TWINKIES NOT OUT OF THE WOODS YET?

It looks like the breads of Hostess Brands are being settled first, but there is a bidder for Twinkies out there.*  So although Hostess Brands is liquidating, very little of it will be just shuttered.

* https://www.cnbc.com/id/100502552

ARE STOCKS OVER VALUED AND OVER BOUGHT?

Though corrections in the stock markets are always possible, and may even be occurring now, once again I don't see anything alarming to suggest they are over valued and over bought as claimed by some. The P/E, as imperfect a metric as it may be, of the S&P500 is 15.54 now vs 14.53 a year ago so it has increased but not alarmingly so. And the dividend yield of 2.53% is actually above a year ago of 2.50. The DJ Transports have actually fallen in P/E from 20.90 a year ago to 18.94 today with an increase in dividend percent to 3.72 from 1.56.

On the other hand the DJ Utilitys have risen in P/E to 22.42 from 14.95 a year ago, an alarming increase screaming correction to me. And the dividend has fallen from 4.05% to 3.10% which is also not a good sign.

There are a couple of mildly worrying things in the highs and lows as the NYSE last week (February 19-22) had two days with the number of new 52-week daily lows somewhat above 40, and I don't like to see that (The NASDAQ Composite had none.). Still, the number of 52-week daily highs were above 40 every day with three days above 100 (and 412 on Tuesday!), resulting in weekly highs of 576 (and I like to see this above 100) with 82 new lows (I like to see this below 100, which it is, but the highest number since the week ending December 17, 2010.) Needless to say, the breadth index was negative for both the S&P500 and the NASDAQ Composite).

So I only see a looming problem in the utilities but am watchful on other areas.

OH NO, NOT MEAT INSPECTORS

One problem with the Sequester is that it is "across the board," which means that every program in every agency must be cut a certain amount.  Another is that the fiscal year of the Federal government is more than 5 mo. old so a good deal of Federal money has already been spent, which means that the amount to be cut is cut from a smaller pot.  Thus those who say that the Sequester is nothing are wrong.  For example, consider just meat and poultry:

The inspection and grading of meat and poultry are two separate programs within the U.S. Department of Agriculture (USDA). Inspection for wholesomeness is mandatory and is paid for with public funds. (Emphasis is from the reference)

http://www.fsis.usda.gov/FACTSheets/Inspection_&_Grading/index.asp

So it is the law that meat and poultry MUST be inspected.  Inspection is almost entirely manpower so, if the budget for meat inspectors is cut (which it must be if the budget is across the board), a certain number of meat and poultry inspectors must be laid off in some way (If not some number of pay periods, then some number of days of the week.).  What this means is that no meat and poultry inspection, no meat and poultry in the market for you to buy.  In fact, it will probably be that less meat and poultry will be available for consumption because of fewer inspectors per work week.  What do you think that will do to the price of these commodities?

Budget cutters have tripped over this problem before, most notably when Rep. Newt Gingrich shut down the government which meant NO meat or poultry inspection so NO meat and poultry to the stores.  Fortunately, the shut downs were short enough to that there was no meat or poultry crisis.

The DoD apparently is going to get around this problem from a national security problem to some degree by just furloughing civilian employees.  One is already hearing cries from governors against this.  How in the world does anyone think you can cut the Federal budget without cutting employees?

DOESN'T THAT TAKE THE CAKE?

Normally, I don't comment on politically made crises until they are solved one way or another; however, Rep. Boehner and some other Republicans keep claiming that the Sequester is Obama's idea.  It turns out that Boehner himself proposed the Sequester in July of 2011!  I know that politicians play fast and lose with the truth, but really.  To blame someone else for what you proposed takes the cake.  http://www.thedailybeast.com/articles/2013/02/20/the-powerpoint-that-proves-it-s-not-obama-s-sequester-after-all.html

In reality, I don't care whose idea it was first.  The reality is that this is where we are at or, as Sec. Clinton said about Benghazi, "What difference, at this point, does it make?"  Read more: http://www.newyorker.com/online/blogs/closeread/2013/01/hillary-clintons-testimony-what-difference-will-it-make.html#ixzz2LXymwvJ2

Note added February 25, 2013:  Bob Woodward claims that the Obama administration did propose the Sequester first after all.*  The date given is July 27, 2011 "Obama personally approved of the plan for Lew and Nabors to propose the sequester to Senate Majority Leader Harry Reid (D-Nev.). They did so at 2:30 p.m. July 27, 2011, according to interviews with two senior White House aides who were directly involved."  But Boehner's PowerPoint was also in July so the dates are pretty close.  I reiterate, however, that I don't care who proposed it first, that it is where we are at the matters.

* http://www.washingtonpost.com/opinions/bob-woodward-obamas-sequester-deal-changer/2013/02/22/c0b65b5e-7ce1-11e2-9a75-dab0201670da_story.html

REPUBLICANS RAISING TAXES

Lawrence O'Donnell has pointed out the following.  Though there may be another state more Republican than Wyoming, it is hard to imagine.  For example, there are only four (4) Democrats in the state Senate.  The State Senate and state house are 85% Republican.  The governor is Republican as are the two Federal Senators and the Representative.  Yet, the state Senate and state House recently enacted a 10 cent/gal increase in the state gasoline tax and the Governor signed it into law.*  Of course this increased gasoline tax falls most heavily on the working poor and is a regressive tax.

It is O'Donnell's thought that if there aren't Democrats around to do the responsible thing, the Republicans will act responsibly.

The reference* also discusses Virginia where the state Senate has passed a 5 cent/gal increase in the gasoline tax indexed to inflation.  The Virginia governor has proposed a wild change of eliminating the state gasoline tax and increasing the state sales and use tax by 0.8% plus increasing the state vehicle tax by $15 and instituting a $100 fee on alternative fuel vehicles.  I'm not sure whether this change would fall more heavily on the working poor as it just changes the tax method, though this change in the sales tax would broaden the tax collections to those who do not own vehicles.  The state House approved of the Governor's plan.

I don't know why the Governor of Virginia is imposing the $100 fee on alternative fueled vehicles.  I would think he would give such vehicles a $100 credit, if anything.  It appears that he is opposed to such vehicles.  I presume this is because of the possibility of off-shore drilling for oil.

* http://news.agc.org/2013/02/15/wyoming-approves-gas-tax-increase-virginia-still-debating-funding-increase/

TOTAL GOVERNMENT SPENDING HAS BEEN DECREASING

                                                                                 

Total government spending (Federal, state, and local) has declined under President Obama.  The big increase was under President George W. Bush.

Even if you just look at Federal spending under President Obama, Federal spending has declined somewhat from its peak as a result of the Great Recession.

These charts were published by Kevin Drum in Mother Jones (January 22, 2013): http://www.motherjones.com/kevin-drum/2013/01/government-spending-down-obama-era

MALI

I'm impressed at how much geography one is learning from the present Middle East turmoil.  One learned how important the area of Iraq was in the history of Christianity as well as Islam for just one example.  I don't recall ever hearing the word Mali until recently and assumed it was in the Indonesian Archipelago.  You know, Bali, Mali.  It figured.  But then I heard that Timbuktu was in it, and I knew that Timbuktu* was in the interior of northern Africa so was I ever wrong.

Now I am finding out that Mali played a key roll as a center of learning in African Islam and had a library with 30,000 of documents, some of which have recently been destroyed (http://rendezvous.blogs.nytimes.com/2013/01/30/malis-culture-war-the-fate-of-the-timbuktu-manuscripts/?ref=mali).  Much to my surprise, Mali also is the third largest producer of gold in Africa and has a history of being an important producer of rock salt (http://en.wikipedia.org/wiki/Mali).

* I'm not sure why I knew this, except maybe I saw the movie Timbuktu at some point.  I think it was a common word to say "the end of the earth."  Timbuktu conjures up images of long camel caravans out on the edge of the sand-strewn Sahara — a remoteness so legendary that the ancient city is still a byword for the end of the earth (http://www.npr.org/2013/01/29/170562921/from-here-to-timbuktu-myth-and-reality-at-the-world-s-edge).