RateWatch #424 Bull Market Call. Vote for Me.
September 11, 2004 by Dick Lepre

What's Happening

The big news for we folks who care about mortgage rates is that the monthly stochastic (this thing which we use to forecast long-term rate movement) upcrossed to a bullish cycle on 8/31.

Generally, this means a period of lower Treasury yields and mortgage rates for 12-15 months.

There are some issues here.  This bullish cycle is unlikely to drive yields down by the same amount
that the last cycle did.  If we are fortunate, we will see rates approaching the lows of the last cycle.

I know that the Fed is hiking the Fed funds rate but it is necessary to understand that the buyers of
Treasuries are mainly concerned about inflation. The purpose of the series of Fed hikes is to
abate inflation.  A rapid hiking of the Fed rate would mean a healthier (i.e. lower rates) bull cycle.  What we want is the Fed to briskly get the Fed rate to something like 2.5%-3.0%.  As long as CPI stays low (+2.5% or less) and GDP growth stays above 3.5% we will see low Treasury yields and a return if investor confidence which will help equities as well.

Vote For Me

I kept trying to write something about the choice between Bush and Kerry and eventually realized that I had to start from scratch.  Accordingly, I would like to announce my own candidacy for the job of President.

This is my platform:

1) Jobs - I am not going to create jobs for any of you. Jobs are like dates. It takes two willing and well-intended parties.  In the case of jobs this would be an employer and an employee.  If you want a good job in the present economy you need either a college degree (a Master's is not a bad idea) or a darn good education in a trade or a craft. Try to get training in more than one field
to avoid getting your butt outsourced.

I can't prevent outsourcing.  If some dude in India wants to answer phones for Microsoft tech support for $2.00 an hour I don't intend to compete with him and I don't advise you to try to.  I don't intend to try to come up with some harebrained tax incentives to make believe that I can keep jobs here. All that will happen then is that about 20-30 people will make a few hundred million dollars each gaming the system.

Education is the key to the jobs market.  If folks lose jobs that are not going to come back then the government should help to train or educate them for the jobs that are here.

Bill Clinton did not create jobs, George Bush did not destroy jobs in 2001 and then start creating them in 2004 and Dick Lepre is honest enough to tell you that he can't do anything about it.

1) Education -  A news story on 9/9 said that 53 percent of working-age people in Los Angeles have poor literacy skills.  We are not educating America for the good jobs that are here.  What will transition immigrants to high paying jobs is no different now than it was during the 20th century - a good education.

In fact, one of my first directives will be to reassign Smokey the Bear, a Federal employee. Smokey will now say, "Don't be careless with education.  Only you can prevent joblessness."  I mean, everyone knows about the matches and forest fires thing.  Also, children have been taught to trust bears.

2) Iraq - this is a doozy.  We got into this because it seemed like a good idea at the time.  We are stuck there until they can have elections and we help pacify the place and then get the heck out.  To be fair, I think this is President Bush's policy also.  I think that Kerry wants to get out yesterday.  It is impossible to tell from what he says what his policy is. I read a bunch of stuff that
he has said since the vote to invade Iraq and all that I got was a bad frontal migraine.  This got my wife, whom I dearly love, very upset and I had to promise her not to read anything else that Kerry said.

I think that Kerry is anti-war but that someone told him that he could not get elected if he said that so he is going with the policy de jour thing. 

When I listen to Bush, I get confused because he gets so many words wrong but I am fairly confident that I know where he stands.

The only reason that I could see for invading Iraq was as part of a comprehensive plan for peace in the middle-East. Something like this:  get rid of Saddam, bring democracy to Iraq, blow away Syria, get a real Palestinian state (by the way, it may already exist under the name of Jordan) and
encourage the Iranian population to insist on democracy. Like Bush, I believe that bringing liberty to the rest of the world is a noble thing.  Unfortunately, it is also expensive in terms for money and lives. If the rest of you don't have the stomach for all of this, I will understand.

3) My record during Vietnam.   I am not sure why, since it is 2004, this is a big issue but since my opponents have beaten this to death I guess I have to talk about it.  Kerry seems to have served in Vietnam in an actual combat zone for about 3 months.  He got a bunch of medals but then bailed
and came back here and started dissing the war.  Bush was in the Air National Guard in Texas or Alabama and his attendance record there seems to be like Kerry's attendance record in the Senate.  I had a college deferment until I graduated and then I worked in Las Vegas in the nuclear
weapons industry and had what I think was called a "critical occupations deferment".  To rate myself here, let's say that I am there with Dick Cheney.

4) Energy - I am head and shoulders above Bush and Kerry on this because I have a degree in physics.  I know energy.

I will encourage Congress to spend a crap-load of money on energy: controlled nuclear fusion, solar, more fission reactors for the time being until we get the controlled fusion thing down.  In fact, I would like to find a way to make sure that until they solve the problem of "where the hell are we going to get all this energy without giving a buck to those frigging people in the middle-East" no physicist will get a dollar from the government for any other activity.  In fact, I may even intern them in Alamogordo until they solve the problem. This worked before.

5) Health Care - OK, this is an area in which I am weak but I know one thing: here in California we have something called Kaiser-Permanente which in a very large HMO.  I think that this is a model that is scalable so that it can cover everyone in the country at a near minimum cost.  Once you become a member your account is transportable from job to job.  You can also have an individual account. If you are unemployed or in really bad shape we will find a way to help you with your HMO payment.  I need to work on the details here.

6) Free Trade - I am totally into free trade.  Whatever Pat Buchanan believes, I believe the opposite; so just read whatever he wrote on this and don't annoy me.

7) Abortion/ Right to Life/ Right to Choice

I think that the Supreme Court blew it on this.  This should have been left up to the states.  People are much divided on this issue.  I think that the only real effect that doing away with Roe v Wade and going with state by state determination would be that some folks would move from or to Utah.
Accordingly, I promise to widen Interstate 15 and Interstate 80.

8) Gun Control - see #7.  The Supreme court blew it here too.  There is no place in the Constitution that says you have the right to have a gun. It says that states have the right to raise militias.  If you don't know the difference between people having guns and states having militias then please don't vote for me. This also, should be state by state. I am not going to initiate any changes here (because I don't want to get shot).  I am just stating my opinion for the record.

Speaking of getting shot - if elected, I am going to change the name of the Secret Service.  It sounds like some sinister, well, secret plot.  What the hell is the secret?  

9) Fiscal Policy - this is about taxes and spending.  On this I am pretty much going to do whatever Greenspan tells me to do. If you have ever watched Greenspan testify before Congress you might have the impression that he knows more about the economy and fiscal policy than all of them put

I understand that putting fiscal policy under the same control at the guy setting monetary policy is a bad idea in principle but I don't have a better idea. 

If Greenspan dies, I will have to depend on Jim Grauer - the StoMaster.

10) 527 Attack Ads - Free Speech

If George Soros wants to spend tens of millions of dollars dissing Bush let him do so.  If the Swift Boat Veterans want to diss Kerry let them do so.   Let everyone talk and when all the shouting is over voters can decide.  There is a bizarre irony here.  Moveon.org spends tons of money
and gets less effect that The Swift Boat Veterans.  Go figure.

11) The Environment - I am in favor of the environment.  I think it is a fairly decent thing - especially in Hawaii. In fact, I think that if we do a good enough job on #4 above we don't have to worry about air pollution and global warming.

Wait, now that I think about it, my environmental policy will be to make the 48 contiguous states have the same environment as Hawaii.  Let me see Bush or Kerry top that.

12) Gay Marriage – I live in San Francisco.  Castro Street is 200 feet away from my front door. Can I pass on this issue?

For now, that is it.  I can't spend any time campaigning. I need to get back to work doing your loans.  I am not rich like Kerry or Bush.

Your fellow citizen and willing servant,
Dick Lepre

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