BigGovernment.com has obtained records of Massachusetts Democrat Senator John Kerry and his wife Teresa Heinz’s stock portfolios that show almost perfectly timed pharmaceutical stock trades during the Obamacare debate, which fattened their already enormous personal fortune.

The documents further support allegations of suspicious trading leveled during Sunday’s 60 Minutes report about the explosive new book by investigative reporter and Breitbart News editor Peter Schweizer, Throw Them All Out.

Sen. John Kerry’s position on the powerful Senate Finance Committee’s Health Subcommittee gives him direct access to critical information regarding health care policy. In July 2009, pharmaceutical industry representatives met with key members of Congress to flesh out the Obamacare bill. Then, in November 2009, with the bill’s passage was looking more likely, the Kerrys’ portfolios reflect a drug stock buying spree.

First, $750,000 worth of stock in drug maker Teva Pharmaceuticals was added to their portfolios at around $50 a share. Once Obamacare passed, the value of the stock rose to $62 per share. Subsequently, in 2010, a portion of Teva holdings was dumped from the Kerry portfolio, resulting in tens of thousands of dollars in capital gains (exact profits are unclear because politicians are only required to report ranges, not exact dollar amounts). (more…)

There is a forgiving nature in the Southerner that surprises the occasional Yankee visitor. Doors are opened, ladies are escorted off of curbs, and conversation is edifying. There is a sharp but tailored critique of wrongdoing, and forgiveness comes as easy as the gentle southern gulf breeze—but only once. Part of the charm of the south is the genteel way they approach human interaction–until, that is, you cross them. Expect decisive correction. I have come to know that this is how the south “weeds” out its own bad, so that the genteel southern tradition continues.

The southern tradition of civility is deeply rooted. That is why the short selling of the American economy by Alabama Congressman Bachus, as described on 60 Minutes last Sunday, and his pursuant refusal to explain, apologize, or make reparations to his constituents strikes them as so abhorrent. Alabamians are asking for the honorable removal of the Congressman who did the dishonorable.

The following is a letter sent Monday to his office, after one sent Sunday evening went unanswered:

Mr. Staley:

This is my second attempt at communication to you and your Congressman’s office.

I am looking to give you and/or Congressman Bachus an opportunity to speak in his defense to his constituents before they organize an all out protest of his non-response on what appears to be a horrible injustice against the citizens of Alabama, and the American economy.  He is welcome on my show today any time between 4 and 7 pm.

I will be diplomatic to my guests, Mr. Staley, but non-response from an elected public servant and his staff is wholly unacceptable and will result in a relentless pursuit of the same.

I am not only an engaged Republican, Tea Partier, and show host, I am his constituent.

Please respond to my Producer, Jason (cc’d), ASAP.

Thank you,

Dr. Gina Loudon

The congressman’s office sent a written statement in response to the interview request as follows (edited for brevity): (more…)

There is a real class war going on in this country, and the Occupy Movement doesn’t seem to realize that they are on the wrong side of it. No, it’s not the wealth-hating, broad brush 99% vs. 1% class war that the Occupiers chant about. That so-called “war” is a merely a distraction from the real class split in America. Nope, the real deal pits American citizens on one side and on the other, safely ensconced inside the Beltway, are the Political Class.

The Political Class live in a world of wealth and power, and they don’t play by the same rules that you and I do. The Political Class operates above the law – literally, above it and lording over it. Since they make the laws, they can rewrite them to suit themselves. They pull the strings on the mainstream press establishment by playing games with information and power. As a result, the Political Class has been able to line its own pockets while much of the economy has gone to shambles.

If this all sounds a bit dramatic and dystopian, you haven’t read Throw Them All Out by Breitbart editor Peter Schweizer or seen the recent 60 Minutes segment that was based on the book’s research but independently verified and reported by CBS and Steve Kroft.

The book and TV segment ripped the mask off of Washington D.C. and showed how politicians use their resources — power and access to information — to make money. The books methodically lays out how politicians have been able to enrich themselves and keep this political brand of insider trading legal.  On 60 Minutes, they went into detail about how Republicans like Spencer Bachus and Democrats like leader Nancy Pelosi have been able to rake in hundreds of thousands or even (in Pelosi’s case) millions by having access to information that citizens do not. (more…)

Kyle Wingfield in the Atlanta Journal-Constitution:

See if you can follow me here:

1. CBS’s “60 Minutes” caused a stir with its report Sunday, based on a forthcoming book by Peter Schweizer, about members of Congress who may have traded stocks based on insider information to which they were privy because of their elected offices.

2. Many members of Congress are desperate to raise new revenues any way possible, in the name of stopping our borrowing binge.

3. Some of our politicians, and even more European leaders, are partial to the so-called Tobin Tax on financial transactions.

4. In light of the revolving door in Washington — in which politicians and their appointees leave public service and then cash in by lobbying or otherwise working for the companies they used to regulate — the law professor and proprietor of the Instapundit blog, Glenn Reynolds, hasproposed “a 50 percent surtax on any earnings by political appointees in excess of their prior government salaries for the first five years after they leave office.”

Voila! How about a 50 percent tax on financial transactions by members of Congress and their staffs while they are with the government, and for five years thereafter?

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From Newsweek:

One of the more dramatic episodes in the book recounts the trading activity of Republican Rep. Spencer Bachus, of Alabama, who, as the ranking member of the House Financial Services Committee, was privy to sensitive high-level meetings during the 2008 financial crisis and proceeded to make a series of profitable stock-option trades.

Bachus was known in the House as a guy who liked to play the market, and in fact he was pretty good at it; one year, he reported a capital gain in excess of $150,000 from his trading activities. More striking is that Bachus boldly carried forth his trading in the teeth of the impending financial collapse, the nightmarish dimensions of which he had learned about first-hand in confidential briefings from Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke. On Sept. 19, 2008, after attending two such briefings, Bachus bought options in an index fund (ProShares UltraShort QQQ) that effectively amounted to a bet that the market would fall. That is indeed what happened, and, on Sept. 23, Bachus sold his “short” options, purchased for $7,846, for more than $13,000—nearly doubling his investment in four days.

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The latest Gallup poll pegs President Obama’s approval at a new low of 41 percent. That adds to the thought that the winner of the GOP presidential-primary sweepstakes is going to be the next president.

And inside that Republican contest, the policy pendulum is swinging toward pro-growth, flat-tax reform. A new agenda. With Herman Cain’s 9-9-9 plan and the announcement of a Steve Forbes-type flat tax from Gov. Rick Perry, the GOP flat-tax-reform competition is dominating the headline news.

While President Obama stumps for huge tax hikes — on incomes of $200,000 to the millionaire and billionaire level — and demoralizes businesses and entrepreneurs with his populist attacks on success and risk-taking, the GOP is fast coming up with a much better idea.

The handwriting is now on the wall. A huge part of the 2012 campaign will be pro-growth tax reform versus “fairness,” redistribution, and soak-the-rich. In a stalled-out economy, I’ll take the supply-side bet anytime. Pro-growth, flat-tax reform is going to win.

The stock market gets this. The flat tax is bullish. In late September, Herman Cain trumpeted his 9-9-9 flat-tax/fair-tax hybrid reform plan at the Orlando, Fla., debate. Since early October, stocks have come out of their funk, rising 12 percent.

Coincidence?

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From the Associated Press:

Asian stock markets took a beating Monday after U.S. job creation ground to a halt in August, reviving fears of a recession in the world’s largest economy.

Japan’s Nikkei 225 stock average was down 1.7 percent at 8,797.89 with sentiment also undermined by the persistent strength of the yen against the dollar, which hurts exporters.

Australia’s S&P/ASX 200 fell 2.2 percent to 4,148.50 and South Korea’s Kospi slid 3 percent to 1,811.44. Hong Kong’s Hang Seng fell 2.2 percent to 19,768.09. Benchmarks in Singapore, Taiwan, the Philippines and mainland China were also down.

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I get tired constantly repeating myself to my fine friends who are on the Left side of the political spectrum when it comes to economic, fiscal, and business realities.  It’s not their fault.  I used to be the same way.  However, following up on a good article about economics for dummies, I thought I’d add some basic concepts that everyone should understand — regardless of political beliefs.

This stuff isn’t that hard to understand.  My old high school math teacher would just drill me over and over on something until I got it.

Risk, Reward, and Investment

A rich person makes all his income, more than $250,000 each year, from investment income only.

Investment involves taking a risk.  In exchange for that risk, an investor is rewarded.  The greater the risk, the greater the reward.

Imagine two cups.  Under one is a dollar.  You bet one dollar and choose one cup.   The odds of picking the right cup are 1-1.  If you are right, you win one dollar.

Imagine ten cups.  Under one cup is ten dollars.  You bet one dollar but choose only one cup.  The risk of choosing the right cup has gone up to 9-1 against you.   Don’t you think you deserve a higher reward for choosing that one right cup?

If you don’t think so, I have a bridge I’d like to sell you.

Investment works the same way.

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From the Associated Press:

The Federal Reserve acknowledged Wednesday that the economy is growing more slowly than it expected. But it said it will complete its $600 billion Treasury bond buying program by June 30 as planned and announced no further efforts to boost the economy.

Ending a two-day meeting, the Fed repeated a pledge to keep interest rates at record lows near zero for “an extended period,” a promise it’s made for more than two years.

Fed officials said in a statement that they think the main causes of the economy’s slowdown, such as high gas prices and supply disruptions from Japan’s disasters, are temporary. Once those problems subside, Fed officials said the economy should rebound.

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In the 26 months since the stock market bottomed in March of 2009, stocks have risen 80%+ as the economy regained its footing after the 2008 financial crisis and ensuing market crash.

As impressively, the market has made such tremendous gains with only one significant correction, which ironically began almost a year to the day before the one in which we now find ourselves. Now, with the markets tumbling, many are unsure of why or how far they will fall.

To be blunt, the basic problem with the markets at present is that since the bottom investors haven’t been adequately compensated for the risks they’re taking in the markets. Sure stocks prices have risen, but that buying has been in anticipation of growth in revenue being passed onto shareholders. After all, when investors buy stocks what they’re really paying for is a share of dividends to be paid in the future (plus the break-up value of the company).

Unfortunately, since the bottom of the 2008 crash interest income paid to Americans has made almost no recovery (thanks to the Fed’s policy of maintaining low interest rates for “an extended period of time”). Dividend income, meanwhile, has ticked up just slightly and is still nowhere near pre-crash highs, and Personal Income Receipts on Assets has completely failed to keep pace.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the slumping markets, China’s holding of U.S. debt and Peter Diamond’s child-like tantrum.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Stocks Slide, Led by Banks
China Has Divested 97 Percent of Its Holdings in U.S. Treasury Bills
Peter Diamond to Withdraw Fed Gov. Nomination
Francs: No, Mr. Diamond, the Fed Doesn’t Need Your Expertise

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News coverage of Government Motors over the past few weeks has painted an increasingly glowing picture, but here’s a dose of reality:  GM still has not repaid taxpayers for the bailout and it’s looking less and less like taxpayers will ever be made whole.

Unlike much of the media, we actually spent a considerable amount of time looking behind the press releases to see what GM’s numbers really say about the health of a company taxpayers now own.

This week, we will be sharing with readers a more realistic picture of the company’s health.  The bottom line:  The picture is far less rosy than GM would like you to believe.

1. GM’s Share Price:  Will taxpayers ever be made whole?

Remember these promises?

• “Recent progress at GM gives reason for optimism that it may be possible for taxpayers to get every penny back.” – Steve Rattner, Presidential Task Force on the Auto Industry (11/18/2010)
• “American taxpayers are now positioned to recover more than my administration invested in GM.” – President Barack Obama (11/18/2010)
• “The government’s investment is well placed, and I think they’ll make a lot of money.” – Former GM CEO Ed Whitacre (11/18/2010)

GM’s share price closed below its $33 IPO price for the first time on March 1st.  The company has underperformed the S&P 500 by 15% since the beginning of the year.  The Middle East is in turmoil and gas prices are skyrocketing.  Not a good harbinger for GM’s share price.

Now the Feds say that they want to get out of their GM position as soon as possible. Their first opportunity to do so will be when the government’s “lockup period” ends in May.

But according to the House Oversight Panel’s January update on TARP and the auto industry, for U.S. taxpayers just to break even on the government’s historic $50 billion “investment”, GM shares will need to trade at $54.28 — a whopping 65% premium over GM’s March 1^st closing price.

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The past is not always a prologue to the future. But looking at some of the big winners and losers of 2010 does provide some strong hints of a positive 2011.

The biggest winner last year was the Tea Party, which shellacked President Obama in the election. Mr. Obama becomes the biggest loser. And the economy and stock market will be the beneficiaries.

The elections were the first major step toward restoring free-market capitalism and rolling back big-government controls, planning, and spending. This is a money-politics issue. Stocks roared 20 percent during the second half of last year, as markets sniffed out the huge political change. Post-election, stocks also had a big move, finishing the year at better than two-year highs — going all the way back to pre-Lehman Brothers.

Sure, there were important economic factors involved. Europe didn’t fall apart. The dollar didn’t collapse. And better U.S. economic numbers started coming in. (Double-dip bears also were big losers last year.) But rising political confidence helped, too.

The emergence of Tea Party free-market populism — what I call Reaganomics 2.0 — is hugely bullish for stocks and the economy in 2011.

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Friday’s unemployment report for September, the last before the election, brought more bad news for the Obama Democrats.

Noteworthy is the fact that stocks rallied a bit on the lackluster and tepid jobs numbers, pushing through the 11,000 mark. But more and more, it seems bad economic news illustrating the failure of Obamanomics becomes good news for stocks on the expectation of a GOP tsunami in November.

The unemployment rate itself held at 9.6 percent. It’s been over 9.5 percent for 14 straight months. Meanwhile, the marginally unemployed — or the so-called impairment rate (U-6) — jumped to 17.1 percent from 16.7 percent.

These headlines are political poison for Democrats. Voters are going to keep asking, What exactly did we get for a $1 trillion stimulus-spending package that puts us deeper in hock?

Overall, nonfarm payrolls fell 95,000 for September, largely from a drop in census workers and state and local government employees. Private payrolls increased 64,000, only a third of what’s necessary to sustainably reduce unemployment.

Average hourly wages were flat, as was the workweek.

Looking back, the jobs story was much stronger in the first four months of the year through April. But job creation has slowed markedly since then, along with the overall economy.

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This past week I gave a speech to a group of investors. The organizer of the event e-mailed me the night before, asking that I please try to be optimistic. Well, that’s my usual habitat. But optimism has been hard for me this year. Our muddle-through economy and lackluster stock market, challenged by so many taxing, spending, and regulating problems coming out of Washington, are the reasons why.

In fact, until recently, I’ve been advising people to take profits in the stock market, rather than buy-and-hold. You should keep your money before the Obama IRS takes it from you.

But following the tea-party primary victories in Delaware, New York, and New Hampshire this week, I’m once again getting energized.

Free-market capitalism is on the comeback trail. That’s one of the key tea-party messages. And make no mistake about it: The free-market power of the tea-party political revolt is totally bullish for stocks and the economy.

In short, this is a revolution.

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In the six days that followed the attacks on September 11^th, the New York Stock Exchange was closed for the first and longest time ever since the Great Depression and World War I.  The markets would reopen on September 17^th, but to quite a rocky start.  During the immediate aftermath of the attacks, the heartbeat of our nation’s economy stopped, suspended in time.  And a forgotten class of Wall Street workers faced the difficult decision of whether or not to return to work. Those who did would return to a completely different world, one that had already changed them forever.  And today, nine years later, many of them are still there.  In a polarized political environment where the bad behavior of a few has unfairly demonized all of Wall Street’s workers, their contributions to our post-9/11 recovery have been largely ignored.  But had these workers made the choice back in 2001 never to return again, what might have happened?  This is one story, out of many, of the courage, determination and dignity of an entire class of forgotten patriots who stood by their country in the aftermath of September 11^th, 2001 when it would have been so easy to simply walk away.

Nine years ago, my brother Will was working for a Wall Street brokerage firm just steps away from what is now known as Ground Zero.  His office building overlooked Trinity Church on one side and the World Trade Center on the other.  Just on the other side of the river, near his home in Hoboken, NJ, he boarded the PATH train every day, bound for the bustling station at the World Trade Center.  Like so many others, he went to work on September 11^th thinking that day would be just like any other.

Just before 8:46 am as Will was settling into his day with his co-workers, a loud, screeching sound of shearing metal boomed just outside their building.  He looked up at the trading desk manager, and both were stunned.  Will thought it might be a high rise construction accident; the desk manager suspected an explosion.

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This week, the Securities and Exchange Commission approved a rule that is designed to make it much easier for large shareholders to force out corporate directors. The rule allows a big shareholder to nominate his own board slate and have those its board nominees listed on a company-mailed “proxy” ballot alongside the candidates favored by management.On one hand, the rule seems pretty reasonable, why shouldn’t the average shareholder have a choice in who to vote for? Its the American way.This rule, however has nothing to do with the average shareholder, in fact it probably guarantees the average shareholder will have less to say about the direction of the company.

The new SEC rule gives an investor or group of investors owning at least 3% of a company’s stock for at least three years the right to place its candidates on the company’s ballot. Who fits into this category? Generally we are talking about institutional investors (like state retirement plans)  and union pension funds. As a consequence corporate America will now be beholden to state politicians who only care about where their next vote is coming from, and Union Leaders who in many cases are promoting Socialism rather than Capitalism.

Even President Obama, whose decisions usually favor big labor is opposed to the new rule:

Barney Frank and his House colleagues are standing strong against a White House effort to block shareholders from having proxy access to governance issues in corporations in which they have a stake. Investors, pension funds and labor unions reacted with alarm when Sen. Chris Dodd (D-Conn.) introduced the Senate proposal that would effectively deny so-called “proxy access.” The provision had not been approved by either the Senate or the House and several sources, both in Congress and in the industry, said the White House is pushing the measure. The White House proposal would require a shareholder to hold a five percent stake in order to have proxy access — a level met by virtually no institutional investors.

Corporate Directors are supposed to make decisions based on what is best for the company, and its shareholders(even if its not the best thing for the company’s employees).  Union sponsored directors will be tied to their small constituency, union members. America could be nearing the day when  a corporate director telling a negotiating manager, give the unions what they want or you are fired!

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Regime uncertainty has gained increasing recognition as the current economic troubles have persisted with little or no improvement since the economy reached a cyclical trough early in 2009. As described in my 1997 paper, regime uncertainty pertains to

the likelihood that investors’ private property rights in their capital and the income it yields will be attenuated further by government action. Such attenuations can arise from many sources, ranging from simple tax-rate increases, to the imposition of new kinds of taxes, to outright confiscation of private property. Many intermediate threats can arise from various sorts of regulation, for instance, of securities markets, labor markets, and product markets. In any event, the security of private property rights rests not so much on the letter of the law as on the character of the government that enforces, or threatens, presumptive rights.

In the latter half of the 1930s, many investors feared that the government would destroy the private enterprise system and replace it with fascism, socialism, or some other extreme transformation of the existing economic order.

In testing my hypothesis, I marshaled three distinct types of evidence: historical documentation of government actions and public reactions; findings of public opinion surveys, especially surveys of businessmen; and evidence from financial markets. The latter seems to some observers, especially to economists, to be the most telling because it is relatively “hard” and quantitative. In any event, it is the sort of evidence economists are accustomed to analyzing.

My most striking financial evidence for the New Deal episode pertains to the yield curve for corporate bonds, that is, to the spreads between the effective yields on high-grade corporate bonds with various terms to maturity. I found that this yield curve became suddenly much steeper sometime between the first quarter of 1934 and the first quarter of 1935 (a period when the New Deal lurched from its first, or business tolerant, phase to its second, or business hostile, phase) and remained very steep until sometime between the first quarter of 1941 and the first quarter of 1942 (a period when the New Deal handed over the reins to the military and the big businessmen who, along with the president himself, ran the war-command economy for the duration). I interpreted these extreme spreads as risk premiums on longer-term investments caused by regime uncertainty.

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It’s time for your weekly dose of Coffee and Markets, featuring The New Ledger’s Francis Cianfrocca, a podcast brought to you by the fine folks at Andrew Breitbart’s BigGovernment.com and LibertyPundits.com, your home for conservative podcasts. In this week’s edition, we discuss the crazy fallout from a glitch on the stock market Thursday, the latest unemployment numbers, and what’s happening with the crisis in Greece.

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This morning, in testimony before the Joint Economic Committee, Treasury Secretary Timothy Geithner said that, by any measurement of the strength and stability of the US economy, the economy today is better than it was when Obama took office. Sheesh, tell that to the millions of people who have lost their job since January.

Apparently, “any measurement” doesn’t include the unemployment rate, job growth, number of jobs, wage growth, hours worked, home foreclosures, rate of mortgage delinquencies, etc.

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