Obama Gets Into Cyber Security Game

Obama Gets Into Cyber Security Game

Finally after more than few years of mounting cyber attacks with increasingly devastating results to individuals, businesses and other institutions, President Obama finally opts to get into gear with our Safety & Security investment theme. This also confirms what many of us have already thought – the increasing role of cyber attacks in modern warfare.

The Obama administration is preparing to elevate the stature of the Pentagon’s Cyber Command, signaling more emphasis on developing cyber weapons to deter attacks, punish intruders into U.S. networks and tackle adversaries such as Islamic State, current and former officials told Reuters.

Under the plan being considered at the White House, the officials said, U.S. Cyber Command would become what the military calls a “unified command” equal to combat branches of the military such as the Central and Pacific Commands.

Source: Obama prepares to boost U.S. military’s cyber role: sources | Reuters

Obama Claims Country Better Off Today?

Obama Claims Country Better Off Today?

Obama claims the country is better off?  Uh, what? Last week President Obama told a small group of wealthy donors that by almost every metric, the U.S. is significantly better off under his leadership than under Bush’s. Oh dear God this is just getting embarrassing! Can we please have a little reality check here?

enhanced-buzz-22099-1331845844-6

 

The most basic metric for how well the country is doing is median household income – are families making more today than in years past?  Errrr, not so fast there Mr. President. As the chart below shows (the red line) we are still well below we were when you took office… and that is despite the massive amount of government spending and monetary policy stimulus! Or perhaps, this is in fact because of all that insanity? In fact, median household income, after taking inflation into account, is where it was back in 1989, twenty-six years ago!

2015-07 Median Household Income

 

One of the reason household income is so low is that despite the often touted “unemployment rate” the more important number, the percentage of people in the country actually working is down to levels not seen since the early 80s and well below the ratio during George W Bush’s Presidency.

2015-07 Employment Population Ratio

On top of that, 2.2 million Americans are in part-time jobs who want to work full time, still far above the level at the start of the recession and during George W’s entire Presidency.

2015-07 Part-time for economic reasons

 

So people are making less and fewer people are working… what about the debt burden on those who do have jobs?  When Obama took office, the total Federal Debt was 10.7 trillion. Today it is over 18 trillion and expected to be well over 19 trillion by the time he leaves office.  That’s more than an 80% increase in the debt burden shouldered by the American people in just 8 years, nearly doubling!

2015-07 US Total Public Debt

This has also been the weakest economic recovery in the nation’s history. For the first time ever, U.S. GDP has contracted twice since the recovery and on an annual basis remains well below historical norms. Normally after a recession, we experience a period of above average growth which helps repair the damage experienced during the recession.  Not only did we never get that above average growth, but the economy continues to stumble along at very weak levels.

Just exactly what is it that you are looking at Mr. President?  As the “most transparent Administration in history,” (snort, chuckle, eye roll) how about if you show us?

 

President Obama and the VA Scandal

I recently was in studio in New York, speaking with Neil Cavuto on the latest scandal facing President Obama’s Administration over the treatment of Veterans by the VA , involving alleged deception about the waiting time for treatment at veterans hospitals.   While it would be easy to say that this is the fault of an incompetent administration,  the reality is this is simply another example of why the size and scope of government ought to be limited.  Today the federal government is simply to big to succeed!

Ukraine – Why and What’s Next

Ukraine – Why and What’s Next

As if things in Europe aren’t complicated enough, the situation in Ukraine is getting more troubling by the day. The turmoil there is having vast geopolitical impacts that are keeping the investing world as nervous as a long-tailed cat in a room full of rocking chairs. Here’s the quick, errrrhhh, fair enough, as quick as a verbose Irish lass can get, version of how we got to today.

 

In late 2013, Ukrainian President Viktor Yanukovich was expected to sign some agreements that could eventually integrate Ukraine with the European Union economically. Ultimately, he refused to sign the agreements, a decision thousands of his countrymen immediately protested. Demonstrations eventually broke out with protesters calling for political change. When Yanukovich resisted their calls, they demanded new elections. Eventually the protestors won, Yanukovich was forced to flee the country and now we have a nation in flux.

 

So why does anyone outside of Ukraine, population 44.6m and with 233k square miles, care? Ukraine is central to Russian defenses, sharing a long border with the former Soviet Union and more importantly, Moscow sits all of 300 flat and easily traversed miles from Ukraine. Therefore, from a Russian perspective a tighter Ukrainian-EU integration represents a threat to Russian national security. Putin appears to be disinterested in actually governing Ukraine, but rather his goal seems to be to effectively have negative control, the ability to prevent Ukraine from doing anything Russia dislikes. With that in mind, it appears that even the very idea of further EU integration was provocation enough for Putin. The European Union’s and the Germans’ public support for opponents of Yanukovich crossed his red line.

 

From a European perspective, Ukraine isn’t quite as interesting. Economically the Eurozone wasn’t enamored with having the nation join the EU, it just liked the possibility of such. Adding a country as weak and disheveled as Ukraine to an already strained union didn’t make much sense, but the idea of the possibility someday is attractive. The talk about joining was really more about inviting Ukraine to make a cultural shift towards Europeanism, with a constitutional democracy and a more liberalized economy. Germany found itself between the proverbial rock and a hard place as it continues to work with Russia on its mutual energy and investment interests while trying to manage coalitions within the European Union, particularly attempting to appease the Baltic States and Poland who would like to see Ukraine closer to them and further from the Russian camp, giving them an additional buffer.

 

The U.S. strongly supported the Orange (anti-Yanukovich) Revolution, siding with the Germans and the Eurozone, which was no doubt going to get under Putin’s skin; but then the U.S. owed him one after the Snowden situation. Throughout history, many of the global conflicts, and for that matter noteworthy familial brawls, have been catalyzed by the little things.

 

The situation has evolved into a tense standoff between the G7 nations and Russia. On March 12th, the U.S. Department of Energy announced that it would draw down from the U.S. Strategic Petroleum Reserve in what it claimed was a “test sale to check the operational capabilities of system infrastructure.” In reality, this was a warning shot fired at Putin. Later that same day Bloomberg reported that the U.S. has escalated the situation even further, with General Martin Dempsey, the Chairman of the Joint Chiefs of Staff, claiming that “in the case of an escalation of unrest in Crimea, the U.S. Army is ready to back up Ukraine and its allies in Europe with military action.” The G7 has threatened sanctions against Russia if it continues, with the U.S. Congress passing a resolution on March 11th to work with European allies and others to “impose visa, financial, trade and other sanctions” against key Russian officials, banks, businesses and state agencies. In a quick tit-for-tat, Russia responded on March 13th that it is prepared to retaliate with sanctions of its own against the west. Germany responded to this by announced that Angela Merkel is prepared to cancel a summit with Russia if Moscow does not help to defuse the situation.

 

To add a little extra flame to the fire, Iranian Oil Minister  arrived in Moscow late March 13th to meet with Russian Energy Minister Alexander Novak and Deputy Prime Minister Igor Shuvalov, IRNA reported. Namdar-Zanganeh will discuss ways to deepen economic cooperation between the countries, because there weren’t nearly enough strained relationships!

 

Militarily things are also nail-biter as around midnight on March 5th the Russian navy used tugboats to maneuver a 9,000-ton hulk of a mothballed anti-submarine cruiser into the inlet to Crimea’s Donuzlav Lake, effectively blocking access to the sea from Ukraine’s primary naval installation on the peninsula. Reportedly seven of the Ukrainian’s twenty five ships are trapped, picture at left.

 

According to the Ukrainian Defense Ministry, on Saturday March 15th, Ukrainian forces repelled an attempt by Russian troops to land in the southern Ukrainian region of Kherson Oblast. The landing reportedly occurred on Arbatskaya Strelka, a long spit of land running parallel to the east of Crimea. Earlier, it was reported that four Russian military helicopters deployed around 60 Russian troops near the town of Strilkove, forcing around 20 Ukrainian border guards and servicemen to retreat from their positions. Later in the day Ukrainian and Russian defense ministries announced a truce in Crimea until March 21st. Anyone else feel like renting Red Dawn (the original of course)?

On Sunday March 16th, the people in the Crimean region reportedly voted to have Russia annex Crimea by an overwhelming majority of some 95%+. On Monday the EU announced that it would impose travel bans and asset freezes on 21 Russian and Ukrainian officials that are considered central to Crimea’s move to separate from the Ukraine. The U.S. issued sanctions as well, via an executive order signed by the President, to freeze the assets of and ban visas for seven Russian officials and four Ukrainians.

 

Tuesday the Kremlin announced that it had officially annexed Crimea, which could be the most dangerous geopolitical event of the post-Cold World era. The two most likely outcomes are:

  1. Russia will quickly prevail, gaining the power to redraw its borders and set the precedent for exercising veto powers over the governments of its neighbors or,
  2. Western-backed Ukrainian government will push back and the second-largest country by area in Europe will descend into a Yugoslav-style civil war that will likely pull into its turmoil, Poland, NATO and eventually the U.S.

 

An alternative outcome is unlikely as Putin cannot at this point give up Crimea. It would mean a publicly shaming on a global level that could destroy his presidency.

 

Bottom Line: This situation has the potential to rock the markets, which are for now keeping a wary eye. Europe desperately needs Russian fuel. London and much of Europe is greatly beholden to the nouveau riche Russians for their highly demonstrative consumption of luxury goods and services, which only adds more pressure. There’s even a reality TV show called “Meet the Russians” which follows the lives of some ultra-bling Russians who are buying up Britain and “setting a new benchmark for extravagant living.” Europe can’t afford to push too hard back against Russia, but they also cannot ignore a precedent for unfettered Russian aggression. It is impossible to predict exactly how this will play out, but close attention is warranted.

New Home Refinancing Plan Steals from Piggy Banks to Boost Prices

On February 8th Lenore Hawkins joined the Freedom Fighters to discuss a new proposal to aid the struggling housing market and the recent push to include Fannie Mae and Freddie Mac in the federal budget.

President Obama wants a sweeping new program to help more struggling homeowners refinance their mortgages at lower interest rates, but there’s an important detail – a fee Uncle Sam will likely charge homeowners for the government’s help. The President proposed lowering monthly payments for millions of homeowners by refinancing their loans through the Federal Housing Administration. The agency provides insurance against default for banks that make riskier loans mainly to borrowers who make small down payments. FHA currently tacks 1.15% on top of the interest rate of new mortgages it guarantees. While the Administration has not yet decided how to structure charges this new refi program, a fee of that size could reduce savings for borrowers and make it less cost effective for the borrower. To help pay for this plan, the President proposed a new fee on big banks. It would raise $5 billion to $10 billion a year to subsidize premiums–“a big chunk of the cost,” the administration official said. The subsidies would help keep the program affordable, he said–and attractive to as many eligible borrowers as possible.

  • This is all about trying to boost up the prices of homes to give people the impression that they are better off, but it is yet another example of government getting cause and effect all messed up AND taking money away from one group and giving it to another.
  • Keep in mind that this refinancing would harm the owners of mortgage bonds, which are primarily mutual funds, pensions and real estate investment trusts.  So in order to try and boost the price of my home, the government is going to raid my savings!

On to the efficacy of the program:

  • The price of anything is determined by supply and demand.
  • The demand for housing is a function of 3 things:  Household income, stability of that income (will you need to move/ will your paychecks keep coming) and interest rates.
  • From 1999 to 2007 Median the median home price rose 54% while median household income FELL 1%.  Prices skyrocketed while the ability to pay fell?  Why?
  • Interest rates and the availability of credit expanded.  Houses were no longer purchased to become a home, but rather as a fail-safe investment.   This drove demand well beyond what it should have been.
  • The exploding demand induced a construction boom.  Now we have more homes that the economy can support.
  • Unemployment may have fallen to 8.3%, but that is a misleading indicator.  The employed as a percent of the population bottomed at 58.2% in Dec 2009 and is now only 58.5%.  0.3% increase since the depths of the recession.  Meanwhile household income has continued to fall, even after the end of the recession and is now 14.2% below the 2009 peak.
  • The housing problem can only be solved by 1, letting the excess supply get worked out and 2, a growing economy in which household income rises.  No amount of government manipulation of interest rates and the supply of loans can, over the long run, counter the gravity-like reality of simple supply and demand.

Adding Fannie and Freddie to the National Books

House lawmakers passed legislation Tuesday to put the operations of Fannie Mae and Freddie Mac on the federal budget to more accurately reflect the costs of their rescue. When the government took over Fannie and Freddie through a legal process known as conservatorship, the Bush administration opted against incorporating the companies’ obligations into the federal budget, citing the arrangement’s “temporary nature.” The President’s administration has maintained that policy, accounting for Fannie and Freddie as entities that are independent from the government but receive regular infusions of cash. Critics, however, argue that this arrangement doesn’t reflect reality.

  • In 1990, federally backed loans made up roughly 50% of all loan originations.  For the past 3 years, they’ve been over 90% of all loan originations.
  • Home prices continue to fall, according to a Case-Shiller report prices fell another 3.7% in November (the most recent report).
  • Fannie and Freddie simply transfer the risk of mortgage default from the lender to the taxpayer.
  • Although the U.S. government needs very much to get out of the home loan business, it is not reasonable for this to happen anytime soon as it would be entirely too disruptive to an already fragile and critical part of the economy.
  • The most likely solution for Fannie and Freddie is to have them slowly wind down their loans, which means they will be on the books for a considerable period of time, thus their financials need to be integrated with the rest of the federal government.
  • Ultimately taxpayers and the U.S. economy will only be protected from future bailouts by a full withdrawal of the federal government from housing policy.  Interventions by the FHA, Fannie, Freddie, Federal Home Loan banks etc continue to push excess capital into the housing markets, making the commercial banking sector overly vulnerable to downturns in the housing market.