I hasten to add, the stories of the six victims in Tucson, Judge John Roll, Christina Taylor Green, Giffords Aide Gabe Zimmerman, Phyllis Schneck, Dorwin Stoddard, and Dorothy Morris, need to be held in the fore, our prayers going out to their families. The continued updates regarding Rep. Giffords miraculous improvements, as well as the condition of the other 13 injured, is also important to keep in the fore.

But here are some of the things you may have missed. Amy Siskind of The New Agenda had a very interesting post about Obama, and the number of women in his cabinet/inner circle. Bottom line, it is low, as her post, “After Arizona, Will Obama Learn to Include Women?” indicates:

[snip] Yes, just as I was snapping to, Air Force One would be landing back in D.C. Senator Gillibrand and Congresswomen Wasserman Schultz and Pelosi would deplane and return to their 17% minority. President Obama would be head back to the White House — or should I say, the “fraternity house”: his inner-circle is composed almost exclusively of men.

Yes, to the president’s credit, he did appoint two women to the Supreme Court. That’s the end of the good news for women. Here’s the bad news:

* Obama’s cabinet picks are just 25% women.

* Obama’s czars are only 12% women.

* No women have leadership roles in running our country’s economy.

* Obama has only one woman in his inner-circle: Valerie Jarrett.

[...]

Paradoxically, Speaker Boehner in his opening days seems quite comfortable with women. One of his first symbolic gestures: to build a women’s restroom near the House floor. Next, Boehner shocked even me: he officially endorsed a woman for RNC chair (Maria Cino). And here’s a prediction: Boehner’s ability to cry in public will make it easier for women candidates to do the same in the future. Hey — I gotta admit — although I agree with Speaker Boehner on very few issues, I like the guy! He walks the walk for women on the right.

[...]

So I say this to our president: yes, let’s live up to the dreams of Christina Green, the nine-year-old who was tragically and senselessly killed in the Arizona shooting. The girl who was interested in politics and therefore came to see Congresswoman Giffords, Arizona’s only female representative in the U.S. House or Senate. Why don’t we have more women in leadership for girls like Christina to see and model after? And President Obama, what will YOU do to live up to her expectations? (Click HERE to read the rest.)

Yes, I can see why so many “feminists” wanted to support Obama over Hillary Clinton. He is SO good on the women’s equality issue – not.

But wait, there is more. Once again, LGBT groups are unhappy with Obama. Yes, yes, I know he signed the bill to repeal DADT, but he did blessed little to get that to come about, and did exactly what I thought he would do – have it in the Lame Duck session so he could blame the Republicans in case it didn’t pass.

Well, that is exactly what he did in terms of DOMA, but not before his Justice Department did this:

Supporting DOMA: Gay rights advocates are criticizing the Obama Justice Department after its attorneys filed a court motion Thursday in support of the Defense of Marriage Act despite the president’s view that the law should be repealed.

[...]

The Justice Department says it’s obligated to defend U.S. policy regardless of the president’s personal beliefs. The department made the same case after it had to, awkwardly, fight a judge’s ruling against “don’t ask, don’t tell” in the months before it was repealed by Congress.

But that’s no salve to the gay rights community, which has called on the administration to show more resolve against laws like DOMA. [snip]

And it is not true, either. Other Administrations have stood up to laws they thought were un-Constitutional, not continuing to defend them, as the Obama Administration has done repeatedly with DOMA. Indeed, it continues in that same vein in this filing:

[snip] “All families deserve the recognition and respect of their government. We know the president supports us. It’s time for him to help lead the American public toward full equality for all Americans,” Human Rights Campaign President Joe Solmonese said in a statement. The gay rights group said the Justice Department should at least “acknowledge that the law is unconstitutional.”

It does not. In its filing, Justice Department attorneys said the law was “not unconstitutional under this court’s binding precedent.” The Justice Department argued that the law “reflects Congress’s reasonable response to this still-evolving debate among the states regarding same-sex marriage.”

Why Solmonese, that Hillary Clinton backstabber, continues to act all insulted is beyond me, but I will spare you my diatribe on him this time around.

But here’s what I knew would happen with Obama:

[snip] “The Department of Justice has long followed the practice of defending federal statutes as long as reasonable arguments can be made in support of their constitutionality, even if the administration disagrees with a particular statute as a policy matter, as it does here,” the brief said.

“Indeed, the president supports repeal of DOMA and has taken the position that Congress should extend federal benefits to individuals in same-sex marriages. But a consensus behind that approach has not yet developed, and Congress could properly take notice of the divergent views regarding same-sex marriage across the states,” it said.

[...]

He told a gay-and-lesbian magazine last month that while a repeal of DOMA may not be possible, particularly with Republicans in control of the House, “that’s something that I think we have to strategize on over the next several months.” (Click HERE to read the rest.)

Yep, like I expected, Obama will blame the Republicans if it doesn’t get changed now. The Democrats were in control of the entire Congress for FOUR years, and now it is all the Republicans fault…(Civility? Oh, that is only for Conservatives, not Democrats.)

Here is a whopper of what came out this week. It was foretold by none other than Sarah Palin back in November when the government was looking to buy more bonds:

“All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher. And it’s not just groceries. Oil recently hit a six month high, at more than $87 a barrel. The weak dollar — a direct result of the Fed’s decision to dump more dollars onto the market — is pushing oil prices upward.”

I intentionally withheld the title of that article: “What Sarah Palin Gets Wrong About Inflation.” And that would be what, exactly? Haven’t all of those things, along with foreclosures setting another record high in 2010, and an increase in unemployment claims, come to pass? Yes.

In that same article, though, there was this (condescending) response:

[snip] Sudeep Reddy of The Wall Street Journal pointed out that Palin didn’t seem to be quite up on what’s been going on with inflation. In fact, he noted, grocery prices haven’t risen that much. “The consumer price index’s measure of food and beverages for the first nine months of this year showed average annual inflation of less than 0.6%, the slowest pace on record (since the Labor Department started keeping this measure in 1968).” [snip]

Hey, Reedy – guess which one of you is wrong here? I’ll give you a hint – it is not Palin. No need to take my word for it. Here is Stuart Varney discussing this issue:

These are just a few of the issues that have been going on this week (I know, Daley came onboard on Friday, but the massacre on Saturday pretty much knocked that way down, as it should have). Women still are underrepresented, Obama’s Justice Department is still targeting gay people, and we are increasingly in an economic world of hurt.

We cannot forget the victims of last week’s shooting, but nor can we allow ourselves to allow the political smoke and mirrors to distract us from what else is going on in our country.

What else happened this week that was low on the media totem pole? Consider this an Open Thread.

Many Americans were duped by financial practices and products emanating from Wall Street. Where was Washington? I would assess Washington’s involvement and responses in the following fashion:

1. At worst, Washington was complicit given a wide array of failed public policy programs, especially in housing. These public policies were largely ‘greased’ by lobbying dollars and campaign contributions.

2. To a large extent, Washington was negligent in terms of oversight, especially on the financial regulatory front.

3. At best, Washington was naive given a general lack of understanding of markets and finance.

The American public is now responding in appropriate fashion. How so? In increasing numbers, they are choosing not to play the Wall Street game. What game is that? Active trading and investing. While the numbers of pure day traders may have increased, the American population at large is focused elsewhere. Where is that focus? On the economy at large and on their individual pocket books.

Washington’s focus on Wall Street and its selling of the market rebound as reflective of a return towards prosperity is a product that will not fly . . . try as they might. Why?

It’s the economy, stupid! Reports this morning indicate that wages will likely show the greatest decline since 1991. Even in the face of declining wages, consumers’ purchasing power is being further eroded by the continuing decline in the value of the dollar. That decline is inflationary which hurts consumers but it continues to present a very cheap funding vehicle for those who want to use the greenback to employ leverage in the markets. Who has the advantage in that process? The large banks. Do they spread that wealth in terms of increased credit and higher savings rates? Now why would they do that?

The American saver and consumer shouldered the cost of the bank bailouts in 2008. They are now shouldering the cost of the wealth transfer to the banks in 2009. While Washington would like to sell this dynamic differently, the American public gets it.

Washington will continue to sell this dynamic at its peril.

LD

Given the prevailing major shortcomings in the international financial and monetary system, UNCTAD draws attention to some elements of reform of the international financial architecture, which is long overdue. These include effective capital account management, strengthening the role of special drawing rights (LD’s highlight), and a multilaterally agreed framework for exchange rate management. These reforms imply a fundamental rethinking of global financial governance to stabilize trade and financial relations by reducing the potential for gains from speculative capital flows. This will reduce the likelihood of similar crises in the future and help create a stable macroeconomic environment conducive to growth and smooth structural change in developing countries.

I purposely highlight the UN’s desire to strengthen the role of special drawing rights. In layman’s terms, that means the UN wants to promote the currency of the IMF at the expense of the U.S. dollar.

When BRIC nations promote a move away from the U.S. dollar, one may view it as the competitive nature of international trade. When an entity such as the United Nations is also promoting a move away from the U.S. dollar as the international reserve currency, we are embarking on an entirely new slope along our economic landscape.

The fact that we have heard little to nothing from our power base in Washington leads me to believe that Obama, Geithner, Bernanke, Summers, et al are comfortable with a decline in the value of our currency.

In my opinion, that comfort can be a very dangerous long term maneuver. How so? Economic growth requires capital. If investors deem our currency to be weakening, the capital will flow elsewhere . . . and elements of our quality of life may go right along with it.

LD

One other issue that has just arisen was detailed in my local paper recently,”Millions TO Face Shrinking Checks; Trustees: No Cost Of Living Adjustment For Two Years.” It details how Social Security checks, for the first time since 1975, will get no “Cost of Living Adjustment.” None. Here are some of the more salient points:

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

“I will promise you, they count on that COLA,” said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. “To some people, it might not be a big deal. (Emphasis is mine.)

But to seniors, especially with their health care costs, it is a big deal.”

Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.

Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income.

“For many elderly, they don’t feel that inflation is low because their expenses are still going up,” said David Certner, legislative policy director for AARP. “Anyone who has savings and investments has seen some serious losses.”

No kidding. But that sums it up nicely.

As does my fellow NQ writer, Bronwyn’s Harbor, in this post, “I’ve Changed My Mind About ‘Death Panels,‘” in which Bronwyn’s neighbor’s travails of the effects of no COLA are laid out in stark relief. The neighbor is being forced to choose between medicine and food, a horrible choice for any person, but especially one who has no other source of income.

It makes my head just swirl. Representative Mike Rogers details some other choices Americans will have to make. Or rather, choices that will be made for us, in one of the most common sense statements I have heard yet about the health care policy the Obama Administration is trying to institute, along with some actual provisions of the bill:

I don’t know to which party this man belongs, and I don’t much care. What I DO care about is that he seems to care about US, the average U.S. citizen. And I appreciate his calling out the Congress for its desire to over-function. That is to say, when the functional people have to work extra hard to compensate for the dysfunctional (as in not fully functioning, not mentally unstable or physically disabled) people. It does not bring up the dysfunctional people. On the contrary. All it does is pull down the fully functioning people (Rabbi Dr. Friedman discussed this issue frequently in his practice). It sounds like that is exactly the same thing Abraham Lincoln was saying, as quoted by Rep. Rogers noted above.

Choosing between food, shelter, and medicine as a result of government run programs sounds to me like programs that are not run to the benefit of the people. And that will bring all of us down. There has got to be a better way…

Obama’s rash disinterest in creating a positive cash flow, despite a few sneaky tax increases (see below), makes me want to assume the identity of the character Blake in Glengarry Glen Ross, shake my fist at Obama, and say to his smug visage, “You can’t close the leads you’re given, you can’t close shit, *you are* shit, hit the bricks pal, and beat it, ’cause you are going *out*. “

What will happen? Inflation. Or, as Larry Johnson and Larry Doyle have warned, hyperinflation.

Inflation will also affect entitlement programs like Social Security. The annual “cost of living” increases will bump up accordingly. This all comes out of the U.S. treasury or, er, those loans from the Chinese.

You’ll also be paying more taxes.

What about the taxes and the unbelievable $3.6 TRILLION budget? As Lynn Westmoreland wrote in “Fiscal sanity dies in Obama budget,” published in the Atlanta Journal-Constitution:

[...]

The Democrats’ budget spends too much, taxes too much and borrows too much.

President Obama promised his legions of young supporters on the campaign trail that he would restore fiscal sanity to Washington and kick all those money-grubbing special interests to the curb. Blue Dog Democrats swore they’d stand up to ultraliberal Speaker Nancy Pelosi and impose “paygo” —- which means that every dollar of new spending is balanced out with cuts elsewhere or new revenue.

Ha! Joke’s on us, I guess. They pulled a fast one.

Instead of balancing budgets and reforming entitlement spending and “making tough choices” (Remember that Obama phrase?), the Democrats’ plan is quite simple: Just spend, spend, spend. The Congressional Budget Office estimates that Obama’s plan will expand the debt by $9.3 trillion over the next 10 years. That’s more than all the debt accumulated by the nation from George Washington to George W. Bush.

There’s a whack to fiscal sanity.

The CBO further predicts that federal spending will average 23 percent of gross domestic product while federal revenue will equal about 19 percent of GDP. That’s government expansion of 3 percent of GDP.

Double whack!

The Democrats’ $3.6 trillion budget raises taxes on all Americans by $1.3 trillion. Hey, reader, that’s you. Whether you’re a parent struggling to pay the bills, a small-business person trying to avoid layoffs or worse, or an employee at a plant worried about keeping your job, the Democrats’ taxes are going to hit you. They promised a “middle-class tax cut” but now they’ve dropped that idea. It was merely a sleight of hand to distract attention away from the global warming taxes that will hike costs for every American who turns on a light switch.

Thing is, I rather doubt that these stealth taxes will sufficiently replace the staggering loss in income from federal income taxes. Which means the debt will continue to grow monumentally, all thanks to Obama’s devil-may-care, I-want-what-I-want-and-I-want-it-now mentality. The key to his whole personality is understanding that he wants to win. It’s all just a poker game and, if taxpayers lose, so what. He doesn’t care.

Many investors are questioning how to best position themselves for a potential increase in inflation. Various analysts are recommending commodities, real estate, and precious metals. However, while each of those assets can be a great store of wealth in the face of rising inflation, an investor is faced with a mix of fundamental and technical variables in determining the value of the asset. As a result, the correlation between rate of inflation and the performance of assets within those classes is not perfect. Is there an asset perfectly correlated with inflation? Come closer, I will give you a tip as to the asset class correlated to inflation.

Treasury Inflation Protected Securities, yes TIPS, are U.S. government securities indexed to the rate of inflation.

Like any bond, TIPS will rise or fall in value as interest rates change (rates up, bond prices down and vice versa), but they are indexed to inflation so will protect against a rise in inflation. I personally believe that interest rates will rise causing bond prices to decline. In light of that assessment, if I were to buy TIPS, I would buy shorter maturity bonds which are less sensitive to a shift in rates. As rates move higher, you can then buy TIPS with longer maturities.

Aside from investing in TIPS to protect a portfolio against rising inflation, it is wise to keep an eye on the TIPS market as a measure of how investors believe inflation will move. If inflation expectations are increasing, the TIPS market will do well. If inflation is expected to decline or remain muted, then TIPS will underperform or be stagnant.

How did TIPS perform in March? I am glad you asked. TIPS were up 6% in March!! Investors clearly believe inflation is a real risk.

How can one buy TIPS? Utilizing our trusty Investing Primer, we learn:

How to Buy In
TIPS can be purchased in the same way as any other fixed-income investment: either directly as individual bonds through the U.S. Treasury or a broker, or through a mutual fund. If an investor is seeking to match specific cash flow needs, purchasing individual bonds makes sense. Buying bonds directly from the U.S. Treasury is the cheapest option in this regard. However, if the goal is to receive a fully diversified fixed-income portfolio of TIPS, a mutual fund is the best option, preferably a low-cost index fund. (To learn more, check out Evaluating Bond Funds: Keeping It Simple and Basics Of Federal Bond Issues.)

A fully comprehensive review of Treasury Inflation Protected Securities is provided by Investopedia.

….but don’t tell anybody!!

LD

1. cutting the Federal Funds rate to a range of 0-.25%.

2. backstopping a wide array of short term funding operations, including the Commercial Paper market, Money Market funds, and Swaps market.

3. opening the Federal Reserve discount window for investment banks prior to their conversion to commercial banks.

4. utilizing a massive Quantitative Easing program to purchase government, mortgage-backed, and government agency securities in an attempt to bring interest rates down and jumpstart borrowing by consumers and corporations.

5. working in concert with the Treasury and FDIC to implement the TARP (Troubled Asset Recovery Program), TALF (Term Asset-Backed Lending Facility) and PPIP (Public-Private Investment Program).

In the process of implementing all of these activities, this genie, the Federal Reserve, in the person of chairman Ben Bernanke, has gone places no genie has ever gone before.

The question before the court is whether the free market can ever get the genie back in the bottle. Additionally, aside from getting the genie back in the bottle, these wishes granted by the genie aren’t exactly free. How so?

The Federal Reserve’s balance sheet has expanded so rapidly that many investors are concerned as to the potential cost of that expansion. When will investors lose confidence in the genie? When will investors discount the powers of the genie? When will investors view the genie as less magician and more human?

Given that the largest underpinning in any market is “confidence”, these questions in regard to the genie are being asked on a very regular basis. The genie, Ben Bernanke, and his sidekick, Donald Kohn, responded to these questions the other day. Bloomberg reports:

Chairman Ben S. Bernanke said yesterday in Charlotte, North Carolina that the Fed must retain the flexibility to withdraw its record cash injections to restrain prices. Vice Chairman Donald Kohn said in Wooster, Ohio, “the trick will be unwinding this balance sheet in a timely way to avoid inflation.”

I find it very interesting that Kohn actually uses the term “trick” to address this issue. These maneuvers have never been practiced prior to this time, so the “how to ” manual has never been written.

Will the powers of the genie spin out of control? Will the markets deem the genie to be less magical and actually more warlock? Will this genie, Bernanke and his helper, Kohn, be challenged by the partygoers (market participants) for ever greater tricks only for the parents of the partygoers to get so concerned that the party has gotten totally out of control? Bloomberg offers:

“They have two significant challenges — one is figuring out when to unwind,” said Christopher Low, chief economist at FTN Financial in New York, referring to U.S. central bankers. The second challenge is how, and that’s made tougher by “so many unwieldy positions. Nothing is as liquid as it used to be” on the Fed’s balance sheet, he said.

The U.S. central bank has effectively printed money to buy or lend against a range of assets to alleviate the credit crunch and revive the economy. Bernanke’s speech yesterday detailed steps that the Fed can take to remove that liquidity, including soaking up cash by the issuance of special bills.

The Fed normally raises interest rates by selling Treasuries on its balance sheet, draining reserves from the banking system. That task is tougher with the Fed’s commitment last month to buy more than $1 trillion in mortgage-backed securities, which are harder to sell quickly without roiling markets or potentially attracting political scrutiny.

Bernanke, 55, speaking at a conference hosted by the Richmond Fed bank, hailed last month’s joint statement with the Treasury that spelled out the principles underlying the central bank’s work with the Treasury to revive credit.

While the Fed has implemented “unconventional” measures and taken some “extremely uncomfortable” steps, it’s critical that the efforts “do not interfere with the independent conduct of monetary policy,” Bernanke said.

While these challenging times are certainly no party, the unwinding of the genie’s tricks represents very real issues for all involved. The price of not timely and effectively getting this genie back inside the bottle is massive inflation, if not hyper-inflation.

The only trick the genie knows to deal with that problem is dramatically increasing short term interest rates. While this current period is certainly no party, a rapid increase in short term interest rates is akin to a sentence in the pain chamber.

LD