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Mark's Market Blog

2-10-13: Progressives take over the world.

By Mark Lawrence

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The S&P continued to creep up last week on aenimic volume and unconvincing momentum. I frankly never believed the bull run would last this long, so I'm not in much of a position to be calling an end to it, but it's really hard to see this continue on for any length of time, especially in the face of the sequester and the associated economic slowdown, which I believe we're already starting to see.

S&P 500 August 12 2012 to February 8 2013

This Saturday the post office will perform their last Saturday delivery of 1st class mail. The Economist, a British news magazine, notes that this is a sign of the American apocalypse: the postal service train wreck has been visibly coming for several years now, and congress could not take simple actions to stave off the impending bankruptcy: indeed, the cessation of Saturday delivery is being accomplished by fiat, not by congressional approval. If the congress cannot agree to close money losing post offices, stop Saturday delivery, and restructure the post office into something that has long term viability, what hope is there for a meaningful action on a trillion dollar deficit, out of control entitlement spending, immigration?

As I see it, the sequester is going to happen. The republicans are in no mood to compromise - meaning keep most of the defense cuts, lose many other cuts, and raise taxes yet more. This is going to slow our economy by .5% to 1%, on top of the .25% to .5% slowdown caused by the January 1st tax increases. The sum matches up pretty well with our current growth rate, so it's difficult not to predict a recession starting about now.

War Watch: Last week a couple Chinese frigates aimed their missiles and guidance system radars at a Japanese battleship. They also aimed their fire control radar at a Japanese helicopter taking off from at helicopter carrier. Fire control radar is quite distinctive and not to be mistaken for something else. A ship captain will sometimes react defensively to such a "painting," perhaps firing missiles at the radar to take it out. The Japanese captain did not respond; however by the unofficial cold war rules of the sea one does not paint enemy ships with fire control radar, it's simply too provocative and the potential for accidental war is too high. In a highly structured society like China we may safely presume these acts were authorized at a very high level, at least comparable to our Joint Chiefs. South Korean troops on the border received new orders this week, to deal with any North Korean provocations immediately and decisively - firing back is allowed and encouraged. It's believed in this country that were it to come to war, North Korea would not hesitate to use their nukes. S.Korea apparently agrees, as they are starting to practice bombing runs and missile launches to take out the N.Korea nuclear facilities. Some time ago I noted that due to their one child policy and boys being favored, China has about 35 million unmarriageable young men, more than the population of California. Brigham Young once said "Any unmarried man over the age of 28 is a menace to society." China has good internal reasons to wish external conflict: establish South East Asia as their exclusive domain of influence; get control of oil deposits; get their populace focused on external events and away from income inequality, inflation and official corruption; and perhaps cut down on their excess of 20-something men. Things are getting very tense in Asia. Don't worry about us, due to out mutual defense pacts with Japan and S.Korea we'll get a piece of this action too. Now that we've approved women for combat, perhaps it's time to see how they do.

In a 2006 survey, 30 percent of people without a high school degree said that playing the lottery was a wealth-building strategy. On average, households that make less than $12,400 a year spend 5 percent of their income on lotteries.

In the first quarter of 2012, the number of iPhones Apple sold per day surpassed the number of babies born per day worldwide - 402,000 vs. 300,000.

The future of politics in America: You can feel it, the soviets liberals progressives are feeling very powerful these days, proposing bills that simply drop my jaw. They had their tax increase last month, now their proposed solution to the sequester is more tax increases. This happened in the '60s, the world turned to the left. Of course everything went slowly to hell on a path paved with only the very best New Hampshire Granite intentions. And it stayed that way until the Thatcher / Reagan revolution of '79 / '80. The republican party as I know it is dead; perhaps republicans will continue to dominate in the house, elected there by mid-westerners who want a speed brake on the liberals, but I can't foresee another republican president for at least the rest of this decade. Why? Demographics, the legacy of Teddy Kennedy and his immigration policies. In the '70s a bit under 5% of our population was foreign born, three-quarters of them from European countries. Today that number is 13%, 40 million of our population, and over half of those are from Latin America, the land of failed economies, failed educational systems, failed governments. It's obvious that many, most of the illegals will be getting citizenship eventually, and the republican party is going to have to mutate from the party of the working white majority to a coalition with Asians and Latinos. Until the republicans get themselves into a position to at least split the hispanic vote we will wander in the Sinai, worshipping golden calves and searching for the elusive promised land. Prepare yourself for a decade or more of rising taxes, rising entitlements, increased government and the moral hazards that go with all that. Obamaphones? We're going to look back on them and laugh.

To turbo or not to turbo? A research firm predicted that by 2021 70% of small cars will have a turbo charged engine. Are they better? Not right now. Turbo charged engines work by having an air compressor - the turbo - and ramming more air and fuel into a smaller engine. But to be effective the smaller engine generally has to spin faster. Spinning faster makes more friction - twice as fast is four times as much friction. For the new Corvette a six cylinder turbo engine was tested, a 5.5 liter V8 was tested, but the winning engine was the new 6.2 liter V8 with new technology that shuts off cylinders. In the new Corvette if you're not racing around the 450hp V8 turns itself into a 225hp V4. This is more than enough power for most people for most of their trips, so unless you floor it you're actually using a four cylinder engine in your new Corvette. Smaller V8 engines had to revert to eight cylinders more often and didn't do so well in gas mileage, and the turbo charged six was even worse - it both spun faster and never got to shut down cylinders. Consumer Reports just tested a bunch of cars in both 2 liter turbo version and six cylinder version, and the six cylinder engines consistently made more power and got better gas mileage. EPA ratings seem to tell a different story, but the EPA tests the cars at 48mph on the freeway and Consumer Reports drives them at 65 on the freeway. Small turbos are popular in Europe, but that's because your license fees go up with bigger engines, not because the small turbos are actually a better solution. So when your teenager tells you that you gotta get the turbo, keep in mind that right now this is an expensive solution searching for a problem.

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