Homme du Jour
The flavor of this week is Newt Gingrich. While failing miserably at the outset of his campaign, Newt has gained momentum in recent weeks to take over the leadership in the race for the Republican nomination. Did Newt’s popularity really surge…or did the popularity of others really decline. Well, our buddy Herman Cain saw his number cut in half since his harassment scandals broke. Romney is on the minus side of his plus or minus 3% from his 25% baseline. Perry seems to have dropped off the map…for now and our favorite, Ron Paul is moving up slightly – better than moving down, that’s for sure.
You a Victim?
Like it or not, we are victims of global economic problems.
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I have been trying to put a finger on what it is about Ron Paul, from a personality standpoint, that isn’t resonating with the masses. I agree with many of his stances, on taxation, defense spending, the national debt etc. But, elections today are not about positions as much as they are about personality. Ron Paul just doesn’t have one.
When he’s not wringing his hands and doing Chicken Little impressions, he’s talking over the heads of the electorate. He reminds me of Ross Perot – lots of good ideas, but that squeaky, annoying voice that was a turnoff to many voters, Perot came close, but never quite made it over the hump. I think it was as a result of his lack of personality and his focus on the negative. Paul also focuses on the negative. It’s all gloom and doom. Now, we like gloom and doom to a point because we understand that this country faces a dire situation. But, the electorate doesn’t like to hear incessant rants about the demise of the US. And, Paul does little else but rant. If Paul wants to make a serious run at the Republican nomination he might be better served hiring a makeover artist rather than a campaign manager. To become President of the US you need to have a message other than “the sky is falling” to get elected and you need to be able to articulate the message like a game-show host. Once in office you can pursue whatever agenda you choose and be as boring as you please….
Back to Gingrich for a moment. He is leading Romney in the polls, but when it comes to who the voters think can beat Obama, Gingrich doesn’t cut the mustard. Lucky for him that Romney can’t get past the issue of Mormonism, because that is the only chance Gingrich has to win the nomination. So, what does this have to do with investing? Glad you asked.
It has everything to do with it. In their haste to resolve the debt crisis by forcing the Democrats to agree to no tax increases, the shortsighted Republicans agreed to a Super committee which would be tasked with finding ways to implement deficit cuts or be faced with mandatory cuts if they failed to do so. Well, of course, they failed to agree on anything except a statement that they failed to agree on anything. This, my friends is where the Republicans just gave up the farm trying to save a few cows.
Instead of massive entitlement reform, which is what is needed, the mandatory cuts are going to come from the place that the Republicans cherish most highly – the defense budget. Of course, the fact that the US spends more on defense than the rest of the world combined will ensure that we are not invaded anytime soon, despite the cuts, which are not immediate, but over a period of years. Worse, the lack of an agreement puts into motion the repeal of the Bush era tax cuts. By trying to not give in to Obama in September, they instead will give in to him now, but with bigger and better style. The markets are in flux because a major provision of the tax provisions under the Bush tax changes was for capital gains and dividends. If it expires, both will move higher and so will marginal rates…none of which will be positive for the economy or investors.
Of course, the bond market and the ratings agencies actually looked at this whole situation in a positive light since it ensures that there will be cuts in spending of some type coming down the pike. The point that seems to be lost to most, except Ron Paul of course, is that these cuts are cuts to future increases in spending. This will do nothing to cut the debt as a whole meaning that we are still heading down the river toward a waterfall, with no paddle. Ron, please find a personality soon!
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