and violence committed by the public housing residents in the neighborhood. When Temple was founded in 1884 by Russell Conwell, the neighborhood was fine. Conwell was a pastor whose best known speech and pamphlet was titled “Acres of Diamonds.” Temple has over 600 security cameras, and over 130 full time campus police who are as fully trained as Philadelphia police, but the violence continues. America’s first public housing, (1937, under FDR), was not far from Temple, and is still there, although it has been demolished and rebuilt many times, due to violence of its residents. When I lived in Philly, I had a chain of ten ice cream parlors. Store # 7 was in a white neighborhood, but a high rise public housing project was a few blocks up Ridge Ave, and the violence created by those scum, was unbelievable.

Yeah, I know, “You’re old, and this is 2013. You’ve got to get rid of all those ancient prejudices.” Oh yeah? Sorry, I am a lover of America before FDR, before welfare, public housing, gangs, heinous crime, and millions of worthless vagrants destroying the major cities. My ancient prejudices remember American history, when poverty ridden Jews occupied the lower east side of New York. They worked for slave wages, raised their kids to obey, work, and be responsible. They kept themselves clean, and their hovels clean also. They worked, slaved, and made it. San Levensen (Google the name) was a wonderful comedian, who was born in 1911, in abject poverty in the lower east side, and one of his best quotes, is, “It was on my fifth birthday, that my poppa put his hand on my shoulder and said, “Remember my son, if you ever need a helping hand, you’ll find one at the end of your arm.” Like that? Here’s another Levensen quote: “Any kid who has two parents who are interested in him, and has a houseful of books, isn’t poor.” Or another, which also applies to those who are in poverty: “Don’t watch the clock. Do what it does, keep going.” How about Ben Franklin, who once wrote in Poor Richard’s Almanac, “Laziness travels so slowly, that poverty soon overtakes him.”

I am certainly not against volunteerism, meaning voluntarily helping those who need it, if that person deserves it. I won’t help someone I don’t know. Why should I? I know plenty of people who need help, and I help them. Taxing everyone, and giving it to some bureaucrat who decides who gets my money, is utterly WRONG. It creates ever more poverty and laziness. If I were President, I’d eliminate all handouts on a ten year, gradual basis. Ten percent a year in all fields. Tear down ten percent of public housing each year, and cut out ten percent of food stamps and other handouts each year, and no new entrants. At the end of ten years, the crime rate would be cut ten percent a year, deficits by ten percent a year (if we were neutral anyway), and by the end of the ten year period, we might be a wonderful nation once again.

P.S. Like funny bumper strips? Try these, which were forwarded to me by a friend. “How long before you will admit that Obama was a mistake?” Or: “Obama and God have only one thing in common: No birth certificate. The difference is, God doesn’t think he’s Obama!”

PHILLY LAP DANCE TAX – IT’S FOR THE CHILDREN

24 comments

Posted on 22nd July 2013 by Administrator in Economy |Politics |Social Issues

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Now he’ll need $21.

If Detroit only had a brilliant mayor like Michael Nutter, they certainly wouldn’t be bankrupt. When the going gets rough and you’ve run out of money, create a new tax out of thin air. Nutter has already jacked up taxes on cigarettes and soda, which impact the poor the most. Now he wants to tax you for having a trollop sit on your lap. I bet Nutter will have 10,000 government union drones applying for the 50 lap dance enforcement specialist jobs that will be created. Maybe they can add a blowjob tax (an extra 5% if they swallow), a handjob tax, an anal tax, and a premature ejaculation tax. Nutter is cumming for your money. If you need any more proof of a city in a downward spiral, this is it. Do it for the chilrun.

This guy should get a tax refund.

Lap dance in West Philly

Lap dances to be taxed to help Philadelphia school  revenues

Date 

Romy Varghese

A man in a strip club

A man in a strip club Photo: Michael Rayner

Philadelphia: It’s one thing to watch a scantily clad woman  twirl around poles. It’s another, says Philadelphia, to pay her to undulate over  your lap.

That’s the stance being taken with at least two strip clubs, Club Risque and  Cheerleaders: The city, which taxes the establishments’ entrance fees, is trying  to collect levies on lap dances as well.

It’s unclear how much the city would reap from collecting lap-dance levies  from every club, of which there are dozens.

The city is pressing its case as it hires a revenue collection officer and  goes after delinquent property tax, which is fifth highest among US cities  surveyed last month by Pew Charitable Trusts. Mayor Michael Nutter has pledged  an extra $US28 million from improved collections to the school district, which  has a $US304 million deficit.

“It’s smart business” to apply the tax code to erotic dancing, said Michael  Gillen, director of the tax accounting group at Duane Morris LLP in  Philadelphia. “They have to be foolish not to expand their reach.”

New York and other cities also are trying to collect more revenue as they  recover from the worst recession since the Great Depression and they are looking  in innovative places.

The adult-entertainment industry has waged and lost several taxation battles.  New York in October rejected a bid by the strip club Nite Moves to get a break  on the grounds that it provided musical art performances. The Texas Supreme  Court three years ago upheld a per-customer tax in nude businesses that serve  alcohol.

At issue in Philadelphia is a 5 percent tax that applies to any amusement in  the city, including concerts, movies and strip- club entry fees. The city  collected $US21.9 million in those taxes in the fiscal year that ended in July  2012, documents show.

Now the city says lap dances are distinct amusements and should be taxed,  according to George Bochetto, a Philadelphia lawyer challenging the city’s tax  assessment on behalf of the two clubs.

Philadelphia sent a $US486,483 bill covering lap dances performed at  Cheerleaders and charged Club Risque $US320,540, according to documents provided  by Mr Bochetto. The city is seeking principal, interest and penalties over three  years.

It’s unclear how much the city would reap from collecting lap-dance levies  from every club, of which there are dozens.

At Club Risque, which is advertising a Christmas in July party next week  featuring “naughty elves,” lap dances start at $US20 and can cost $US200 in a  semi-private area. The club already pays the amusement tax on entry fees as high  as $US15, depending on the day and time, according to the documents.

Mr Bochetto says the city’s approach is unfair, arguing that a personal  performance doesn’t constitute a separate amusement.

Mr Bochetto said he will press his clients’ appeal in front of a city tax  board next week and said he’ll go to court if needed. In papers filed with the  city, he said dancers pay their own taxes and provide their own costumes and  props. In exchange for security, the performers give the businesses a percentage  of their earnings at the end of each shift.

“The city started saying, ‘OK, we need more money, and here, maybe, is a way  we can scare up some more money without having to raise anybody’s taxes,’ ” Mr  Bochetto said.

Mark McDonald, a spokesman for Mr Nutter, declined to comment on how many  strip clubs the city is trying to tax for lap dances or on the bills for  Cheerleaders and Club Risque.

The city and school district are owed $US515.4 million in delinquent taxes  and penalties, according to a report last month from the Pew Charitable Trusts,  a Philadelphia-based research and public policy group. Pew surveyed the nation’s  most populous metropolitan areas and six others that, like Philadelphia, have  poverty rates of more than 25 percent.

Outside, John Adams, 33, of Philadelphia, a former manager at another strip  club in the city, said applying the fees is a “horrible” idea.

“It’s going to be impossible to regulate,” Mr Adams said, adding that prices  can vary widely. “Sometimes it’s negotiated. Sometimes a woman just sits on your  lap.”

 

STILL MISSING YOU

10 comments

Posted on 16th June 2013 by Administrator in Economy |Politics |Social Issues

My Dad passed away two and a half years ago. I miss him. I hope to be reunited with him someday. Here is the article I wrote as a tribute to his life.

UNTIL WE MEET AGAIN

 

William & Margaret Quinn emigrated from Ireland in the early part of the 20th Century. They were both from the same County in Ireland, but did not meet until they both arrived in America and settled into South Philadelphia. I know very little about these early years. Quinns are not a talkative bunch. The one story that stuck with me was about my grandfather’s service in World War I. I was told that he was in the cavalry and had two horses shot out from under him during the Battle of Belleau Wood. That story spurred my love of history.

I do know that William and Margaret had three sons and two daughters. One of the sons was named John Francis. He was born on February 25, 1925. They raised their children in a small row house on 2nd Street in South Philly. They got through the Great Depression. William worked for Atlantic Refining Company in South Phila. John was an athletic boy. He was 5-11 and 180 pounds. He played Semi-Pro football in his youth. The day he turned 18 in 1943, he rushed down to the enlistment office to fight for his country. Luckily for me and the rest of my siblings he was turned down because of his very poor eyesight, a gift he passed down to all of us. His nickname among his buddies was “The General”. We have no idea why. He never told us.

I assume that his old man pulled some strings to get him hired by Atlantic Refining in 1945. His brother Billy also got a job at Atlantic. His entire working life was spent working for Atlantic, retiring in 1985 at the age of 59. Driving an 18 wheel gas truck for decades will wear a strong man out. He would go to work at 5:30 every day and put in a 10 hour shift. He would have his 40 hours in by Thursday. We would wait for the phone to ring on Thursday night asking him to work on Friday. He always said yes. He had friends killed on the job. He had friends badly injured. Working with gasoline, climbing ladders, lugging heavy hoses, and driving an 18 wheel bomb would make anyone a little nervous. One spark or even static electricity could end in disaster. Somehow he managed to do this dangerous job for 40 years without incident. He had a perfect record for safety. He was proud of that. After 40 years, they gave him a gold watch. Later in his life, he gave that watch to me.

Those are the facts. But, that isn’t what defined my Dad. He was a man of few words and didn’t talk much about his youth or his adventures during his 20s. He met my mother in the early 1950s. Their first date was seeing Tony Bennett at the Bolero in Wildwood, NJ. This began a lifelong love affair with Wildwood. I took my mom to the Bolero a few months ago for dinner. They married in 1955 and had my brother Jack shortly thereafter while living in a small apartment in South Philly. They realized the American dream in 1957 when they bought a brand new 900 square foot 3 bedroom, 1 bath row home for $10,000 in Collingdale, the new suburb 10 miles outside of Philadelphia. They paid off their 30 year mortgage in 1987 and had a party to celebrate.

They joined St. Joseph’s Parish. They never missed Sunday Mass. They always made their weekly donation. I was born in 1963 and my sister Maureen arrived in 1967. There were miscarriages between my brother and myself, but they were not spoken about. Irish Catholic families are good at not speaking about certain things. We are also good at holding grudges, drinking and laughing when we should cry. My recollections of my childhood are all positive. My Dad went to work. My mom stayed home and raised us. He would come home from work and sit in his chair to read the Evening Bulletin. My mom would bring him a beer. We’d eat dinner as a family. He’d have another beer and usually drift off while reading the paper. One of our dogs (Ginger, Snoopy, or Boots) would always be next to him. We joked that he liked his dogs more than us. They never talked back.

We were not coddled. I rode my bike to school. The kids in the neighborhood organized our own fun. There were baseball fields and basketball courts within walking distance. We played hockey in the middle of the street. We weren’t shuttled around to activities because we only had one car.  Somehow, on the salary of one blue collar parent, they put us through 12 years of Catholic school and sent us to college at Villanova, Drexel and Scranton. We learned to be self-sufficient. My parents were there to help, but it was up to us to succeed or fail. I learned my work ethic from my Dad. I don’t remember a lot of specifics from my early childhood, but I do remember my Dad pulling his Mack Truck up in front of our house when I was 4 years old. He had just made a delivery to an ARCO station near our house. He lifted me into the cab and took me for a ride around the block. It became a highlight of my childhood and sticks with me today.

My Dad was a child of the Depression. He was frugal and risk averse his entire life. He bought used cars during my entire youth. He bought whatever beer that was on sale (Red White & Blue, Tiger’s Head Ale, Schlitz). No foreign beers for him. He never trusted credit cards. Even ATMs were suspect in his view. The only debt he ever had was the mortgage. In his last year of work in 1985 he made $32,000, the highest earnings of his lifetime. He took a lump sum payout of $200,000 for his pension. He made it last for the next 25 years. We never lived above our means. We went to Wildwood for 2 weeks every year. My Mom and Dad’s brothers and sisters would bring their families for the same two weeks. It was a party. The kids were free to roam and the parents were free to drink and play poker.

I am who I am because of my Dad. We shared many of the same interests. He liked history, fishing, sports and funny TV shows. I had the patience to be a good fisherman and I didn’t throw up when I went on a boat, like my brother. He would take me deep sea fishing, fishing off the dock at Dad’s Place, and fishing off the beach in North Wildwood. He would take us to Franklin D Roosevelt Park in South Philly to fish for sunnies in the lakes. We would go to Phillies games on the weekend, sitting in the yellow seats up top. It was 50 cents for a kid and $2 for an adult. I inherited his hate for traffic. We always parked on the street, about a half mile from the stadium. He wanted to beat the traffic. It has been a running joke in our family that we never saw a 9th inning at a Phillies game. Dad would make us leave in the 8th to beat the traffic. I remember leaving a Monday night Eagles game and hearing the crowd cheer as we walked down the street. An Eagle had run a kickoff back 102 yards to win the game. I also remember leaving a 76ers game when they were down by 30 points. They staged one of the greatest comebacks in history to win the game. But, we didn’t get caught in the traffic.

My Dad had a dry sense of humor. He was not politically correct. He loved the sitcom All in the Family. Of course, he agreed with most of what Archie Bunker said. When we asked him how he got that scar on his knee, he said that he was stabbed by a Jap midget in WWII. He influenced my deep skepticism of most things. I would read hundreds of books about WWII, the Civil War, and other times in history. After finishing a book, I’d be bursting to tell him what I learned. I’d tell him what I learned and he’d look up from his newspaper and say, “Don’t believe everything you read.” That would make me so mad. But, he was right. The lesson was that I had to think for myself.

The last week has been emotional and difficult. One of my main tasks was to produce a slide show that we could show at the funeral luncheon to celebrate the life of my Father. We rummaged through five decades worth of pictures and picked out 60 pictures that told the story of his life. I spent hours scanning these pictures and creating a power point slide show. What I realized while performing this task was that my Dad and Mom had provided the foundation and the bridge to future generations. They gave myself and my brother and sister the opportunity to move up and have a better life than they did. They were rewarded with 8 grandchildren (Sean, Megan, Erin, Brynn, Ethan, Kevin, Jimmy, Mike), and I have to say that there is not a bad one in the bunch. My Dad came up a few months short of seeing twin great grandchildren. My parents did not live for today. They lived to help make the future better.

My brother made two comments during his Eulogy yesterday that really hit home for me. Everyone liked my Dad. He had no enemies. He smiled easily and was slow to anger. He spent the last 3 years of his life in the St. Francis Country Home. Seeing the compassion, love and care shown to my Dad and my Mom from the nurses, orderlies, and administration at St. Francis has renewed my faith in the American people. These people do not do it for the great pay or glory. They do it because they care about less fortunate human beings. As we waited out my Dad’s final hours, workers from the Home would arrive to pay their respects and give him a kiss. Some stayed for hours with us. These people loved him. They became my Mom’s best friends. I’m truly thankful that he spent his final days in this loving place.

The other thing that my brother said was that history would not remember my Dad, but everyone whose lives he touched would remember him. It is people like my Dad that made this country. They did the hard work. They lived life the right way. He wasn’t famous. He wasn’t ambitious. He was a good man – a role model for his children and grandchildren. If we had more men like John Quinn this country would be a better place. He was a generational bridge that allowed his kids and grandkids to cross over to a better future. We laughed and cried in equal doses in the last week. I loved my Dad. I’ll miss him for the rest of my life. As I was putting ties around the necks of Jimmy and Michael on the morning of the funeral, I realized they still need me. They won’t need me to put their ties on in a few years, but hopefully they will always remember the love of family they have learned from their parents and grandparents. As I type these words tears are falling on the keyboard. Goodbye Dad. I’ll see you in Heaven, if I make the list.

NEVER COUNT YOUR MONEY WHILE YOU’RE SITTIN AT THE TABLE

8 comments

Posted on 2nd June 2013 by Administrator in Economy |Politics |Social Issues

If you don’t like to read detailed analysis of why the stock market is overvalued by 80%, here is the key paragraph from Doctor Hussman:

The price/revenue ratio of the S&P 500 has reached 1.5, compared with a historical norm of just 0.8 prior to the late-1990′s bubble. The Shiller P/E (S&P 500 divided by the 10-year average of inflation-adjusted earnings) remains near 24. Importantly, despite weak earnings at various points over the past decade, the denominator of the Shiller P/E remains well within the historical growth channel that has contained Shiller earnings historically. In other words, the Shiller P/E is not being biased upward by an unusually low denominator. If anything, the ratio of “Shiller earnings” to  S&P 500 revenues is among the highest in history, so much like other price/earnings measures, even the Shiller P/E is biased downward by elevated profit margins in recent years. That said, the Shiller P/E is essentially a useful shorthand for discussion purposes, as we use numerous other measures in practice that have an equal or stronger relationship with S&P 500 total returns. I continue to view the S&P 500 as being about 80% above the level that would be associated with “fair value”, but that’s simply another way of saying that I expect annual S&P 500 total returns to average little more than 3% nominal over the coming decade. Valuations are not a timing tool, but in a mature, overbought half-cycle, where advisory bulls dramatically outpace bears, my impression is that the likelihood of a long and pleasant future for stocks is quite low, at least until much more reasonable valuations are established.

Know when to hold em and know when to fold em.

 

Following the Fed to 50% Flops

 John P. Hussman, Ph.D.      

One of the most strongly held beliefs of investors here is  the notion that it is inappropriate to “Fight the Fed” – reflecting the view  that Federal Reserve easing is sufficient to keep stocks not only elevated, but  rising. What’s baffling about this is that the last two 50% market declines –  both the 2001-2002 plunge and the 2008-2009 plunge – occurred in environments  of aggressive, persistent Federal Reserve easing.

It’s certainly true that favorable monetary conditions are  helpful for stocks, on average. But that average hides a lot of sins.

There are many ways to define monetary conditions using  policy rates, market yields, and variables such as the monetary  base or other aggregates. But given the strong relationship between monetary  base/GDP and interest rates, these measures overlap quite a bit, and the  results are quite general regardless of the precise definition. For discussion  purposes, we’ll define “favorable” monetary conditions here as: either the  Federal Funds rate, the Discount Rate, or the 3-month Treasury bill yield lower  than 6 months prior, or the last move in the Fed Funds or Discount Rate being  an easing. Historically, this captures about 52% of historical periods. During  these periods, the total return of the S&P 500 averaged 13.5% annually,  versus just 8.8% annually when monetary conditions were not favorable.

This is a worthwhile distinction, but it doesn’t partition  the data enough to separate out periods where the average return on the S&P  500 was below Treasury bills. So historically,  using this indicator alone would have suggested holding stocks regardless of monetary conditions. One might  expect to do better by taking a leveraged exposure during favorable monetary  conditions, and a muted exposure during unfavorable conditions, but this  strategy would have invited intolerable risks. Strikingly, the maximum drawdown  of the S&P 500, confined to periods of favorable monetary conditions since 1940, would have been a 55% loss. This compares with  a 33% loss during unfavorable monetary  conditions. This is worth repeating – favorable monetary conditions were  associated with far deeper drawdowns.

If this all seems preposterous and counterintuitive, consider  the last two market plunges. While investors seem to have forgotten this inconvenient  history, the 2001-2002 market plunge went hand-in-hand with continuous and  aggressive monetary easing.

Ditto for the 2008-2009 market plunge. Persistent monetary  easing did nothing to prevent a 55% collapse in the S&P 500.

From an asset allocation perspective, even simple  trend-following methods have performed far better historically than following  monetary policy. For example, since 1940, when the S&P 500 has been above  its 200-day moving average, the total return of the index has averaged 14.2%  annually, versus just 4.5% when the index has been below its 200-day average.  That separation in returns is meaningful, because the return during periods of  unfavorable trends did not exceed Treasury bill returns, so it would not have  harmed long-term performance to be out of the market during those periods (at  least, before transaction costs, taxes and slippage). The deepest loss of the  S&P 500, confined to periods of “favorable” trends and reflecting  occasional whipsaws, was -26%, versus -53% during unfavorable trends.

As I noted a few weeks ago (see Aligning Investment  Exposure with the Expected Return/Risk Profile), all of the net historical  benefit of favorable trend-following has occurred in periods where “overvalued,  overbought, overbullish” characteristics have been absent.  In the presence of this syndrome, the average  total return of the S&P 500 collapses below Treasury bill yields, on  average. The same is true, on average, when favorable monetary conditions are  coupled with overvalued, overbought, overbullish features.

Hands-down, the worst-case scenario is a market that comes  off of such overextended conditions and then breaks trend-support in the  context of an economic downturn. That’s not something we observe at present,  but it is something to keep in mind, as I doubt that we will avoid that  sequence over the completion of the current market cycle.

Part of the reason that monetary policy was so ineffective  during 2001-2002 and 2008-2009 is that these market collapses were preceded by  overvalued, overbought, overbullish euphoria, and then gave way to economic  downturns. Though monetary policy certainly fed the preceding bubbles, monetary  policy did not  prevent or halt those recessions, and those recessions  were not broadly recognized until stocks had already lost about 30% of their  value. At least in post-war data (Depression-era data is more challenging), the  proper investment approach has generally been to accept market risk in the  presence of favorable market action, particularly if monetary conditions are  supportive, to start walking when overvalued, overbought, overbullish  conditions emerge, and to run once  momentum rolls over (as it has already). There’s a grey area when such  overextended conditions are cleared, which can allow for recovery rallies if  market action is still supportive. But regardless of monetary policy, investors  should avoid risk in richly-valued environments once market action  deteriorates, and buckle up hard on  signs of economic weakness once an overvalued market loses trend support.

The following point should not be missed. I am not saying  that monetary conditions are unimportant. Indeed, provided that trend-following  conditions are favorable and overvalued, overbought, overbullish conditions are  absent, favorable monetary conditions have contributed to stronger total  returns for the S&P 500, and reduced periodic losses, in data since 1940.  Favorable monetary conditions are most useful in confirming and supporting favorable evidence on other measures. My  concern here,  however, is that investors  seem to believe that favorable monetary conditions are a veto against all other possible risks, regardless of whether those  risks are financial (e.g. overvalued, overbought, overbullish conditions) or  economic. This is dangerously incorrect.

There is no question that Fed action can affect economic outcomes when it relaxes some economic constraint that is actually binding (for example, during bank runs, when Fed-provided liquidity  is essential). But there is little evidence of any transmission mechanism whereby a greater supply of idle bank reserves promises to make a dent in the economy beyond occasional and short-lived can-kicks. There is also no question that interest rates matter, given that stocks must compete with bonds. But stocks are much longer duration securities than investors seem to appreciate, and the relationship between stock yields and interest rates is not even close to one-to-one, despite what Fed Model proponents might suggest.

Even so,  investors have come to believe that there is a direct  cause-and-effect link from monetary easing to rising security prices. The  historical evidence is much less supportive. Interestingly, if we look at  conditions that have been most generally hostile for stocks on average (S&P  500 below its 200-day moving average, or overvalued, overbought, overbullish  conditions in place), more than half of these periods were accompanied by  “favorable” monetary conditions. Stocks proceeded to underperform Treasury  bills anyway, on average, with steep interim losses.

Conversely, monetary conditions have been unfavorable in  nearly half of historical periods where trends were supportive and overvalued,  overbought, overbullish features were absent. In those periods, the average  total return of the S&P 500 was still quite strong, and returns were only  slightly lower than when monetary conditions were favorable under otherwise similar  conditions (15.6% vs. 18.9% at an annual rate), while periodic drawdowns increased  only slightly.

So again, the point is not that favorable monetary  conditions are irrelevant. The point is that they are not omnipotent – and that  the most severe market losses on record have been accompanied by aggressive easing. Without question, quantitative  easing has been very effective in suppressing spikes in risk premiums in recent  years. More recently, it has been effective in removing any perception that  stocks have risk and creating the impression that easy money is enough to  override every possible economic or financial concern. But that is where perception  has moved beyond reality. There is no evidence in the historical record for  such optimism. Indeed, even the recovery from the 2009 lows was more directly  linked to the change by the Financial Accounting Standards Board to eliminate “mark-to-market”  accounting (keeping banks from insolvency even if they were technically  insolvent) and the shift to an outright guarantee of Fannie Mae and Freddie Mac  debt by the U.S. Treasury. It is superstition to believe that monetary easing  is a panacea. Investors who recognize (actually, simply remember) this now  are likely to fare better than those who are forced to relearn it later.

Needless to say, all of this will be summarily ignored by speculators  who have been rewarded by the strategy of following the Fed in a mature,  overvalued, overbought, overbullish, unfinished half-cycle that recently hit new  highs. Advice from Kenny Rogers – you never count your money when you’re sittin’  at the table.

Economic Notes

We’re observing some very wide dispersion in regional  economic surveys in recent reports. On one hand, the Chicago Purchasing  Managers Index surged to 58.7 last month, with the important new orders  component jumping to 58.1 (a level of 50 on the PMI is neutral). This sort of  strength, if sustained over several months and joined by strength in the  Philadelphia Fed index, would  help to ease our economic concerns  here, as several months of strength on these two measures are among the more  reliable leading indicators of economic shifts.

On the other hand, in nearby Milwaukee, the PMI collapsed  from 48.4 to 40.7, while the Philadelphia Fed index itself dropped into negative  territory, falling from +1.3 to -5.2, with the new orders component  deteriorating from -1.0 to -7.9. That general weakness was much more in line  with what we’re observing from other surveys, including the Chicago Fed  National Activity Index, Empire Manufacturing, Dallas Fed, and Richmond Fed.

When we plot “outliers” (where the Chicago PMI deviates from  the average of the other surveys), against subsequent changes in the Chicago PMI, what results is a clearly downward-sloping scatter,  meaning that positive outliers, as we presently observe, are typically  corrected by subsequent disappointments in the Chicago PMI. Conversely,  however, outliers in the Chicago PMI are typically not related to subsequent positive surprises in the other indices.  Again, joint strength in the Chicago PMI  New Orders component and the Philly Fed index, sustained over a period of 3-4 months, does tend to lead broader  improvements. This is not what we observe here.

In short, the coincident and leading economic evidence is  deteriorating, not improving. Even the chart below incorporates a strong Chicago PMI  figure that appears to be a temporary outlier. Employment data is a well-known  lagging indicator, and is always somewhat “rear-view”, but it’s fair to say  that given what is now the lowest labor participation rate in 30 years, the  relatively restrained level of new claims for unemployment has been a bright spot.

It seems to be universally assumed that surprisingly strong  data on the economic and jobs front would pose the greatest risk to the market,  as it would accelerate the “taper” of quantitative easing. To the contrary, the  largest risk here would be an acceleration of disappointing economic data, as  it would further reinforce the case made by former Fed Chairman Paul Volcker  that the benefits of quantitative easing are “limited and diminishing.” Disappointments  on the economic front may be met with knee-jerk enthusiasm. But the quickest  path to an extended bear market would be a deteriorating economy, coupled with  recognition that quantitative easing has an even weaker benefit/cost tradeoff  than is already plain.

The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse. Only comments in the Fund Notes section relate specifically to the Hussman Funds and the investment positions of the Funds.

Fund Notes

Investors, like the proverbial frog, invariably wish to remain  in a boiling pot as long as possible. But as I noted a few weeks ago, very few  live frogs can be pulled from a boiling pot once a syndrome of overvalued,  overbought, overbullish market conditions is coupled with a deterioration in  the market’s momentum. When we examine the set of historical periods  where the market has been overvalued, overbought, and overbullish even to a lesser extent, very few instances have been followed by positive returns once  measures of price momentum deteriorate. This is the  situation we presently observe.

The price/revenue ratio of the S&P 500 has reached 1.5, compared with a historical norm of just 0.8 prior to the late-1990′s bubble. The Shiller P/E (S&P 500 divided by the 10-year average of inflation-adjusted earnings) remains near 24. Importantly, despite weak earnings at various points over the past decade, the denominator of the Shiller P/E remains well within the historical growth channel that has contained Shiller earnings historically. In other words, the Shiller P/E is not being biased upward by an unusually low denominator. If anything, the ratio of “Shiller earnings” to  S&P 500 revenues is among the highest in history, so much like other price/earnings measures, even the Shiller P/E is biased downward by elevated profit margins in recent years. That said, the Shiller P/E is essentially a useful shorthand for discussion purposes, as we use numerous other measures in practice that have an equal or stronger relationship with S&P 500 total returns. I continue to view the S&P 500 as being about 80% above the level that would be associated with “fair value”, but that’s simply another way of saying that I expect annual S&P 500 total returns to average little more than 3% nominal over the coming decade. Valuations are not a timing tool, but in a mature, overbought half-cycle, where advisory bulls dramatically outpace bears, my impression is that the likelihood of a long and pleasant future for stocks is quite low, at least until much more reasonable valuations are established.

Strategic Growth remains fully hedged, and the recent  decline has taken the market to or below the “staggered” strike prices that we  established at higher levels on the index put option side of our hedge, raising the value of those options toward 2% of Fund value at present. While  recent Fund returns have been primarily driven by differences in performance  between the stocks held by the Fund and the indices we use to hedge, the impact  of these index put options will likely become a source of day-to-day Fund  variability if a market decline takes them significantly in-the-money. This can  create a give-and-take profile in day-to-day returns, where a sharp market  decline may benefit those put options one day, and a market advance the next  may withdraw that benefit. My suggestion here is to take day-to-day fluctuations with  something of a grain of salt, because if this sort of give-and-take profile  emerges, it will most likely be because a market decline has taken the Fund’s put options “in-the-money,” and market action is generally validating a defensive stance. My strongest concern in early declines from overbought peaks is the tendency for selling to become indiscriminate. Our staggered strike hedge is largely insurance against that potential risk here.

Of course, we do shift our strike prices opportunistically,  and I expect to lessen or remove portions of our hedges as constructive  evidence emerges. As I’ve often noted, the most likely opportunity to accept a  greater exposure to market fluctuations would be a moderate retreat in  valuations coupled with a firming of market internals, and the absence of an overvalued, overbought,  overbullish syndrome of conditions.  I  have little doubt that we will observe such combinations of evidence during the  completion of the present market cycle, not to mention future ones.

Meanwhile, Strategic International remains fully  hedged, and Strategic Dividend Value remains hedged at about 50% of the value  of its stock holdings. In Strategic Total Return, we boosted our duration  slightly on the recent spike in Treasury yields, bringing the Fund’s duration to  about 3.5 (meaning that a 100 basis point move in interest rates would be  expected to impact Fund value by about 3.5% on the basis of bond price  fluctuations. Conversely, we are observing a growing tendency toward risk  aversion from a variety of sectors such as corporate debt, and the combination  of higher Treasury yields and lower inflation pressures tends not to be as  supportive as we would like for precious metals shares, despite what we see as  undervaluation. Balancing these considerations, we scaled our precious metals  position below 10% of assets for a while.

RETURNS BORN OF EUPHORIA ARE NOT EASILY RETAINED

3 comments

Posted on 20th May 2013 by Administrator in Economy |Politics |Social Issues

John Hussman is the master of the understatement. Heed his warning:

“Markets move in cycles. Investors learned  that by the 2002 lows, but only after terrible losses. They learned it again in 2009. They  have already forgotten, so investors will have to learn it yet again.”

The show may go on for a few more weeks, but the stampede for the exits will be epic. Your “friends” on Wall Street have blocked the exits and caged you in.

Not In Kansas Anymore

John P. Hussman, Ph.D.      

Having rested the case for a defensive investment stance in  a series of recent weekly comments (see Closing Arguments for  a summary), what remains is simply to update the status of those  considerations. Importantly, our concerns are driven by the average outcomes that have accompanied  similar evidence. We don’t need to forecast near-term direction, and while we  have very strong views about long-term return prospects, there are likely to be  numerous constructive opportunities along the way to more favorable valuations.  Our approach is to align our investment position with the return/risk profile  that we estimate based on observable evidence at the present moment. The fact that  similar evidence has historically been so one-sidedly hostile is certainly  worth noting, but in fact, no forecasts are required, and we have every  expectation of moving with the evidence. What is most necessary here is simply  the recognition that markets move in cycles, that investment conditions will  change over time, and that returns born of euphoria are not easily retained.

On overvalued, overbought, overbullish conditions

Last week, Investors  Intelligence reported that the percentage of bullish investment advisors  moved to 54.2% (from 52.1% the prior week) with just 19.8% of advisors bearish.  The Shiller P/E (S&P 500 Index divided by the 10-year average of inflation-adjusted  earnings) reached 24.5. The S&P 500 is well-through its upper Bollinger  bands (two standard deviations above its 20 period moving average) on weekly  and monthly resolutions, in a mature bull market advance, with 10-year Treasury  yields higher than they were 6-months prior.

None of these conditions in isolation has enormous impact;  each usually only modifies expected  returns. The problem is that when significantly overvalued, overbought,  overbullish conditions have been observed together – particularly coupled with  rising bond yields – the syndrome indicates a disease that none of the symptoms identify individually.

I’ve noted before that even a Shiller P/E above 18 combined  with a wide spread of bulls versus bears at some point during the prior 4-week  period is generally enough to outweigh trend-following considerations, such as  the S&P 500 being above its 200-day moving average (see Aligning Market Exposure  with the Expected Return/Risk Profile). I’ve also noted that some  conditions can be more simply defined. For example, instances featuring bearish  advisors below 20%, with the S&P 500 at a 4-year high and a Shiller P/E  above 18 are limited to the present advance, May 2007, August 1987, December  1972 (though with an early signal in March-May of that year), and February 1966,  all which were followed by significant bear market losses.

Various definitions of an overvalued, overbought, overbullish  syndrome can capture slightly different instances. Less stringent definitions  capture a larger number of danger zones, but also allow more false signals.  Still, as long as the basic syndrome is captured, the subsequent market outcomes  are almost invariably negative, on average. Presently, what we observe is among  the least frequent and most hostile syndromes we identify.  As I observed in the weekly comment that  turned out, in hindsight, to accompany the 2007 market peak (see Warning – Examine All Risk  Exposures):

“There is one particular syndrome of conditions after which  stocks have reliably suffered major, generally abrupt losses, without any  historical counter-examples. This syndrome features a combination of  overvalued, overbought, overbullish conditions in an environment of upward  pressure on yields or risk spreads. The negative outcomes are robust to  alternative definitions, provided that they capture that general syndrome.”

The chart below highlights each point in history that we’ve  observed the following conditions: Overvalued: Shiller P/E anywhere above 18;  Overbought: S&P 500 at least 7% above its 12-month average, within 3% of  its upper Bollinger bands on weekly and monthly resolutions, and to capture a  mature advance, the S&P 500 well over 50% above its lowest point in the  prior 4 years; Overbullish: a two-week average of advisory bulls more than 52%,  and advisory bears less than 28%. Rising yields: 10-year Treasury yields higher  than 6-months earlier. The instance in 1929 is based on imputed sentiment data,  as bullish and bearish sentiment is correlated with the extent and volatility  of prior market fluctuations.

One of the difficulties with this sort of analysis is that instances  that appear to be very clear peaks on an 85-year chart are actually periods  where there was often a cluster of instances with further market advances for  several more weeks. In 1929, the market advanced another 5% to its final peak  in the two weeks following the first instance of this syndrome. In 1972, the  market advanced a final 3% over 6 weeks. The 1987 and 2000 peaks occurred the same  week that the syndrome emerged. In 2007, the S&P 500 advanced to within 2%  of its final peak 3 weeks after this syndrome emerged, and crawled within 1% of  that peak after 9 weeks. The S&P 500 then dropped nearly 10% over the next  4 weeks, and then staged a final 11% spike over 8 weeks to a marginal new high  which actually marked the 2007 peak. In 2011 the market enjoyed a choppy 6%  advance, dragged out over 16 weeks, before rolling into a 19% correction over  the following 12 weeks. The present signal reiterates the first one that we  observed in late-January, 17 weeks ago. To a long-term investor, this is the  blink of an eye, but in the context of day after day of bullish euphoria, it  seems like an absolute eternity.

In general, the initial decline from these peaks tends to  occur as a sharp 6-10% market drop over a handful of weeks, typically followed  by a partial recovery attempt toward the prior peak. This sort of activity both  before and after major peaks gives the market the impression of near-term  “resilience” that dilutes the resolve even of investors who know the history of  these things.

I should note that present conditions are extreme enough  that neither trend-following nor momentum factors can be used to separate out  favorable outcomes from this small set of decidedly unfavorable ones. As I’ve  previously noted, a great deal of our research during this advance has focused  on this sort of “exclusion analysis.” I recognize that many investors have  simply decided on the strategy of holding stocks until QE ends, or some similar  formulation of “strategy,” but for better or worse, we do insist on approaches  that we can validate in historical and out-of-sample data, and that have been  strongly effective over full market cycles. When we examine the past few years,  as well as long-term history, the most effective “exclusions” aren’t simple  ones like “don’t fight the trend” or “don’t fight the Fed.” Rather, they are  more subtle prescriptions like “stay with the trend in an overvalued market,  but only until overvalued, overbought, overbullish conditions are established.”  These considerations aren’t actually required to do well over complete market cycles, but quantitative  easing has held off the resolution of historically unfavorable market  conditions much longer than usual, and these subtle considerations would have  undoubtedly made recent experience less frustrating.

If this bull market is to continue, I have little doubt that  considerations like this will provide the opportunity to be constructive on the  basis of well-tested evidence that  actually supports a constructive stance. Here and now, a constructive stance is  an experiment about whether QE can override market conditions that have always  preceded unfortunate outcomes. My views and research should be of no impediment  to investors with a different view, assuming that they have a reliable exit  criterion that will precede the attempts of tens of millions of others to exit.  It would be far easier to conduct that experiment without me than to convince  me that it is a good idea.

As the respected technician Bob Farrell once noted, “exponential rapidly rising or falling markets usually  go further than you think, but they do not correct by going sideways.” This  is really all the 1987 crash was – a mass of investors trying to preserve  profits from the preceding advance by acting on the identical trend-following  exit signal simultaneously.

On valuations

Even in the event that quantitative easing is sufficient to  override hostile market conditions in the near-term, it is worth noting that long-term outcomes are likely to be  unaffected. We presently estimate a prospective 10-year total return on the  S&P 500 Index of just 2.9% annually (nominal). See Investment,  Speculation, Valuation and Tinker Bell for the general methodology here,  which has a correlation of nearly 90% with subsequent 10-year market returns – about  twice the correlation and nearly four times the explanatory power as the “Fed  Model” and naïve estimates of the “equity risk premium” based on forward  operating earnings.

We presently estimate  that the S&P 500 is about 94% above the level that would be required to  achieve historically normal market returns. If you work out present  discounted values, you’ll find that depressed interest rates can explain only a  fraction of this differential, even assuming another decade of QE – and even  then only if historically inconsistent assumptions are made to combine normal  economic growth with deeply depressed rates.

This chart gives a good overview of what has actually  transpired in the stock market through post-war history. Points of deep  undervaluation like 1942, 1950, 1974 and 1982 created foundations on which long secular bull market advances were  built. The rich valuations of the mid-1960’s were enough to ensure that any  return to undervaluation would result  in a long period of poor market returns. The late-1990’s bubble took valuations  far above any historical valuation norm, and ensured that even a return to valuations previously considered “rich” would  produce devastating returns, and we saw that in 2000-2002. The advance to the  2007 peak did not go nearly as far, but still ensured that even a return to normal valuations would produce  devastating returns, and we saw that in 2007-2009.

At present, valuations are less extreme than they were in  2000, approach levels that were reached in 2007, and remain well beyond those  observed at the late-1960’s secular peak. The question is where valuations will  go from here, and while other indicators can be applied to that question,  valuations alone don’t provide the answer. Matching the valuations of the 2007  peak would require another 8% advance in the S&P 500. A return to  historically normal valuations would imply a 48% market decline – the average cyclical bear market in a secular bear market period has typically  represented a decline closer to 38%. A move to secular lows (about 0.5 as a  multiple of fair value) would imply a Depression-like drop of about 75%, but  such lows are typically associated with macroeconomic crises such as world war  or uncontrolled inflation. Still, these are all valuations that we’ve actually  observed in the post-war period. None of these calculations are indicative of  where the market is going, but we should at least be aware of the extremes that  are already in place.

On the economy

Among the better leading indicators of the economy, the  Philadelphia Fed Index of economic activity deteriorated to 1.3 in April, and  dropped to a disappointing -5.2 reading for May. The Chicago Purchasing  Managers Index slipped from 52.4 to a contractionary reading of 49 in April,  though the important “new orders” component held above 50, coming in at 53.2.  The chart below shows data on a variety of national and regional surveys from  the Fed and the Institute of Supply Management. Notably, the chart shows data  only through April. The May reports released thus far are the Philly Fed and  Empire Manufacturing surveys, both which surprised significantly to the  downside.

As I noted last week, holding  hours worked constant, the U.S. economy would have lost the equivalent of  550,000 to 600,000 jobs in April. Meanwhile, excitement about improvement in  the federal deficit is largely driven by several one-off factors and quite rosy  assumptions. These include special distributions, repayments from Fannie Mae  and Freddie Mac, the expiration of accelerated depreciation deductions for  investment, and capital gains realizations taken in advance of the “fiscal  cliff.” Projections of further deficit reductions are predicated on assumptions  that inflation in health costs will be controlled; that corporate tax revenues will  increase by 57% by 2014 (and 88% by  2015); that the U.S. economy will avoid any recession in the coming decade; and  that real GDP growth will increase to 4% (6% nominal) in the coming years,  despite a 9% decline in discretionary outlays by the government next year. The CBO projections also assume that tax revenue as a percentage of GDP will move sustainably  above the long-term average. I do expect that the Federal deficit will gradually come down over time. But barring  a massive, domestically financed increase in gross real investment (which the  data do not suggest is presently in the works), the 2-quarter lagged effect of a  smaller government deficit is likely to be weaker corporate profit margins, for  reasons I’ve articulated previously.

On quantitative easing

Over the past three years,  the U.S. economy has repeatedly approached levels that have historically marked  the border between expansion and recession. There is little question that  massive quantitative easing by the Federal Reserve has successfully nudged the  economy away from this border for a few months at a time. But as I’ve noted  before, the belief that monetary easing solved the 2008-2009 financial crisis  is an artifact of timing. The Fed was easing monetary policy throughout 2008,  and while it is tempting to view the recovery as a delayed effect, the more  proximate factors were a) the change in FASB accounting rules to dispense with  mark-to-market accounting, which relieved banks of insolvency concerns even if  they were technically insolvent, and b) the move to government conservatorship and  Treasury backstop of Fannie Mae and Freddie Mac, which reduced concerns about  default risk among mortgage securities.

The Pavlovian response of  investors to monetary easing – as if it has anything more than a transitory and  indirect effect on the economy – fails to distinguish between liquidity and  solvency; between economic activity and market speculation; and between  investment value and artificially depressed risk premiums. The economy is not  gaining anything durable from these policies, and the conditions for the next  bear market are already established. Meanwhile, the chart below updates the  extreme that monetary policy has already reached (data points since 1929).

The 3-month Treasury yield  now stands at a single basis point. Unwinding this abomination to restore even  2% Treasury bill rates implies a return to less than 10 cents of monetary base  per dollar of nominal GDP. To do this without a balance sheet reduction would require 12 years of 6% nominal growth (which  is fairly incompatible with sub-2% yields), a more extended limbo of stagnant economic  growth like Japan, or significant inflation pressures – most likely in the back  half of this decade. The alternative is to conduct the largest monetary  tightening in the history of the world.

None of this is to suggest  that speculation cannot go further – though present overvalued, overbought,  overbullish extremes weigh against it. Still, valuations and monetary  conditions are far removed from what is sustainable, and there is more evidence  to indicate that the economy is weakening than support of the idea that it is  strengthening.

Knowing where you are doesn’t mean that you’re leaving, but you should still know where you are. We’re  not in Kansas anymore.

The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse. Only comments in the Fund Notes section relate specifically to the Hussman Funds and the investment positions of the Funds.

Fund Notes

Last week, market conditions reiterated the most hostile  syndrome of overvalued, overbought, overbullish, rising-yield conditions we  identify. Strategic Growth Fund remains fully hedged, with a “staggered strike”  hedge that raises the strike price of the index put option side of the hedge  closer to market levels, but we continue to significantly lag those strikes  below the market in order to minimize time decay. Presently, that staggered  strike position represents less than 1% of assets in additional time premium  looking out to mid-summer. This also means that until the market declines by  more than several percent, most of the day-to-day fluctuation in Fund value is  likely to be driven by differences in performance between the stocks owned by  the Fund and the indices we use to hedge. Strategic International remains fully  hedged. Strategic Dividend Value is hedged at about 50% of the value of the  stocks held by the Fund. Strategic Total Return continues to carry a duration  of about 3 years (meaning that a 100 basis point move in interest rates would  be expected to impact Fund value by about 3% on the basis of bond price  fluctuations), and just over 12% of assets in precious metals shares.

There are countless investment strategies that offer  aggressive investment approaches, long-only exposure, and loads of various  market risks for investors who desire them. We follow a specific, long-term  discipline defined by an effort to accept market risk in proportion to the  expected return/risk profile that we estimate based on prevailing conditions.  We make every attempt to refine that discipline over time, but the Funds are  defined by the specific investment objectives and disciplines that we promise  to our shareholders. We constantly research promising indicators and investment  considerations. Those that place heavy weight on trend-following and  Fed-following are testable strategies,  and their return/risk characteristics can be carefully evaluated. Once  overvalued, overbought, overbullish conditions emerge, they don’t perform  nearly as well over time as investors seem to believe. Quantitative easing is certainly  “new” in the sense that such extreme policies have never been pursued. But data  on interest rates, Fed action and the monetary base go back nearly a century,  and even analyzing more recent experience with quantitative easing by Japan,  England, the European Central Bank and the Federal Reserve leaves us with  little confidence that QE does much more than to temporarily suppress periodic  spikes in risk premiums.

Investors who wish to follow the Fed to the exclusion of  other evidence should feel no compulsion to consider our own research, or our  own performance in the years prior to the recent bull market advance. In my  view, we are now in a very mature, unfinished half of a market cycle  spectacularly distorted by monetary and fiscal imbalances. The prospects that  the financial markets will face over the next few years are quite unlikely to  mirror the lovely ones that they enjoyed while these imbalances were being  established.

Nearly all of my own assets remain invested in the four  Hussman Funds, with the largest allocation to Strategic Growth, because despite  the challenges we’ve experienced in the advancing portion of this cycle, I have  no doubt that the financial markets will experience cycles – not endless parabolas  – over time. We accept a significant of “tracking difference” versus a  buy-and-hold approach because our objective is to achieve full-cycle returns above  the long-term norm for equities, with smaller losses than the general market over  the full-cycle. There is no assurance we’ll achieve that objective, and the  recent cycle has been an extraordinary challenge for reasons that I’ve  frequently detailed. In contrast, I view the performance of Strategic Growth in  the 2000-2008 period to be a reasonable reflection of those objectives in practice, even in an  environment where the general market achieved no net gain.

With regard to the challenges of the most recent market  cycle, my insistence on stress-testing our approach against Depression-era data  in 2009 to early-2010  led to an unfortunate miss in the interim, but I believe  that it will make us more resistant to extreme market conditions in the future.  I also believe that we’ve addressed most (though probably not all) of the challenges  created the monetary-driven speculation of recent years by incorporating what  I’ve described as “exclusion analysis.” This involves refining the pool of  periods where average expected  outcomes are negative in order to “exclude” the largest set of constructive  instances from that pool, and validating the exclusion criteria in out-of-sample data. For example, trend-following considerations can be important  even in periods where our return/risk estimates are negative, but only in the absence of overvalued,  overbought, overbullish syndromes. That refinement could have saved us some  trouble in recent years, but such considerations still do not encourage a  constructive position here. That may be a shame, or it may turn out to be a  blessing. All we know with certainty is that nearly a century of evidence –  even including trend-following and monetary factors – supports a defensive  stance from our investment approach here.

This will change. Markets move in cycles. Investors learned  that by the 2002 lows, but only after terrible losses. They learned it again in 2009. They  have already forgotten, so investors will have to learn it yet again

WEST PHILLY – WILDWOOD CONUNDRUM

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Posted on 18th May 2013 by Administrator in Economy |Politics |Social Issues

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While walking down the street in Wildwood yesterday I noticed something that most people would find highly unusual. There was a gang of teenagers coming towards me and I wasn’t scared. It was because  they were all Asian and dressed in blue Morey’s Piers  work shirts.  They were headed to their jobs on the boardwalk. I had previously passed a gaggle of Eastern Europeans in blue Morey’s work shirts while riding my bike on the boardwalk. This is not a recent development. Morey’s has been employing foreign students for years to man their rides and concession booths.

Foreign Workers 2010

The Morey family essentially runs the Wildwood Boardwalk. They operate the three amusement piers and many of the game and food booths. They have been model citizens and have done many good things for the town and the people. They have been the major player in Wildwood for decades.

They employ 1,500 people every summer and half of them are foreign students. They come from China, Thailand, Bulgaria, Egypt, Ireland and other Eastern European countries. This fact has always had me scratching my head. Morey’s pays them $7.50 to $8.00 per hour. They provide housing and transportation. They feed them lunch and dinner. The foreign workers are pleasant, efficient, and competent. They are clean cut and show up every day for work. They appear to be loving the experience.

You might be wondering how foreigners can come to the U.S. over the summer and get jobs when our real unemployment rate is north of 20%. It seems there is a Federal government program called the Summer Work Travel Program, run by the State Department.  It was created in 1961 to bolster diplomatic ties with other countries by way of cultural exchange. As a reminder, Federal programs NEVER die. They just get bigger. The primary purpose of the program is to acquaint foreign students with the culture and life of modern America and the distribution of other cultures among its inhabitants. I guess taking ride tickets and selling fried oreos to obese tattooed Americans is really acquainting them with our culture. Approximately 120,000 foreign university students are shipped over for three or four months every year to work low level tourist industry jobs.

The foreign students actually end up paying $2,000 to just get over here to work. Would-be participants typically first make contact with a recruiter in their home country. From there, they are connected with one of dozens of private “sponsors,” who are tasked by the State Department with overseeing the visa program. The sponsors acquire visas for students and connect them with employers or, at times, another company before they are granted entrance into the United States. Those who gain entry into the program typically spend more than $2,000 in travel expenses and fees to recruiters and sponsors, but some pay much, much more. “With recruiters, you don’t know how much they might be charging. We found someone who was charging $10,000,” said Allan Smith, chief executive officer at American Camp And Work Experience, the sole New Jersey-based Summer Work Travel sponsor. “On the other side,” Smith said, “you have employers who house kids, charging them over $100 a week. At the end of the summer, they end up owing the company money. When you get stuff like that, it hurts everybody.”

Morey’s does not treat their employees badly. But this program is not really a cultural immersion program. It’s a cheap labor program for American companies. Federal taxes are waived for participants in the program. That means Morey’s does not have to pay their 7.65% portion into the Social Security fund. But at the end of the day, I believe Morey’s when they say they can’t fill the positions locally. I do not believe Morey’s are racists, but there are very few African American or Hispanic workers on their piers. This is interesting since 31% of the local population is Hispanic and 12% is African American. The total local population is only 5,500, with only 500 or so residents between 18 and 24 years old. It makes sense that they would need teenagers from outside of Wildwood to fill their needs.

This brings me to West Philly and how the welfare state policies of this country are the reason the Morey family has to seek out good teenage workers from across the globe. My Section 8 neighbors have a 17 year old son living in the condo. He lives 50 yards from the Wildwood boardwalk between two Morey’s amusement piers. He does not work. Morey’s is going through a lot of effort to ship in teenagers from foreign countries. The people living next door have not interest in working. If they earned money working at a real job, they would lose some of their free shit. That kid has no interest in working on the Boardwalk. He has learned already that not working is easier and more profitable than working.

This entitlement attitude extends into West Philly. Philadelphia is 90 miles from Wildwood. There are 205,000 18 to 24 year olds living in Philadelphia. The true youth unemployment rate in Philadelphia is in excess of 50%. The black unemployment rate is north of 70%. How screwed up is our country that Morey’s couldn’t find 750 teenagers in Philadelphia to collect ride tickets and sell funnel cake? Any normal teenager would love to spend the summer at a shore house with an easy night time job. I blame the 45 years of welfare state policies for this ridiculous situation. The teenagers in West Philly have been raised with an entitlement mindset. Working would reduce their government freebies. Most of these teenagers have never had an example of two parents working hard at jobs. Many don’t even know their fathers. They have no concept of personal responsibility or getting ahead in life. They know their family EBT cards will be recharged on the 1st of the month. They aren’t capable of adding, subtracting, using correct grammar or dressing like a normal human being. The kids from China have a better grasp of the English language than kids in West Philly.

It is a sad reflection on our government run educational system, entitlement plantation mentality instilled by liberal do-gooder politicians, and complete lack of parental responsibility within the urban ghettos, that employers have to seek workers from 7,000 miles away when there are 200,000 teenagers only ninety miles away. Do you blame Morey’s for not hiring these Philadelphia teenagers?