Monday, October 7, 2013

Steve King/ Bought Back VWITX at $13.77/Bought: 50 BMLPRJ at $19.93, 100 Cominar REIT at C$18.75/SOLD 50 FCG at $19.15, 50 CVY at $23.87/ Paired Trade Roth IRA Bought 50 FAM at $14.2-Sold 50 SNLN at $19.89

Since a few readers are interested in how I am responding to the current political dysfunction in Washington with my asset allocations, I am publishing the weekly post whenever I finish writing it rather than on the usual Saturday morning. I am consequently on an irregular publication schedule. The next post may be published this Friday or next Wednesday, depending just on when I finish writing it.

If and when the current dysfunction is resolved with a CR and a debt limit increase, I will go back to the normal Saturday schedule, possibly publishing an update to my CEF portfolio in between posts since there would likely be a longer than usual time between posts.

As to my comment policy, I am not going to publish anymore a comment that deliberately misrepresents my position and throws ad hominem attacks my way, filled with what I view as inaccurate information and deliberate misstatements of my positions. Those kind of comments are more appropriate in the Yahoo Finance Message Boards, where word pollution has no known limits, rather than here.

I would remind any right wing ideologues/reactionaries that wish to spew their venom and vinegar my way that I voted for the two current Republican Tennessee Senators Bob Corker and Lamar Alexander as well as the current Republican Governor Bill Haslam. I do not like many of their actions and votes and will weigh the alternative in all elections.

Bill Maher outdid Jimmy Kimmel in citizen interviews about Obamacare. Until watching the video aired during Maher's program, I did not realize that Obama wanted to put chips in our arms to keep track of us.

I did not cite the chip in the arm issue when discussing my reasons for opposing the law: Why I Would Have Voted Against Obamacare Perhaps, I need to correct that oversight.


I am concerned that the market may be over estimating the likelihood of both a quick end to the shutdown and a debt limit increase. For example, Goldman assigns a zero possibility to no debt limit raise by the deadline. MarketWatch Am I comfortable with that kind of prediction?

Cruz: Use debt ceiling debate for leverage – CNN

Based on my observations over the past 62+ years, I am more inclined to prepare for irrationality rather than to assume rational behavior. I was concerned about the stock market before this latest eruption of political dysfunction, and my normal prudence is causing me to lighten up on stocks. I can always buy back when the dust clears. I am shedding at least one position per day and may soon add a triple short.

Another consideration is the usual balancing of potential risks/rewards. If there is a 5% to 15% risk of a 30% to 50% decline in the stock market, I need to take that into account.  "A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall" - Bloomberg

Brian Wesbury may be right that the default discussion is just scare talk, but how much would you bet now on that being a correct assessment? Is it responsible to take the nation to the brink or for politicians to even discuss that possibility?

The stock market is currently predicting a zero chance of a debt default.

Reading articles, like this one published over the weekend in the NYT about voters in Tom Graves congressional district in Georgia, highlight the potential conflict resolution problem. (see also, Tom Graves is sued for 2+M loan default: Claims Bank is at fault for loaning him the money |

True Believers are incapable of exercising good judgment for a variety of reasons. They are unable to acquire or evaluate accurate information due to their ideology and pre-existing opinions formed with no or little accurate information; their ideology will warp and shape any opinion; their proposed solutions to any problem are unworkable and can not be made to work without causing severe hardship to large segments of the population;  and they are incapable of learning anything from current events or history.

I would also emphasize a point made last week. If the Democrats are willing to vote for a clean CR, as they claim, this would be a vote for sequestration in F/Y 2014.

The CBO estimates that there will need to be $90.528 Billion in discretionary spending cuts in the current fiscal year under sequestration. CBO | Sequestration Update Report: August 2013

The Democrats claim that there is enough votes for a clean CR. Boehner disagrees so he will not allow anyone in the House to vote on one. If he did, he would be ousted as Speaker by a majority of House republicans.

Hopefully, irrespective of a person's political affiliation, we can all hope that Washington will not inflict significant damage on the economy and threaten the status of the USD as the world's reserve currency. I would not assign a 100% probability to that outcome however as many do. In my most optimistic and transitory moments, I would give it 90% but admittedly I am both cautious and cynical, far more inclined to be safe rather than sorry.

Assigning blame is only important in the next election cycle. If someone shoots me today, the reason does not matter to me when I am laying in a hospital bed with a gunshot wound or in my grave.

In the last analysis, I recognize that I am responsible for managing my own money and that of family members. I have to make objective, prudent and informed decisions when doing so.

I have no control over the events that can seriously impact my investments. Is their a buying opportunity now as many claim with the S & P up almost 70% from 10/1/2011?


Maureen Dowd has a comical vision into our future. NYT

A non-Fox "news" perspective on the shutdown can be found in these articles: Jonathan Chait's opinion column published by New York Magazine; Fareed Zakaria's blog at; and by this article in Sunday's NYT: "A Federal Budget Crisis Months in the Planning" The NYT article provides some background history about the GOP's planning.

"Cruz promises Republican victory in shutdown fight" – CNN

"What would a U.S. default look like?" | Reuters


Big Picture Synopsis


Stable Vix Pattern (bullish)
Short Term: Expecting a 10%+ Correction
Intermediate and Long Term: Bullish

As the dysfunction in Washington continues, I continued to reduce slightly my stock allocation for the reasons given in the last post.

Readers of this blog know that I was nervous about stocks prior to the government shutdown and the game of chicken with the debt ceiling increase. As noted last week, David Stockman and many republicans see no problem in holding the debt limit hostage, even if that means a potential default on the nation's obligations.

Irrespective of which side deserves the blame, the result is the same. The economic recovery is weak and fragile and an extended government shutdown increases the likelihood of a recession next year without producing any long term benefits worth the cost.

The failure to raise the debt limit is potentially catastrophic and consequently unimaginable to investors. The collapse in the housing bubble and the recent Near Depression were likewise unimaginable.

Recent Testimony of Mark Zandi "The Economic Cost of Debt-Ceiling Brinkmanship".

Debt Limit Analysis: Sept 2013.pdf

"Shutdown: A multi-billion dollar hit to economy" CNN

Part of the harmful impact will be reduced by the agreement to pay federal workers for not working due to the political impasse.


Short Term to Long Term: Slightly Bearish (based on interest rate normalization: The Difficult Path to Interest Rate Normalization)

So far, bonds have benefited from the recent decision by the Federal Reserve to continue its asset buying spree at $85B per month.

The FED's balance sheet is approaching $3.5T. System Open Market Account Holdings - Federal Reserve Bank of New York "T" stands for trillion, as in one million million.  

As noted earlier, I am estimating that the normal 10 year treasury would be yielding now 4% to 4.25% in the absence of Federal Reserve intervention in the market, based on current inflation expectations embodied in the 10 year TIP. That estimation is based on the historical 10 year yield, determined in a free market, will average 2%-2.25% over the anticipated inflation rate. 

For each .25% rise in that annual inflation expectation above 2.25%, I would raise that normalized nominal 10 yield treasury yield by .25%. 

I would raise the 2.%-2.25% spread to anticipated inflation even higher during periods where inflation expectations are increasing rapidly higher, since such events create more uncertainty and consequently require larger than normal spreads to compensate for the inflation risk.

I am not positive how treasuries will respond to a failure to raise the debt limit. In that eventuality, Congress has attempted to prevent the treasury from paying the lawful debts of the U.S.

I am not sure that it would be lawful for the President to pay some debts while delaying or reneging on others authorized by the laws of the U.S., approved by Congress and signed into law by the various Presidents.

I would view the failure to pay some obligations as a U.S. government default even if interest in paid on treasuries and principal is paid on maturing ones. A default in paying a vendor is no different in my mind than failing to make an interest payment on a debt obligation. An interesting legal issue is whether it is treason to cause a U.S. default on its lawful obligations by refusing to increase the debt limit. A default could easily be more damaging to the nation's interests than all prior acts of actionable treason-combined- from Benedict Arnold to Robert Hanssen.

A sizable number of republicans want to find out what will happen by conditioning their approval of a debt limit increase and say there is nothing to worry about, which is not surprising.

If it is possible to prioritize payments, then it is possible that treasury prices would rise, rather than fall, in price even if the ratings on the government's debt are justifiably reduced to a "D", the assignment made by the rating agencies when a company enters BK.

When and if  Congress refuses to raise the debt limit,  there could be a flight to safety among investors worldwide. As a result of the FED buying large quantities of the U.S. government's paper with newly created money, there could actually be a shortage of treasuries to meet the demand. Another issue is whether buying treasuries under those circumstances is a proper flight to safety choice. It would be the knee jerk one.

Is it wise to buy the debt of a country whose politicians are discussing issues relating to a debt default?

As noted, the Fed's balance sheet is approaching $3.5 trillion. System Open Market Account Holdings - Federal Reserve Bank of New York


Recent Economic Reports:

The government was unable to release September's job report last Friday due to the government's shutdown. One causality of the shutdown is that investors have to make decisions without updated government statistics relevant to those decisions.

The government closure is also delaying crop reports that investors need to price commodities intelligently.

The September ISM services NMI was reported at a lower than expected 54.4, down from the August reading of 58.6. The consensus forecast was for 57. The new orders component declined slightly to 59.6. The employment index declined to 52.7 from 57 in August.


1. Bought Back VWITX at $13.77 (see Disclaimer):

Snapshot of Trade: 

Bought VWITX 217.8 at $13.77
I am starting out with a minimum $3,000 investment and will start to add an additional $250 per month starting in October 2013 until I reach $5000. 

Security Description: The Vanguard Intermediate-Term Tax-Exempt Fund (VWITX) invests in tax free municipal bonds. 

The expense ratio is low at .2%. The average duration is 5.6 years. Vanguard - Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares

The credit quality of the bonds is high:

Portfolio Composition

Prior Trade: I did not discuss this transaction in the blog:

2012 Sold All at $14.23 +$177.78
That transaction occurred on 3/1/2012: VWITX Historical Prices

The fund hit a high at $14.59 last December. Vanguard Intermediate Term Tax- Fund Chart

I also sold $1,000 in 2010: What is the More Rational Prediction for the Future-Inflation or Deflation(July 2010)(noted selling $1000 in both the Vanguard Intermediate Investment Grade Bond fund and the Vanguard Intermediate Tax-Exempt fund

I have also liquidated my position in the Vanguard Intermediate-Term Investment-Grade Fund (VFICX).

I will buy that one back, but I will wait until the 2014 summer to do so. I do not want to overdue my bond fund buybacks until the FED is closer to terminating its bond market intervention through QE.

Rationale: I never invested the proceeds from the prior sales of this fund. The proceeds were exchanged for shares in the Vanguard Prime fund which is paying .01% before taxes. 

There was a Barrons' article a few weeks arguing that investors should buy municipal bonds, basically due to their after tax yields compared to similar quality taxable investments. That argument holds water only if interest rates do not move up.

Based on recent developments, including the government shutdown, I have extended both the start period for tapering and when it may end.  As I noted in a recent SA comment, I will assign possibilities and probabilities to future scenarios and then alter those assignments based on subsequent events. I now believe that there is a 50% possibility that I will be able to exit this position in a year at a profit while earning close to real rate of return after taxes.

With an intermediate term bond fund, there is a benefit associated with an interest rate increase. As bonds mature, the manager can reinvest the proceeds at higher coupons that would over time lead to dividend increases. By reinvesting the dividend, the investor will also capture the lower prices caused by the rise in rates that would lead to even more income when the proceeds from maturing bonds are invested in higher yielding securities. 

Risks: (1) Interest Rate Risk and Duration. Municipal bonds have such low yields that it would not take much of a rise in rates to offset the income paid by those bonds.  The Vanguard Intermediate Tax Free has interest rate risk. With a duration of 5.6 years, I would generally expect something close to a 5.6% decline in price with a 1% rise in rates.  

Get to know your bond fund: Duration| Vanguard

The net asset value per share declined from $14.44 per share on 5/2/13 to $13.48 on 9/5/13. This was during the interest rate spike period. Unadjusted for the small monthly dividend payments, the share price declined 6.65% or more than two years of dividends at the current rate.

2. Bought 50 BMLPRJ at $19.93 (see Disclaimer):

Snapshot of Trade:

2013 Bought 50 BMLPRJ at $19.93
Security Description: The Bank of America Preferred Floating Rate Non-Cumulative Series 4 Stock (BML.PJ) is an equity preferred stock that pays qualified, non-cumulative dividends at the greater of 4% or .75% over the 3 month LIBOR rate on a $25 par value. Final Prospectus Supplement

This security was originally issued by Merrill Lynch and became a Bank of America obligation after the merger.

Dividends are paid quarterly.

Day of Trade Closing Price: BML-PJ: $19.90 -0.49 (-2.40%)

A general summary of the advantages and disadvantages of this type of security can be found in Stocks, Bonds & Politics: Advantages and Disadvantages of Equity Preferred Floating Rate Securities.

Prior Trades: My trading in this security has been in small amounts, mostly clipping one or more dividends and selling at small profits.

Sold 100 BMLPRJ at $19.55 (February 2012)(no snapshot since the gain was less than $30; Profit =$7.06)- Item # 4 Bought 100 BMLPRJ @ 19.32 (February 2011)

Item # 5 Sold 50 BMLPRJ @ 18.73 (October 2010)-Item # 4 Added 50 BMLPRJ at $17.74 (August 2010); Item # 2 Sold 50 BMLPRJ at $19.25 (September 2010)-Item # 7 Bought 50 BMLPRJ at 18.50 (August 2010)

2010 BMLPRJ +$50.16
I held one position for only a few days, capturing a $90.98 profit on a 50 share lot. I was playing the volatility:

Item # 1 Sold 50 BMLPRJ at $18.9 (February 2012)- Added 50 BMLPRJ at $16.8 (February 2012)

2012 BMLPRJ 50 Shares +$90.98
Total Realized Profit: $148.2

Rationale and Risks:

I have recently discussed the rationale and risks connected to this type of security:

Item # 3 Bought 50 HBAPRF at $18.53
Item # 4 Added 50 SANPRB at $18.24 

In a brief summary, the disadvantages include the lowly status in the capital structure below all bonds and above common stock only; the non-cumulative status of the dividends; the perpetual character of the security (redeemable at the option of the issuer); the issuer's leverage; the likely price of zero in a BK;  the volatility in price usually caused by one or more of the preceding characteristics (rational or irrational); and the fact that short rates will not increase the coupon for several years due to ZIRP.

The advantages are the volatility in price providing opportunities for quick capital gains; the qualified dividend status; the relatively decent real yield at the current price and coupon; the stopper clause which prohibits the elimination of the preferred dividend for as long as BAC pays a cash dividend to common shareholders; and the problematic inflation protection built into the coupon with the Libor float. However, the float provision does not provide any protection for as long as ZIRP continues since the 3 month LIBOR rate will be near zero due to that abnormal policy. It would provide some protection in a rising interest rate environment caused by problematic inflation and a normal Federal Reserve monetary policy.

The current yield based on the 4% minimum coupon would be about 5.02%.

3. Sold 50 CVY at $23.87 (see Disclaimer): The Guggenheim Multi-Asset Income ETF  (CVY)

Snapshot of Trade:

2013 Sold 50 CVY at $23.87
Snapshot of Profit:

2013 CVY 50 Shares +$150.71

Rationale: This ETF was sold to reduce my stock allocation during the current period of political dysfunction. I also had a decent percentage profit. Another reason for selling it was the insignificant size of the position.

4. Bought 100 Cominar REIT at C$18.75 (see Disclaimer): Canada does appear to me to have far more rational politicians than the ones infesting the U.S.

Snapshot of Trade:

2013 Bought 100 CUF_UN:CA at C$18.75

Security Description:  Cominar Real Estate Investment Trust Units  (CUF.UN:TOR) is a Canadian REIT that owns office, retail and industrial/mixed-use properties in Canada

Welcome – Cominar Real Estate Investment Trust

Cominar Properties - List of Properties (Atlantic provinces, Ontario, Quebec and Western Canada)

Cominar Properties - Overview


Prior Trade:

2011 Cominar 100 Shares +$196.7
Item # 1 Pared Trade: Sold 100 CUF_UN:CA @ 22.66 CAD & Bought 100 CDZ:CA at 21.26 CAD (April 2011)- Bought 100 CUF-UN.TO @ 21.68 CAD (Nov. 2010)

The pared trade worked out this time since  iShares S&P/TSX Canadian Dividend Aristocrats Index Fund (CDZ:TOR) is higher in price now while Cominar is lower than the previous sale's price of C$22.66.

Recent Earnings Report: As of 6/30/13, total assets amount to C$5.879B, up 24.6% from the 2012 second quarter quarter. The occupancy rate stood at 93.4%. The debt ratio was 51.3% and the annualized interest coverage ratio was 2:82:1. Recurring adjusted funds from operation per unit was unchanged at $.38 per unit. During the quarter, the company sold $100M in unsecured debentures bearing a 4% coupon and maturing in November 2020. Subsequent to the quarter's end, the company issued another $100 in unsecured debentures maturing in July 2020 at 4.941% and redeemed all of its Series C preferred stock which had a 5.8% coupon. .pdf

Rationale: My recent Canadian REIT buys have not been kind to me so far. Bought 200 Canadian Apartments at C$20.67;  Bought 300 of Artis REIT at C$14.36

Dividends are paid monthly. The current rate is C$.12 per share.

At a total cost per share of C$18.75, that works out to be around a 7.68% dividend yield. Over time, I would expect modest dividend increases provided there is not another deep recession anytime soon.

Risks: The recent fall in price illustrates a risk. On 4/30/13, the share price close at $24. CUF-UN.TO Interactive Chart Unadjusted for dividends, the price declined by 21.875% until I purchased 100 shares at $18.75 and more after my purchase. I associate that decline with a rise in interest rates and the overall slight over valuation in the REIT space that existed in Canada and the U.S. back in May.

The decline to C$11.5 during the Near Depression highlights another risk. That decline was not related to the bond substitute/interest rate risk issue but to the recession or depression risk.

While the current dividend yield is attractive, the dividend growth rate is unattractive as shown by the recent dividend history. Investor Relations - Distribution History On the positive side, the dividend was not cut in 2008-2009 which happened for a large number of U.S. REITs. The annual payment is currently C$1.44 per share and has not been raised  between the start of 2009 to date. The annual rate in 1999 was C$1.052.

I do not view a dividend increase as likely anytime soon. The total monthly dividends for one quarter equals $.36 while the recurring adjusted funds from operations per unit stood at $.38 for the second quarter.

5. Paired Trade Roth IRA: Sold 50 SNLN at $19.89 and Added 50 FAM at $14.2 (See Disclaimer):

Snapshots of Trades:
2013 Roth IRA Sold 50 SNLN at $19.89
2013 ROTH IRA Added 50 FAM at $14.2
The share loss was $25.02 after commissions, roughly break-even after the dividend payments.

Item # 1 Bought 50 SNLN at $20.11-Roth IRA

Description of Securities: The Highland/iBoxx Senior Loan ETF (SNLN) is a junk bank loan ETF.

The First Trust/Aberdeen Global Opportunity Income Fund (FAM ) is a leveraged closed end bond fund.

FAM Page at CEFConnect

FAM Page at Morningstar (3 Stars)

Sponsor's website: First Trust/Aberdeen Global Opportunity Income Fund (FAM)

As of 12/31/12, the operating expense ratio is high at 1.3% with another .29% in costs added by the leverage.

FAM Data as of Friday 10/4/13 (date of purchase):
Closing Net Asset Value: $15.7
Closing Market Price: $14.19
Discount: -9.62%

As of 10/4/13
Average 1 Yr Discount: -2.99%
Average 3 Yr Discount: -3.03%
Average 5 Yr Discount: -6.1%

I have noted in prior posts on this CEF that the credit quality is weighted in investment grades:

Semi-Annual Report (period ending 6/30/13)

Rationale and Risks: This pared trade will slightly increase my income generation which is tax free when paid into the Roth IRA. I have also increased the probable time duration of abnormally low short term rates.

FAM is currently paying a monthly dividend of $.13, partly funded by a ROC. (click "Distributions" tab at CEFConnect) To avoid a ROC, the fund will need to harvest some capital gains.

At that rate, the dividend yield would be about 10.99% at a total cost of $14.2 per share.

I was also mindful of this recent critique of bank loan funds published by Vanguard. The report does mention the positives but also the negative features. It can be downloaded at Vanguard - A primer on floating-rate bond funds

I discuss the rationale and risks associated with FAM in several recent posts where I started to buy back shares previously sold at higher prices. Unfortunately, those re-purchases were at higher prices than the last one. The most recent discussion was in a 6/22/13 Post: Item $ 6 Added 50 FAM at $14.95-Roth IRA The risks are the normal ones for a leveraged bond CEF that invests in bonds worldwide. Those risks include the risks associated with CEFs (e.g. an expansion of the discount after purchase); interest rate risk, credit risk and currency risk.

On the more positive side, I did sell my position at higher levels before prematurely buying shares back:

Sold 50 FAM at $17.99 September 2012-Bought 50 FAM @ 17.37 in Roth IRA November 2010

Sold 150 of 200 FAM at $18.64 October 2012 (see snapshot)-Bought 50 FAM @ 17.37 and Bought 100 FAM @ $17.9 (November 2010).

6. Sold 50 FCG at $19.15 (see Disclaimer): I am just looking for small positions to jettison in order to raise my cash allocation some. Under the circumstances, some measured decreases in risk assets seems appropriate. Securities are being selected in part on the size and importance of the position (a 50 share position in an ETF is immaterial), the percentage total return and the time period for that return.

The First Trust ISE-Revere Natural Gas Index Fund Fund (FCG) is an ETF that owns U.S. listed natural gas stocks.

First Trust ISE-Revere Natural Gas Index Fund (FCG)

Snapshot of Trade:

Snapshot of Profit:

2013 FCG 50 Shares +$149.58
18.7% return on the shares since 12/24/12

Bought 50 FCG at $15.84 (December 2012)

I will certainly consider buying this one back after a significant price correction. I am not going to buy it back at a higher price than $19.15.

Politics and ETC:

1. Medicaid Expansion and Obamacare: The NYT published an article recently that highlighted the refusal of 26 GOP controlled states, many of them in the South, to expand Medicaid with Federal funding. Every state in the Deep South has rejected that expansion other than Arkansas.

About 60% of the working poor who would qualify for that expanded health insurance are in those states. Tennessee is one of those states, but the business interests in my state are pushing really hard for that federal money, including the hospitals. The for profit hospital industry started in Nashville and HCA is still based here. Tennessee may consequently relent eventually.  WP I doubt it but it is conceivable.

ObamaCare Medicaid Expansion

As part of Obamacare, the Federal government would agree to initially pay 100% of the costs associated with expanding Medicaid and then taper the contribution to no less than 90% of the cost after 2016.

If the U.S. did not already have a massive underfunding problem for entitlement programs, I would not have a problem with extending Medicaid to cover more low income workers. That situation simply does not exist now or for the foreseeable future.

Unfortunately for those low income workers, the U.S. already has an extremely serious long term fiscal problem with both Medicare and Medicaid as they exist in 2013. Rather than addressing the anticipated long term fiscal issues for Medicaid and Medicare, which could easily lead to a financial collapse down the road, the Democrats add to the existing problem by adding more people to Medicaid, thereby increasing the federal fiscal problem and making it even more difficult to address the existing unfunded future liabilities.

How much will it cost the federal government to subsidize the states participating in that expansion. It will cost a lot of money. I have seen various estimates.

One study estimated the federal share to be $952 billion over the next ten years. "The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis | The Henry J. Kaiser Family Foundation"

I would just remind those who are in favor of these expenditures that Medicare is estimated to be underfunded by over $75 trillion dollars.

Just in case anyone has forgotten about the baby boomers, who are now starting to draw SS and Medicare Benefits, I thought that I would take a snapshot of the first two paragraphs from the last Trustee's Report:

Trustees Report Summary

Social Security and Medicare: time running out to fix them, trustees say -

I am not with the Democrats on this Medicaid expansion until (1) medical costs, including rampant fraud, are brought more under control; (2) other measures are taken to shore up the long term financial viability of Medicare and (3) substantial inroads are made to control fraud.  Has that been done? No, not even baby steps (except on attacking Medicare fraud) in the fiscally responsible direction. A fourth condition is more flexible and involves a further reduction from the current budget deficit level as a percentage of GDP.

I mentioned in the last post a GAO report that Medicare was being fleeced by about $50B per year.

A 60 minutes story, airing last Sunday, focused on the burgeoning and frequently bogus claims that are accelerating the depletion of the U.S. Disability Fund.  Disability, USA - CBS News  America is being fleeced without question out of tens of billions each year.

In a blog several years ago, I mentioned that close to 100% of the workers retiring from the Long Island Railroad were being awarded disability, a practiced exposed in several front page NYT stories, NYT,  NYT. The government is a really easy mark and that has to stop. Crackdowns have started to multiply on major fraud rings. Sequestration is inhibiting those efforts however. Spending cuts on health-care fraud probes hurting enforcementCNBC; Nationwide Medicare Fraud Bust-92 Charge-$432 Million

2. The GOP and the Hispanic Vote/Is Steve King a True Conservative?: Republicans are doing whatever they can to solidify the rapidly expanding Hispanic vote for the Democrats.

Apparently, the goal is to insure that all non-Caucasians form solid Democrat voting blocs for generations to come while the GOP retains a firm hold on (1) WASP, middle aged evangelicals; (2) the Koch brothers, Rush Limbaugh fans and similar citizens; and (3) assorted varieties of wingnuts

{Wingnut examples: Obama is a Muslim born outside the U.S. (the Hawaii birth certificate is a fake); Texans need to be ready when Obama and the U.N. roll tanks into Lubbock Texas to take away our freedoms and guns,, just like the patriots did at Lexington and Concord; the free market alternative to Obamacare is for the less fortunate to trade chickens for healthcare, "Sue Lowden Stands by Chicken Health Care Barter Plan"; Obamacare is all about placing chips in our arms to gain control over our minds; republicans may soon find it necessary to exercise their Second Amendment rights against the government, unless they get their way: "Republican Senate Candidate Sharron Angle floated possibility of armed insurrection", etc. and so ad nauseam}

I mentioned in last week's post that Obama received 71% of the Hispanic vote, one of the most rapidly growing segments of the population. As noted by PewResearch, the number of Hispanics eligible to vote rose by 19% between 2008-2012.

One of the comforting points for the GOP is that more than half of the eligible Hispanic voters did not vote.

The Senate recently passed an immigration bill with significant republican support, including the two republican senators from Tennessee Lamar Alexander and Bob Corker. U.S. Senate: Legislation & Records Home > Votes > Roll Call VoteCNN

I voted for both Corker and Alexander as noted above and in prior posts.

John Boehner will not bring that bill up to a vote since it is opposed by a majority of House republicans.

In the Quinnipiac poll released last week, only 17% approved of the way GOP lawmakers were handling the issues while 74% disapproved. MSNBC That 17% might be pretty close to the modern day GOP's core voters.

There are a few thoughtful republicans who are concerned about that kind of number, though they are a rare species in the House.

One of the House republicans opposing the Senate's immigration bill, who represents Iowa's 4th congressional district, is Steve King.

King stated that Hispanic drug smugglers would benefit from the DREAM Act and outnumber immigrant valedictorians by 100 to 1. "Rep. Steve King insists immigration bill benefits drug smugglers" Say What? He would not supply facts to support that statement when questioned, but the soundbite must have sounded good back in Iowa.

Steve King (R-Iowa) compared Hispanic immigrants to dogs. The Colbert Report - 2013-25-07 - Video Clip | Comedy Central  He denied it, but the video speaks for itself. A video can present a window into the soul.

U.S. Hispanic television stations give his comments a lot of attention, as do Colbert and Stewart who will air frequently his statements, allowing King to speak for, and reveal, himself in his own words and body language.

For many Americans, including the young people that watch Stewart and Colbert, republicans like Steve King have become the face of the modern day GOP.

I am discussing the foregoing simply to highlight a point made in last week's post, which will never be understood by the right wing ideologues who now dominate the GOP.

The GOP is turning off large segments of the electorate and is losing those voters for good. Sure, their message plays well in a large number of congressional districts throughout the South and elsewhere in the prairie states as well as a diminishing number of western areas that religiously listen to Rush Limbaugh to acquire their thoughts and information.

And, it may only be a matter of time before a significant number of their core middle class voters realize that the modern day GOP will throw them overboard, as they did in mass when voting on Ryan's alternative to traditional Medicare. CBO: Seniors Would Pay Much More For Medicare Under Ryan Plan - Kaiser Health (see figure 1 on the increased costs per year under the GOP's voucher plan-a guarantee of BK for most middle class couples in their golden years)
Most readers who are of the GOP persuasion will not look at that chart, so I will reproduce it here:

We can understand why a number of billionaires of a certain ilk supported this plan. But why did 235 republican member of the House vote for the Ryan budget plan (Clerk of the House: Final Vote Results for Roll Call 277), while reducing taxes for the rich. Economic Policy Institute (tax decreases for the wealthy magically paid for by broadening the tax base in some unspecified way)

How did the GOP's voucher plan reduce government spending? It is simple really-by transferring costs from the government to seniors.

Fortunately for the GOP, their white middle class voters are oblivious to those kind of votes. Have they saved enough for retirement even with a continuation of traditional Medicare?

Some might take offense of being thrown overboard to enrich the Koch brothers.

Or, even when the impact is known, it is okay provided the GOP opposes gay marriage, supports the constitutional right to carry guns in bars and to easily buy 800 round cartridges on the internet. (Just a few bucks for a High-Capacity Magazine capable of spraying a 100 bullets in a few seconds)

Others will seemly deride the CBO's estimates as liberal propaganda. What did Fox "news" say about it?

As a means to save the government money, which is what the GOP claims to be doing now, I  propose legislation here and now, as a compromise to resolve the current problem, the permanent  adoption of the Ryan Medicare plan for every person now living in those 232 republican congressional districts, their children, the children of their children, and so on forever, no matter where they subsequently live, sort of a pretend  Scarlett R permanently tattooed on their chests, as in The Scarlet Letter.

Unfortunately for those opposing the voucher plan living in those gerrymandered GOP districts, they will have to pay a price. Life can be unfair and take many unexpected turns. What you need to do is start saving more now.

I will feel their pain since I would be one of them, but then I will not be living under a bridge crossing the Cumberland River, in a cheap pup tent, finding my daily nourishment in the refuse of restaurants located downtown Nashville, when I am 75. Williamson County, Tennessee is the 17th wealthiest county in the U.S. according to the Census Bureau, Forbes, and the wealthiest when cost of living is factored into the equation. Why? The SUV Capital of the World, where HQ is located, is in Williamson County.

King has a lot of support in his Iowa congressional district and is unlikely to be defeated by a Democrat. He soundly defeated a well known Democrat. Christie Vilsack, in the 2012 election. Christie is the wife of the former Iowa governor Tom Vilsack who is now Secretary of Agriculture.

King opposed aid to Katrina victims, supports dog and cock fighting, and has defended racial profiling. Smith was recently profiled in a NYT; Transcript Debate between King (R) and Vilsack (D) Debate Iowa Public Television: King defends his Katrina vote as "principled" and a "good vote", referring to the appropriation as "wasted funds") While I am hesitant to give advice to the Democrats, a case could be made that Democrats should funnel campaign contributions to King, and just quit trying to defeat him in an election, since he is a gift that will keep on giving for them. I may have just figured it out. Maybe Steve King is really a liberal Democrat, an amazingly successful undercover tactic-a Democrat double agent!

I thought that King might want to read this summary of research about MRI's of a dog's brain since he was opposed to a bill prohibiting fighting dogs to their deaths. Dogs Are People, Too - NYT

Dogfighting and Steve King- The Colbert Report - 2012-07-08 - Video Clip

One of the GOP congressman, Steve Palazzo from Mississippi, voted against Sandy aid but voted for aid to the Katrina victims, I will admit to an inability to understand the logic but our LB is not an expert on brain malfunctions.

My representative, who is in favor of federal relief when it comes to flooding and tornados in Tennessee's gerrymandered 7th congressional district (just look at the map), said that "we're not going to cry emergency every time we have a Katrina. . . every time we have a need for extra spending, that we don't go call for a special appropriation that allows us to circumvent the PAYGO rules". The Washington Monthly

If a really bad Category 5 tornado devastates Sioux City and Mason City, two of the largest towns in his district, I am sure King's constituents will understand why he and my congresswoman will have to stop federal aid for them. That's the breaks-as I just said-life can be unfair.

Or, maybe there is a difference between tornados in northwest Iowa or middle Tennessee and hurricanes devastating the Gulf Coast, particularly one impacting large numbers of black citizens in New Orleans. (story 10/5/13: Tornadoes cause damage, injuries across Iowa)

King and his farm belt constituents are fiscal conservatives, except of course when it comes to farm subsidies and other federal programs that lavish benefits on them personally. Another way for them to practice what they preach is to abolish traditional Medicare for them and to give them the voucher alternative that King endorsed, a policy alternative that I endorsed above for 232 congressional districts including my own-just to be fair about it really.

3. The GOP and the Young Voters: The modern day GOP is turning off large segments of young voters. It is already clear that a significant number of young voters are turned off by the GOP's wedge positions on gay marriage, abortion, guns, etc, though less on abortion than the other hot button social issues.

The GOP's positions on those issues have to be rigid in order to maintain their hold on evangelicals who have become an integral part of their Southern coalition.

An interested person only needs to look at the polling data. Voters between 18-29, 18% of the 2012 electorate, favored Obama by 60%. The Generation Gap and the 2012 Election | Pew Research Center; Young Voters Backing Gay Rights Are Republican Hurdle - Bloomberg.

On the gay marriage issue, for example, the gallup polling shows that 70% of the 18-29 year olds believe it should be legal, up from 41% in 1996. Same-Sex Marriage Support Solidifies Above 50% in U.S.

For many youngsters, seeing these old white men taking the contrary position has the opposite effect compared to what that southern evangelical middle aged white person wants to hear.

The demographics are  becoming worse in each presidential election cycle as the GOP turns off more non-whites, women, social progressives, and young people while pandering to their current base coalition.

Tennessee approved in 2006 a Constitutional Amendment banning same sex marriages with 81% voting for that constitutional amendment. Tennessee Marriage Protection Amendment I voted against it, just rubbed me the wrong way, but I knew that the vast majority of Tennessee voters favored it and that is democracy in action. In Tennessee, it  does not matter what I think or how an independent votes.

The voting blocs, which the modern day GOP turns off, do matter in swing states for both senate and presidential elections however, and will impact state races that could lead to several state legislatures turning blue from red (e.g. PA is one such state). Obama carried Pennsylvania with 52% of the vote, but the GOP has 13 out of the 18 House seats from that state.

When the Democrats regain control at the state level, they will likely exact retribution when drawing new lines for congressional districts, and the GOP can complain about gerrymandering that leads to Nancy Pelosi becoming Speaker of the House again. Reverse gerrymandering may not even be necessary in 2014 due to developments later this month.

Sure, many of those youngsters will change their voting patterns as they start to pay taxes. That is inevitable, particularly in high tax states like NJ where they might vote for Chris Christie or Scott Walker in Wisconsin after making their first property and/or state income tax payment. Many may vote for a Scott Walker clone for Governor, but maintain their allegiance to a Democrat in a Presidential or senate election.

Examples of the GOP appealing to social conservatives on the wedge issues are legion, easily numbering in the thousands on a weekly basis. I just wanted to use a recent one as an example to highlight my point since I was discussing Pennsylvania above, an example where the GOP has used gerrymandering to improve their numbers in the House.

The republican Pennsylvania Governor, Tom Corbett, recently compared gay marriage to incest. He smiled when he made that comment YouTubeUSAToday Occasionally, a comment can reveal the core of a politician's soul that is usually obscured by the more artful ones who never reveal what they are actually thinking (e.g. the less than artful comment by Todd Akin that a woman's body had the capability of avoiding pregnancy for a "legitimate rape" NYT) What does a young person think about the GOP when confronted with a constant flow of those kind of statements?

A political gaffe is frequently nothing other than a politician telling you exactly what they believe.

Better Off Without 'Em: A Northern Manifesto for Southern Secession: Chuck Thompson: Books

Idiot America: How Stupidity Became a Virtue in the Land of the Free: Charles P. Pierce: Books


  1. Thanks, Southgent. I enjoyed the post a lot.

  2. Thanks, Southgent. I enjoyed your writing and learnt quite a few things about US society.

  3. Francisco: Thanks. I may have made a wrong turn in 1973. I always enjoyed history, particularly U.S. political history which has always fascinated me. Characters like Steve King are commonplace.

    I graduated from Tulane University in 1973 with majors in history, political science and philosophy, with enough semester hours in graduate level history courses to qualify for a Masters decree. I was accepted into the graduate history program at Harvard, but elected to go to law school, a decision made due solely to monetary considerations.

  4. "An interesting legal issue is whether it is treason to cause a U.S. default on its lawful obligations by refusing to increase the debt limit."

    Definitely an angle worth pursuing; I hope some dream-team of lawyers is on it.

  5. Cathie The legal issues involved in failing to raise the debt ceiling are almost mind boggling to me. I have been trying this evening just to get my head around some of them. Some are constitutional and others are statutory based on laws passed by Congress such as the Prompt Payment Act.

    No one is going to be charged with treason even if a default cascades into a worldwide depression. The actions by political actors leading to that default would have a larger negative impact on the nation's interests than all legally actionable acts of treason, combined, since the founding of the nation. The largest penalty paid by any of them for this transgression would be to lose an election and move on to a higher paying job as a lobbyist.

    It is impossible to reason with a lot of people in our society who have no interest in facts.

    Bruce Bartlett, a republican, pointed out in a column published in the NYT that the treasury has told the republicans that there is no practical way for it to prioritize 80 million payments each month and the failure to make any lawful payment would be considered a default by the U.S. government.

  6. A reader pointed out that my link to a 800 round cartridge was to a toy. I have corrected those two links by inserting this one:

    For $159, I could buy over the internet a MAG5-50 cartridge with 50 rounds that are compatible with M4/M15/AR-15 variants. I would need to go to a dealer to buy a 100 round cartridge in a few states.

    Due to tremendous demand for high capacity cartridges, orders "will be delayed" according to the manufacturer.

    I could also buy a silencer for those weapon: