Something For Everyone . . .

For some people, a recession automatically puts big $$$ in their pocket.

Who are these people?

Would you like to become one of them?  Read on

It’s all in the history.  Let’s look at the past 60 years, last ten recessions and their U.S. Presidents, according to www.recession.org

The U.S. had a recession from July 1953 – May 1954  (10 months, Eisenhower, Rep.)

Another one from August 1957 – April 1958  (8 months, Eisenhower, Rep.)

A three-fer for two-term President Eisenhower – April 1960 – February 1961  (10 months, Eisenhower, Rep.)

This last one ended less than 30 days after Kennedy took office because of policy changes he made.

So how could Kennedy do (in less than 4 weeks) what Eisenhower couldn’t accomplish (in 10 months)?

Kennedy made different choices than Eisenhower did.

Kennedy and Johnson, Democrats, 1960 – 1968, no recessions. Wall Street called these the ‘go-go’ years.  The middle class thrived, the stock markets boomed.  The U.S. government borrowed money to supply the Viet Nam War and spent it buying U.S. goods and services.  In all fairness, baby boomers fresh out of college propelled many new ideas.

February 1970 – December 1970 (11 months, Nixon, Rep.)

November 1973 – March 1975  (16 months, Nixon and Ford, Rep.) brought on by the 1st Arab Oil Embargo, then stretched out artificially as businessmen forced the nation through a string of artificial, deliberate, contrived shortages and resulting massive price hikes on sugar, coffee, salt, candy, beef, milk, natural gas, onions, toilet paper . . .  You name it; first it disappeared completely from store shelves everywhere, then returned quickly at a much higher price that became permanent.  It got so far out of hand that Nixon had to call for a freeze on almost all wages and prices, in spite of the GOP’s image of fighting to keep government regulation out of business.

Enron picked up the ball two decades later with similarly contrived fake electricity shortages in California, but they got caught.  And, yes, Nixon really was a crook; he used his power as president to have the FBI and IRS target people he didn’t like, and hired criminals for illegal activities to ruin the Americans on his “enemies list.”  His Vice-President, Spiro T. Agnew, resigned (8 months before Nixon’s resignation) for being caught red-handed taking a $100,000 bribe, in cash, in the White House, as a payoff left over from a kickback on highway contracts from his years as Governor of Maryland (that was about 10 years pay for an average U.S. worker).  They were both crooks, and the rest of us paid very dearly for their crimes.

A pattern is emerging, but there’s a minor glitch.

January 1980 – June 1980  (6 months, the shortest recession of all, under Carter, Dem.) brought on by the 2nd Arab Oil Embargo, and triggered by the Federal Reserve’s decision to hike interest rates dramatically.  We should have seen it coming.

January 1980 – November 1982  (22 months, Reagan, Rep.) Reagan made many changes to the U.S. government and American society.

The “Black Monday” stock market crash under Reagan of October, ’87 wasn’t technically a recession, but a few people made — and many more lost — a great deal of money. The Dow lost nearly one-third of its value. Money isn’t ‘created’ when stock prices change, money simply moves from one person’s account to someone else’s account. A lot of money changed accounts that day.

July 1990 – March 1991  (8 months, George Bush, Rep.) This one cost Bush his re-election bid against Clinton in November, ’92, just like what happened to Eisenhower in 1960.

Clinton, Democrat, 1992 – 2000, no recession.  Again, in all fairness, Clinton rode the Internet boom simply by being in the right place at the right time.  These were terrific economic times for the middle-class, but that meant business owners had to pay higher prices for labor. (Labor costs much less during a recession, as you know.)  It ended when Y2K was finished and the dotcom bubble burst (you remember; everybody and their uncle bid up the prices so high everything was overvalued? Where have we seen this before?).

In June, 1999, the NASDAQ crashed 2 weeks after George W. Bush announced he’d run for president, and the DOW plummeted in December, just two days after Bush was handed the presidency by the Supreme Court.  Multiple coincidences? Or just a glimpse of the big blows that would come later against our nation, when the ultra-wealthy made billions?

March 2001 – November 2001 (8 months,George W. Bush, Rep.)  This recession was gaining momentum well before 9/11, which certainly aggravated it.

December 2007 - Today  (George W. Bush, Rep., inherited by Obama, Dem.) Bush borrowed incredible sums in September, 2008 to prop up the financial markets and their owners, though the GOP tries to fool everyone into shifting the blame to Obama.  Bush also took out gigantic loans to pay for the War in Iraq, but kept two sets of books to hide them from the public.  (If you or I had a business and kept two sets of books just to fool lenders and owners, we’d go to prison.)  Just as had happened with Bush’s father, the U.S. economy crashed and burned shortly before a presidential election.  Wretchedly poor planning on a monumental scale.

If only the crude oil markets had been less greedy, they might have pushed the date back a year and all that misery would have fallen right into Obama’s lap.  ($14 billion profit in three months for just one company?  Who do you think paid all that money to them.  Oh, yeah — American workers.  That’s about 50 cents a day profit from every man, woman, and child in the U.S. And there are many more oil companies, so they all add up to many dollars per day per person.)  How many textbooks can we buy for $14 billion?  Oh, well, I’m sure they’re doing something with all that money that benefits our society.

Do you see a pattern? Regardless of the policies, the reasons, world events, the preceding administration, your favorite party, my favorite party, or anything else, one fact stands very clear.

In the last 56 years, the U.S. has had a total of over 10 years of recessions under every single Republican President (and Bush II, Reagan, Nixon and Eisenhower had multiple recessions).

Gross incompetence?  Helpless victims to their own policies?  The Fed is the real cause?  Wall Street caused it?  OPEC oil price hikes? Sunspots? All the above?

The cause doesn’t really matter for our purposes.  Just go with the history.

There was a 6-month recession under one Democratic president, Jimmy Carter. Still think this is a all a big coincidence? Still think no one can predict a recession?

I’m not telling you who to vote for, or vote against.

I’m just trying to keep you from getting burned next time around.

Let’s do the math.

During 27% of the time that a Republican was in the White House (10 years of recession during 36 years of leadership), the U.S. economy was in a recession.

When a Democrat was in the White House (1/2 year of recession during 20 years of leadership), that number is just over 2%.

Don’t think this happens through a Republican presidents’ incompetence. That’s just not reasonable, not by any stretch of the imagination.  No one smart enough to become president could be that stupid.

But it doesn’t make any any sense, either.

Everybody knows the Republican Party stands for all the things that strengthen the U.S. economy. We’re also told Democrats want to tax everyone like crazy and give all our money away to people who are too lazy to work.

Well, in case you weren’t around, Reagan’s 1980′s massive tax breaks for the ultra-wealthy were their big payoff that was supposed to create new factories and jobs. Unfortunately, all those new factories were built in Mexico and Asia while they closed matching factories in the U.S.  Reagan wasn’t stupid, the “trickle-down” voters were the fools in the deal.

We lauded Nixon because he “opened China.”  Before Nixon, China was a distant novelty.  Thanks to Nixon getting the ball rolling for U.S. businesses to be able to create factories there, China now owns more US dollars than you will ever understand.

Ooops!  I forgot one important detail.

Maybe this one explains it all.

Republicans are the party favored by the ultra-wealthy (and the super-ultra-wealthy).

Why? Well, if you earn $30 thousand a year and pay $8,000 in federal income tax, a 10% tax cut represents about 800 bucks; enough to buy a nice sofa. But to someone making $100 million a year, that same tax cut represents about as much money as you will earn in your entire lifetime.

The ultra-wealthy want those tax breaks and often support the GOP’s political ambitions by donating heavily to re-election campaigns and finding ways to funnel gigantic donations legally (PAC’s, TV ads, support through ownership of conservative radio and TV stations, newspapers, magazines, direct party donations, fundraisers, loans, etc.).

Congress fully obliges the ultra-wealthy by lamely refusing to stop the bribes (oops, sorry, “campaign contributions”).  Wealthy people always expect a good return on their investment — that’s what made them wealthy. duh.  It’s just the way American business does business.  You and I can safely be called, “cannon fodder.”

Many wealthy people simply donate to BOTH parties so they’ll have influence no matter who wins.  Historically, it’s clear that Democrats in the White House don’t go as far as the GOP to trash the middle class, our entire country, our economy, and our society just to return the favor to their buddies.  Except for a few notable exceptions (mostly Senators from Minnesota) they all take the money, Democrat and Republican alike.

In this last recession, we managed to fireball the economies of the entire planet (so wealthy pals overseas got a piece of the action).  Only insignificant Moldova’s miniscule economy was untouched, because their meager savings are all in cash.  Everybody else got hurt.  Hurt bad.

All this pain and misery just to make a buck.  (That’s not fair — it’s actually so many bucks, we can’t even comprehend the amount of money that a few people made on this last recession.)

How?

When the economy tanks in a recession, all valuable property is suddenly available at deep discount prices.  Blue Chip stocks, hotels, parking lots, your competitor’s business, every other business, resorts, office buildings, furs, yachts, land, condos, apartment buildings, villas, vacations, diamonds, ships, antique cars, new cars – the list goes on and on. Except gold, a form of gambling.

The wealthy know how to make money from a recession.  When prices are stable, there’s no ‘room to move’ to rake in big profits.  They need a recession to really shake things up and put all prices in freefall.  They buy stuff cheap. Later, they sell it at standard market price.

So, if you were incredibly wealthy and held influence over our elected leaders, what’s the biggest gift they could give you for all the cash they were handed? (Which, essentially, was responsible for winning their election.)  That’s right, a big sale on everything valuable (including labor).  A recession. The bigger, the better.

The economy always bounces back, right?  At least that’s what your ”investment advisor” told you when you asked why he didn’t turn all your holdings into cash just before the inevitable crash. Yup, you got burned again, and somebody else now has every dime you lost.

Super-wealthy people don’t make their profits when they sell property at market value; they lock in their profits when they buy at a discount.  Anyone can only sell at ‘market value’ but you can sometimes buy at serious discounts, then wait for the price to return.  For the last 60 years, this is what’s happened when a Democrat goes to the White House after a Republican has ruined the economy.

Democratic Presidents tend to make choices that benefit US society in general, to the detriment of the ultra-wealthy.  Republican Presidents tend to make choices that benefit the wealthy, under the proposition that everyone wants to be wealthy, and that the wealth will trickle down to the masses willing to work.

The bad news?

Everyone’s not going to be wealthy but many want to believe they will when the Republican candidate wins, cuts their taxes and gets government out of their way.

Republicans routinely garner votes by promoting emotional topics over substantive issues, and this works well on about half the voting population, which is about 1/4 of the total voting age population (since only half the people who can vote, do vote).

Do the math.  As long as a political party can consistently align itself with one-fourth of the population under the banner of, “Vote for me and I’ll make you rich!” we’ll likely continue to have a recession every time there’s a Republican in the White House.  Those voters will never believe their leader is using them for their vote, then selling his favor to the big campaign contributors, because they want to.

Deal with it.

Now use this knowledge to help yourself and your family.

A recession is an incredible opportunity for you to make a lot of money with your investments.  Now that you know a Republican president is almost a sure-fire recipe for a recession, make it work for you. The economy generally thrives during the very early stages of a Republican presidency, then crashes badly, (if he’s re-elected, it happens again) then a Democrat gets elected and it recovers.

Be ready to move your investments from stocks to cash before everything tanks.  Once everything has fallen, move back into stocks again at fire sale prices for instant, built-in profit.

Or, you can just keep doing what you’ve been doing before a recession (nothing) and continue to get the same results you’ve been getting (financial loss or disaster).

If you have someone else handling your investments for you, they probably did nothing.

Professional financial advisers will say, “Let it ride; the market always bounces back.  I’m too lazy to move every one of my client’s money.  Besides, if everybody sold, the prices would fall even harder for the rest of us.  If I got you out too early, you’d complain about the gains you missed.  It’s easier for me to just do nothing.  I lost a lot of money, too.  Be patient, and in just a few years, you’ll get it all back.  That’s what I’m doing.”

Professional money managers will try to talk you out of this behavior.  They may call your activity ”trying to time the market” (which is mildly akin to day-trading, a risky, fast-action, high-stakes gambling game).  But that’s not true.  Timing the market means studying, buying and selling individual stocks when you think each one’s price will rise or fall.  Instead, you’ll be timing the entire US economy, a much slower, more obvious task with greater rewards and almost no study except for paying attention to the news and your daily life.

You’re not trying to choose a company, you’re deciding when to get in and out of the entire stock market altogether.  The stock exchange folks HATE it when you do that, and mutual fund reps may actually try to talk you out of it.  After all, their paycheck is riding on you doing what everyone else is doing — nothing.

Don’t bother with call/put options or short sales either, since they are all time-limited, and no one can tell how long each phase will take.  Just be in stocks when a Dem is in the White House, and get ready to move entirely to cash when a Republican moves in and the economy (sort of) booms, then looks like it’s going to crash (because it’s going to crash).  Move back to stocks when it looks like things are improving and the market is on the upswing again.  Be ready in case a Republican president’s second term gives him confidence to pull off a second recession.

Don’t wait until the last possible minute to get out or the very first sign of recovery to get back in.  Use your head, pay attention to what’s going on.  For example, the ’08 crash was triggered by ridiculous mortgage agreements that didn’t even bother to see if the borrower had a job and $4-a-gallon gasoline at the height of summer travel. Everybody just stopped spending money, fearing gas would go to $5 and housing prices would tumble.  A few months earlier, we’d all heard the warnings about Adjustable Rate Mortgage problems and all the upcoming foreclosures, so this wasn’t a surprise.  In the late 90′s, everyone knew the dotcom prices were way out of line, but we didn’t want to believe it would fail because we were making too much money.  Each time, everybody knew the bubble was about to pop, but we didn’t know what to do about it and were making huge paper profits.

Now you know.  Watch who’s in the White House and use your head.  When the time is near, move into cash, then later back into stocks or mutual funds.  Instead of losing half your money in ’08, you would have doubled your money in ’09.  That’s what many of the wealthiest people did.

If history is any teacher, we’ve got about 6 to 8 years before it happens again.  Be ready next time.

Charlie Gosh

If you’d like to hear similar info from a successful professional advisor, check Jim Stack’s InvesTech newsletter, under $200 a year for a monthly email newsletter, with shorter trial offerings and a free sample issue.  No, I don’t get anything for sending you there. He has a top-notch record and he says much of the same thing you’ve just read from a different angle.

Charlie Gosh

A true story . . .

In 1996, Bill Clinton was a featured guest for an HBO comedy special held in Washington, D.C.’s Ford Theater, the same theater where Abe Lincoln was assassinated.  (Clinton sat on the main floor, surrounded by Secret Service.)  One comedian after another made us all laugh.

When it was Paula Poundstone’s turn, she was barely into her routine when she broke out and greeted the dignitaries directly.

“Hello, Mr. President (audience laughs).  Hello, Mrs. President (audience laughs).  I see all the Secret Service all around you, there.  But one question.  Who is that older gentleman sitting right behind the president, inside the ring of Secret Service agents? And why is he sitting directly behind the president?”

No one had noticed him before.  No one knew who he was.  And, shades of Lincoln’s death, he’s sitting directly behind the president.  Who is that guy?

“Let it go,” Clinton directed her and waved his hand to dismiss her.  Most people, when directed by the President of the United States to ‘let it go’ would do so.  But not Paula.

She directs her comments to the audience.  ”We all want to know, right? Who is that man sitting right behind the president, inside the ring of Secret Service agents?”

Clinton finally relents, grudgingly.

“He owns Chiquita Banana.”

“That’s interesting,” notes Paula.

Quick, cut to commercial.  (When we return, Paula is gone, and the next comedian is on stage.)

In that moment, I understood many things that had been a mystery for nearly a decade.

Chiquita Banana.  Guatemala.  Honduras.  Sandanistas.  Oliver North.  Late-night shredding of tens of thousands of important documents.  The Iran-Contra affair.  The CIA is badly stained, North is found guilty, Admiral John Poindexter is indicted, Reagan is publicly humiliated, many more top government officials are involved, but none ever goes to prison.  The nation is outraged that we’ve been illegally selling weapons to Iran in their war against Iraq and using the proceeds to fund illegal activities in Central America.

All to protect that guy’s land.  Peasant farmers lived on that land for centuries as serfs, but this guy owns it now.  The Sandanistas fought to seize the land and give it to the farmers who live there.  The U.S. supplied guns, training and intelligence to protect that guy’s land from being seized and given to the people who live there. The CIA funneled anti-aircraft missiles and thousands of anti-tank missiles illegally through Israel to be sold to Iran.  The CIA used the money to support the Contras, who were fighting the Sandanistas in Central America.

The Contras won.  Chiquita Banana got to keep its land and maintain the sharecropper arrangement that ties farmers to the land where they live and work, but can never own.

No matter who is in the White House, this guy will still curry their favor.  We never did learn his name; we’re not supposed to know that he even exists, much less that he’s this close to the president.

Do you think he gives lots of money to both parties?  Seems possible . . .

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