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Article - What is a Stock Worth (2005)

Here is an excellent article from 2005 that combines Austrian economics with stock valuation.

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What Is a Stock ‘Worth'?

by Sean Corrigan
by Sean Corrigan

The answer seems obvious: whatever someone is willing to pay for it, of course. But, it's not as simple as that.

For example, whenever we are obliged to determine the net asset value of our fund for the purpose of reporting to our shareholders, we take the last price bid for each security on the last day of the month; we multiply this by the size of our holding; we repeat the process for each security in turn; we add up the results and — lo! — we have an aggregate total.

Though this methodology is standard throughout the industry, by virtue of its simplicity and transparency, we really ought not to forget that the price of the last traded fraction of the company's stock is not logically applicable to the value of the whole. Here is the reason behind this assertion.

“Dad, we are thirsty!”

Imagine you are walking a baking hot stretch of beach, trailing your two restive and annoyingly insistent kids, each of them moaning that they are thirsty.

Just ahead is the only kiosk visible for a mile or more in either direction so, gritting your, teeth you drag your little darlings over the last few hundred yards of scorching sand and there you happily part with $5 to get them a couple of small bottles of soda.

Now, those two particular bottles, in that particular time and place, clearly seemed well worth $2.50 apiece in your hour of need. But, by the same token, you'd have been increasingly less keen pay such a premium for a third, a fourth, or a fifth bottle of what you'd soon have come to regard not so much as a welcome liquid pacifier, but as a fairly meager container of overpriced, sugary acid.

Similarly, you'd also be a trifle reluctant to fork over that same $2.50 a pop when you're cruising — thankfully child-free — along the beverages aisle of your local, air-conditioned supermarket — your shopping cart sandwiched between two long, closely-stacked ranks of competing wares.

Again, at the neighborhood cash and carry, you may well be offered this same soda by the crateful. But, since you'll have more urgent things to acquire with your last few bucks of housekeeping money than to buy three weeks' advance supply of soda, it will have to be pretty steeply discounted to tempt you into making such a large purchase upfront.

Taking this to an extreme, you'd be positively dismissive — even if you had the required wherewithal — if Coke itself tried to get you to take a whole year's production from them at an equivalent price to the one being asked by that damnable seaside “gouger” (actually a man who is not so much a rip-off artist as an astute entrepreneur with a keen sense of what the local market will bear).

So, we should quickly be able to deduce from this that it doesn't makes sense to calculate the whole of Coke's annual sales by taking the product of the waterfront kiosk's circumstantially specific $2.50-a-bottle and the company's 475 million bottles of worldwide shipments.

But, if this is the case, we should realize it makes no more sense either to fall into the analogous trap of valuing all of Coke's shares, en bloc, by taking the $42 where the last 4,000 lot changed hands and multiplying it by the whole 2.4 billion shares the company has in issue, to arrive at a market cap of $100.8 billion.

The crucial point to grasp is that any individual trade reflects the monetary overlap in preferences of the most insistent buyer and the most willing seller at the point of exchange.

It should be obvious that each individual will be influenced in where he ranks on that scale of mutual eagerness by plain circumstance. This is exactly in the manner that our two very insistent minors combined with the presence of only one nearby seller to make for a highly skewed deal at the seaside!

Further, it is self-evident that as we begin to satisfy our appetite for what the other fellow has to offer, this quickly changes the relative attractiveness of the trade as we gain more of what we want — soda — and are therefore left with less of what we have to give up — money (and therefore the chance to buy, say, a candy bar for Mom, or a beer for Dad instead).

Theoretically, the converse would apply to our vendor, who would gradually raise the price of each successive soda sold, were it not that he has no other, more pressing needs to satisfy with the money he earns and that he suffers severe constraints of time in shifting his stock-in-trade.

Arguments along these lines were among those which revolutionized economic understanding in the 19th century under the guidance of the so-called “marginal utility” school, which included such Austrian luminaries Wieser, Menger, and Böhm-Bawerk.

Churn and burn

But, as well as this somewhat theoretical objection, there is a more practical aspect to the tyranny of the regular pricing mechanism to which we are subject.

This is that most of these marginal buyers — the I-want-it-now, $2.50-a-bottle guys who effectively set the price for our snapshot of net asset value — are buying now, only to sell a moment later and they are doing this largely with borrowed money, into the bargain.

To give some idea of the incredible rate of churn between specialists, brokers, and clients, consider that NYSE dollar volume has averaged $55 billion a day in 2005, while overall securities trading in the US topped $1 quadrillion (a one followed by fifteen zeroes!) in 2004.

For equities themselves, however, data from the National Securities Clearing Corporation shows that, on any given day, typically as little as 2—3% of that sizeable notional sum actually goes to cash settlement — with the balance being netted out between all those frenzied intraday buyers and sellers, winners and losers.

Thus, in a market dominated by players with the most restricted of short term horizons — who battle it out literally tic-by-tic for the scraps to be made between the brackets effectively set by the less frequent entry of punters taking a longer view — we can see that considerations of the actual fundamental value of any given enterprise are the furthest from the minds of the majority of those likely to set our reference price.

What is a stock worth to these guys? Hopefully, a couple of tenths more than when they bought it two minutes ago.

Moreover, even the longer-term players who impart the underlying momentum to the market — those who, as it were, provide the ocean current, rather than the tide which is superimposed upon it — may well be executing trades based on a whole host of disparate factors: technical analysis, “relative value,” “sector rotation,” “index arbitrage,” “asset allocation,” derivative or convertible arbitrage, and “black box” trading. The list of such blind, mechanistic, model-based approaches seems endless.

As a particular case in point, on average, more than half — and anything up to three-quarters — of NYSE volume is now accounted for solely by program trading (Goldman, Sachs alone accounted in this way for 1.2 out of the total 8.8 billion of recorded volume in the week of June 24th).

Yet another facet of this commoditization and temporal foreshortening of the market is the rise of the exchange-traded funds, or ETFs — quasi-mutual funds which “trade just like stocks.” As the latest hot thing to hit the Street, last year the assets incorporated in these entities soared by nearly one half, reaching $222 billion as everyone sought to cash in on the speculative fever of the times.

Are these savings vehicles or tools of speculation? Are they a means to “grow the world economy by furthering the development of low-cost, efficient capital” (as the DTCC motto laughably proclaims) or merely another fancy way for respectable folks to do a little gambling with their nest-eggs?

You tell us. But again, note that most of the people involved in trading this way — and so in setting a price on all the relevant securities — would be hard pushed to name the CEOs of the constituent companies, or their main line of business, or a single key product, much less tell you anything about their balance sheets or income statements.

It should be apparent that the motivations of the overwhelming majority of “price-setters” are thus wholly different to the ones which drive us as we try to discharge our duty to our shareholders.

In our work, what we are firstly seeking to avoid are costly mistakes of over-enthusiasm — of buying when the market is clearly overpricing a business. We try not to buy soda for $2.50, no matter how much the kids might whine at having to drink water instead.

Conversely, we always try to recognize and take advantage of those times when the market underprices claims on valuable, well-managed, wealth-creating assets. 50 cents a litre? Yes, please. Do you deliver?

By now it should be apparent that on both these counts — both the theoretical and the practical — that to focus too much on price, especially in the short term, is to commit what logicians call a “category error”: instantaneous market price and long-term value are decidedly not the same animal!

Discounting the future

But if a stock is not always “worth” the price, what factors should we consider in valuing a company?

Here, many fall back on something called the “dividend discount” model, which effectively assumes a near infinite flow of dividend payments and discounts them back to a price payable today, using some readily observable long-term interest rate — usually, if highly inappropriately, in our view — the US Treasury 10-year note yield.

This simplistic calculation, however, poses a number of problems, namely:

  • the dividend payments are inherently uncertain (unlike those contractually set by a fixed income instrument) and will certainly be variable;
  • the company may choose to return shareholders' funds through buybacks instead of dividends (whether or not financed by borrowing);
  • it may chose not to return them at all;
  • from the other side of the equation, the T-Note yield is itself intimately subject to market whim and is therefore by no means an objective yardstick;
  • being technically “riskless” (a rather empty guarantee related to the surety with which a government can always print enough local currency — however worthless — to redeem the bond) it is not really suitable for gauging a “risky” asset like a common stock, in the first place.
  • For our part, to the extent we pay any attention at all to this concept, we sometimes compare the market's earnings yield to that applicable to 30-year BAA-rated corporate bonds — which, unlike US Treasuries, therefore theoretically discount for real yields, implied inflationary erosion, and corporate credit risk. This leaves us with a broad measure of expected real, long-term earnings growth. This, in turn, can be loosely benchmarked against observed or expected rates of change in gross domestic product with which, intuitively, it should be correlated over the long run.

    We should caution, however, that the only purpose for doing this is to judge how “cheap” stocks — as a group — may or may not be, relative to bonds, and not whether they — much less any individual components of the index they comprise — hold any absolute appeal whatsoever.

    Through the looking glass

    But what of the vexed issue of why anyone other than one of our market-timer friends would ever wish to buy a non-dividend bearing stock? What we can say here is as follows.

    A non-dividend paying, non-liquidated, still-independent stock derives its worth from a gauge of the company's ability (a) to generate real income (over some uncertain, but broadly-estimated time horizon) and (b) to maintain and hopefully to extend that income generation capability in the course of its operations (i.e. to preserve and accumulate 'wealth').

    Essentially, this 'worth' reflects the fractional ownership of the firm's productive assets, its claims on resources; its inventories of finished goods; its stock of work-in-progress; and any other titles to property it holds, as well as to more ephemeral entities such as brand and reputation.

    Above all this, though, the stock has value as a vehicle through which to devote one's savings to a participation in that epitome of wealth generation — entrepreneurial activity, especially that of a kind in which one either is technically, or perhaps, financially unable to engage, alone and unaided.

    Granted, ownership of the stock must eventually release some of the income or the capital to its proprietors whether through dividends, buy-backs, spin-offs, liquidation, transfer sale, or take-over or there would be little purpose in owning it, beyond vanity.

    However, so long as one regards the potential for such deferred remuneration as reasonable and as long as one possesses the suitably low degree of time preference to wait, one need not demand such a disbursement in the here and now before considering the stock worthy of purchase today (particularly if one holds a realistically dark view of the process of the chronic monetary depreciation endemic to our modern system).

    To illustrate this, we ask you, would you have wanted Microsoft to have paid a dividend in the early, and rapid expansion days (at the possible cost of slowing its advance to profitable, global dominance)? Would you consider a share in the title to an undeveloped (and so, financially 'inert') gold-bearing ore as “worthless”?

    Moreover, for so long as the firm is deemed to be growing its shareholder equity better than any alternative is likely to do for a given degree of uncertainty which is a purely subjective matter, no dividends rationally should be paid; for to do so would actually be to squander and possibly to prejudice entirely the ultimately realizable worth of the company.

    Vive la différence

    To recap our earlier theme, it is critically important to try to maintain the distinction between this process of consciously and painstakingly estimating the true going-concern worth of a viable business enterprise and the one derived by a glib (and wholly non-marginalist!) extrapolation from the prices posted, second-by-second in the stock market, at which a handful of its shares are passing from largely instantaneous sellers to equally short-term buyers, the majority of whom are engaged in a frantic game of musical chairs, often after having borrowed the money for the entrance fee.

    As the example of Mr. Buffett, among others, underlines, significant returns can be had, often at relatively low risk, if one realizes that the two sums can diverge significantly — and can stay divergent for a considerable period of time.

    Indeed, the knack of recognizing this kind of disparity is what makes a great investor simply another form of entrepreneur (if a vicarious one) that is to say, a man who is constantly seeking to exploit the arbitrage between what he feels is the unduly depressed price of resources being made available to him and the total real income he will ultimately derive from their use.

    So, what is a stock worth? The answer — different things to different people — is not as trivial as it sounds, for in that very difference lies a world of opportunity for those of us who know the only way to protect our clients' existing wealth — and then to nurture it — is by redeploying it at the most propitious moment so that it can share in and help foster the creation of wealth anew by others.

    July 14, 2005

    Sean Corrigan [send him mail] is an executive of Sage Capital Zürich AG and strategist for the Edelweiss Fund.

    Copyright © 2005 Capital Zürich AG

    Sean Corrigan Archives


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AGNC news: American Capital down after starting offering

American Capital down after starting offering

AMERICAN CAPITAL AGENCY CORP.

NEW YORK | Fri May 14, 2010 8:53am EDT

NEW YORK (Reuters) - Shares of American Capital Agency Corp (AGNC.O) fell 6.9 percent to $25.65 in premarket trading on Friday, a day after the company commenced a public offering of common stock.

(Reporting by Ryan Vlastelica; Editing by Theodore d'Afflisio)

Article link: http://www.reuters.com/article/idUKTRE64D34P20100514?type=companyNews

Here is the press release courtesy of www.PRnewswire.com:

AGNC Announces Pricing of Public Offering of Common Stock

 

BETHESDA, Md., Dec. 9, 2010 /PRNewswire-FirstCall/ -- American Capital Agency Corp. (Nasdaq: AGNC) (“AGNC” or the “Company”) announced today that it priced a public offering of 8,000,000 shares of common stock for total net proceeds of approximately $219 million. Citi and Deutsche Bank Securities acted as underwriters for the offering.  In connection with the offering, the Company has granted the underwriters an option for 30 days to purchase up to an additional 1,200,000 shares of common stock to cover overallotments, if any. The offering is subject to customary closing conditions and is expected to close on December 14, 2010.

AGNC expects to use the net proceeds from this offering to acquire additional agency securities as market conditions warrant and for general corporate purposes.

To read the whole press release go here: http://www.prnewswire.com/news-releases/agnc-announces-pricing-of-public-offering-of-common-stock-111598429.html

Let’s do some simple back of the envelope math.  The press release mentions that AGNC expects $219 million in new capital will be raised by the new offering.  $219 million divided by 8 million shares = $27.38/share.  If the full 9.2 million shares are purchased then the per share price drops to $23.48/share.

No wonder AGNC dropped from $29.50/share at the close on December 8th, to $25.65 in pre-market trading.  At 9:42 am MST it has climbed to $28.52.

So how many agency securities can AGNC buy with $216 million dollars in new capital.  AGNC maintained an average leverage level of 8.5x in the third quarter of 2010 according to their latest 10-K quarterly report.  If we apply that leverage level to the amount of new capital to be leveraged we get:

$216 million times 8.5 equals $1.836 billion dollars in new agency securities.

Their portfolio size was $9.7 billion at the end of the third quarter 2010.  Add the $1.836 billion in new agency securities and I expect their portfolio to grow to $11.536 billion by the end of the fourth quarter 2010.  I also expect AGNC interest rate spread to tighten.  If I use the tighter interest rate spread of 2.12% from 2009, then I get a total revenue of $244.6 million for four quarters.  Divide that number by four to represent expected net income in the 4th quarter 2010 and you get: $61,140,000 per quarter net income.

According to Google Finance there are 52.19 million AGNC shares outstanding.  If AGNC keep its dividend of $1.40/share, then it will need to pay a $73,066,000 dividend payment in the 4th quarter of 2010.  That is unlikely to happen because net income in the 3rd quarter was $60.0 million with a $9.7 billion portfolio and an interest rate spread of 2.21%.  The question remains whether AGNC can grow the portfolio and the interest rate spread sufficiently to generate enough income to keep paying that $1.40/share dividend.  I don’t think they can do it.  Time will tell.

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Test message for another email account ((tags: testing)

If you can read this, then my test post worked.

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Please click on a Google Ad if you like the content of this website

Please click on some of the Google Ads if you like the Austrian
economics articles and high dividend stock analysis that I've written
on AGNC.

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AGNC earnings power

American Capital Agency Corp. (AGNC) has a massive dividend of near
20%. That easily meets my first criteria for a high dividend stock
which is a dividend yield greater than 6%.

But what about its earning power? I like at least five years of
annual earnings to examine, but ten years is even better. A longer
record of earnings will usually encompass at least one Keynesian
central bank induced boom-bust cycle (e.g. 2001 - present). It is
important to know how the business performed at the top of the boom
and the bottom of the bust in order to determine the average earning
power.

AGNC earnings power

Year, Earnings
2005, not in business
2006, not in business
2007, not in business
2008, $2.36, MAY to DEC ($3.15 annualized)
2009, $6.78
2010 (my est.), $6.28 - $7.18*

Low average = $5.40 EPS/year [($3.15+$6.78+$6.28)/3]
High average = $5.70 EPS/year [($3.15+$6.78+$7.18)/3]

AGNC has been paying a $1.40 quarterly dividend for the last 5
quarters. That equates to a $5.60 annual dividend payment per share
if the company does not change the dividend. It is just too soon to
tell if the average earnings power of AGNC can sustain that $1.40
quarterly dividend. The company's interest rate spreads tightened in
the last quarter. The company's net income will decline if the
interest rates spread tightens and that will lower earnings per share.

I would personally stay away from any bank, financial, insurance, or
REIT unless you can understand how the company makes money. I'm still
confused by much of what I read in AGNC's annual and quarterly
reports. I'm staying away from AGNC despite its huge dividend. I
don't think the dividend is very safe.

AGNC closed today at $29.47.

*2010 earnings by quarter
2010 Q1, $2.13
2010 Q2, $1.23
2010 Q3, $1.69
2010 Q4, $?.?? (low $1.23 - high $2.13)

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The "Ben Bernank" Cartoon Video

The "Ben Bernank" Cartoon Video
Gary North

Nov. 15, 2010

This video was produced on the Xtranormal site. The site provides free
software to produce talking head(s) videos. It doesn't get any better
than this for the money. Bernanke gets skewered.

Enjoy.

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The Duel Over the FED's Dual Mandate

The Duel Over the Fed's Dual Mandate

FONT SIZE
By: Peter Schiff

Given the opposing views of the potentially parsimonious new Congress and the continuously accommodative Federal Reserve, there is a movement afoot among Republicans to eliminate the Fed's "dual mandate." Prior to 1977, the Fed only had one job: maintaining price stability. However, the stagflation of the 1970s inspired politicians to assign another task: promoting maximum employment. This "mission creep" has transformed the Fed from a monetary watchdog into an instrument of social policy. We would do well to give them back their original job.

The imposition of the "dual mandate" was informed by the Keynesian belief that inflation and unemployment don't mix. An economic concept known as the "Phillips curve" postulates that low levels of one cause high levels of the other. But, like many things in modern economics, the curve is a fiction. There is no real reason why low inflation would produce unemployment or full employment would create inflation.

On paper, at least, the Fed has appeared to strike the balance that Congress demands. But this is a fool's errand. The Fed's dual mandate is the equivalent of asking a corporate CEO to maximize shareholder value by giving away as many free products as possible to consumers.

The best way for the Fed to ensure maximum employment is to focus on its one true job - creating price stability. The irony of the dual mandate is that by trying to satisfy both, the Fed ensures that we will get neither.

While it is true that increases in inflation may occur concurrently with drops in unemployment, there is no logical causality that can be implied. Any correlation simply results from inflation lowering the real cost of employment. Put simply: because inflation reduces wages in real terms, employers can afford to hire more people. So it's lower wages, not inflation, that puts people to work.

Inflation does nothing to alter the structural issues that cause unemployment. Like everything else, the labor market is governed by the laws of supply and demand. High unemployment results from a wage structure that is too high relative to demand. Demand for labor is a function of productivity, or more accurately, profitability per worker. Absent higher productivity, which takes time to develop, the only way to clear the imbalance is for wages to fall. However, government and unions typically prevent this from happening. Economists describe this as wages being "sticky" on the downside.

Over-taxation and over-regulation further restrict demand and add to unemployment. On that front, one of the worst offenders is the minimum wage law. It doesn't actually raise wages for anyone, but simply renders unemployable many low-skill workers. By creating inflation, the Fed effectively lowers the minimum wage. Another cause is extended unemployment benefits. Since these payments narrow the disparity between employment and unemployment, and in some cases may even be preferable to accepting a low-paying job, workers are incentivized to reject employment opportunities that they might otherwise accept.

To get around these roadblocks, the Fed lowers the cost of labor through inflation. However, this inefficient solution to a simple problem creates negative consequences for the economy. While wages may go up with inflation, goods prices usually rise faster. The net result offers no benefit for workers. By tricking workers into accepting lower wages, the Fed allows politicians to claim meaningless victories.

In addition, wages are only one cost of employment. Even as inflation lowers real wages, other factors can work to increase employment costs. In the current environment, higher payroll taxes, new health care mandates, economic uncertainty, and the potential for even higher future taxes to fund large budget deficits are all offsetting the "benefits" of lower wages. On top of that, large current budget deficits are crowding out small business credit. The result is that employment costs are rising despite lower real wages. Taken together, these policy mistakes are creating a toxic, job-killing mix.

The other fallacy of the dual mandate is that a fully employed workforce demands higher wages, forcing business to raise prices. More employment increases the supply of goods and services. Yes, employment raises demand, but that demand is satisfied by the additional supply created by a productive economy.

Since wages are the price of labor, wages are themselves prices. To say that rising prices are caused by rising prices makes no sense. Workers cannot demand higher wages unless the increases are justified by higher productivity. If they are, such wage gains will not result in higher goods prices.

The real reason that prices rise, for both goods and wages, is that the Fed creates inflation. This policy undermines the economy by destroying both current savings and the incentives to accumulate future savings. Since savings finance capital investment, lower savings equal weaker economic growth.

So, the best way for the Fed to create maximum employment is to focus on the single mandate of price stability. While a few elected officials seem to be figuring this out, most are just as clueless as the Fed. Unfortunately, even if Congress succeeds in changing the Fed's mandate, there is not much chance that monetary policy will change significantly. Keynesian thinking is so ingrained in Bernanke and his colleagues that they will exploit any wiggle room in their directives to jump back in the driver's seat and send us ever faster toward the edge of an economic cliff.

About the author: Peter Schiff
Peter Schiff picturePeter Schiff, President & Chief Global Strategist of Euro Pacific Capital (http://www.europac.net), is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market in U.S. dollar denominated assets...


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I like Safe Bulkers (SB). Buy it when the market tanks

Safe Bulkers (SB) Declares $0.15 Quarterly Dividend; 10.7% Yield

November 8, 2010 5:27 PM EST

Safe Bulkers, Inc. (NYSE: SB) on Monday announced that its Board of
Directors has declared a cash dividend on its common stock of $0.15
per share, $0.60 annualized.

The dividend is payable on or about November 26, 2010 to shareholders
of record at the close of trading of the Company's common stock on
November 19, 2010. The ex-dividend date is November 17, 2010.

The yield is 10.7%

http://www.streetinsider.com/Dividends/Safe+Bulkers+(SB)+Declares+$0.15+Quarterly+Dividend%3B+10.7%25+Yield/6087085.html

I've done a lot of research on this company, but not a lot of
writing/blogging on it. I would by this stock on any market
correction.

Disclosure: I don't own any SB right now.

AGNC will probably cut its dividend

American Capital Agency Corp. (AGNC) will have to cut its dividend at some point in a few quarters if its operating results are similar to the 3Q 2010 it just reported.
 
Recap: AGNC reported earnings of $1.69 per share during third quarter 2010, compared to $1.82 in the year-earlier quarter. Excluding non-recurring items, recurring net income for the reported quarter was $1.11 per share.
 
Its current dividend is $1.40 per share.  That equates to a 126% dividend payout ratio (1.40 divided by 1.11).  Dividend payout ratios above 100% can't go on forever.  The company only has $115.3 million in cash and cash equivalents to pay for the gap between its dividend and its recurrent earnings.  It could sell some of its agency security holdings like it did this quarter, but you should count on this tactic to earn money everytime.
 
The whole banking system is a house of fractional-reserve cards.  Stay away from it.
 
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John Boehner's "GobGop" Plan to Sell Out the Tea Party in 2013. It Will Begin in January 2011.

John Boehner's "GobGop" Plan to Sell Out the Tea Party in 2013. It Will Begin in January 2011.
Gary North
 
 
Nov. 6, 2012

First, you must understand that Boehner is a GobGop: a Good Old Boy of the Grand Old Party. The GobGops' goal is to keep the present system funded by the Bigs: Big Business, Big Pharma, Big Oil, and Big Banking. If you do not understand this, then you are as naive as a Democrat who thinks Obama speaks for The Common Man.

Boehner shilled for Hank Paulson and Goldman Sachs by begging the Republicans to vote for the $750+ billion Big Bank Bailout in 2008. Watch his emotional performance here. "We just have to do it!" No, they didn't. Ron Paul told it straight. He is no GobGop.

Boehner is going to do it again. He has already told us what he intends to do.

The obvious target is Obamacare. The Tea Party voters hate it. They regard it as an affront.

You've probably seen this. It's all over the Web. It's supposedly from Maxine, the cartoon character who speaks for geezerdom.

Let me get this straight . . . . We're going to be "gifted" with a health care plan

we are forced to purchase and fined if we don't,
Which purportedly covers at least ten million more people, without adding a single new doctor,
but provides for 16,000 new IRS agents,
written by a committee whose chairman says he doesn't understand it,
passed by a Congress that didn't read it
but exempted themselves from it,
and signed by a President who smokes,
with funding administered by a treasury chief who didn't pay his taxes,
for which we'll be taxed for four years before any benefits take effect,
by a government which has already bankrupted Social Security and Medicare,
all to be overseen by a surgeon general who is obese,
and financed by a country that's broke!!!!!

'What the heck could possibly go wrong?'

This is all true. Tea Party people know it's all true. They threw the rascals out . . . but left enough of them behind to sell us out.

Boehner told a Fox News interviewer what he plans to do: (1) repeal Obamacare; (2) pass another heath care law. You can see the video here. Here is a direct quote:

"This health care bill will ruin the best health care system in the world, and it will bankrupt our country. We are going to repeal ObamaCare and replace it with common sense reforms that will bring down the cost of health insurance."

Big Pharma is not threatened by this. Big Pharma will clean up either way.

If Boehner is politically savvy, he will have the Republicans introduce a repeal bill as soon as he takes over as Speaker of the House. The following will then take place.

1. A straight party vote will pass it.
2. In the Senate, the Democrats will not pass it.
3. Boehner will then begin a two-year campaign:

"The Republican Party is committed to a repeal of Obamacare. In 2012, you will have another opportunity to vote the Democrats out of power in the Senate, and give the Republicans a President who will sign this bill."

He will play to the Tea Party. He will gain their trust. He will throw down the gauntlet on health insurance from day one. He will hammer relentlessly on this for two years.

The goal here is to get the Tea Party voters into his camp. He is a GobGop. But it's obvious that he will score lots of points by doing this.

In 2012, the Republicans will take over the Senate and elect a President. It will repeal Obamacare. Then the Republican GobGops will introduce another huge bill that they promise will cut medical costs.

They will not cut spending. They will not raise taxes. They will preside over a gigantic deficit.

The pork will continue to flow.

The Tea Party people will sense betrayal. Then we will see how committed they are to getting the spending under control . . . in 2015. Too late, I think.

The sell-out is coming. It will be business as usual. The GobGops now control the House. They can posture all they want, knowing the Senate will block their token spending cuts. The GobGops will scream: "If we only controlled the Senate! If we only controlled the White House! Then we could get spending under control!" You know: the way they did under Bush.

It will make great political theater. Punch and Judy will perform a real donnybrook. A good time will be had by all.

The Bigs will get bigger. They always do.

Forward this to friends. Post it on Twitter and Facebook. The troops need to be warned what's coming.