We had lunch with our former landlord last October. She is insecure and in search of gurus, and flattered me by asking me the future. She was worried about housing prices, but she also had a boyfriend suffering from Howard-Ruffianism, telling her to buy gold because the sky was falling. I was able to calm her with ease. I told her that, regarding the future, “I haven’t a clue.” I further said that no one knows the future, so not to listen to the boyfriend or buy Krugerrands or some oddball mutual fund that has had recent success. Just endure, as we all do, and hope you can be happy no matter the worst of circumstances.
Around that time my wife’s uncle was agitated and anxious to sell a family real estate partnership before year’s end because he knew with certainty that President Obama was going to eliminate the Bush tax cuts. Here I did know the future. I told him that he might harm his investors by not getting the best price, and that Obama was not going to undo anything Bush had done. That fell on deaf ears, of course, as people trapped in the false dichotomy of Republican/Democratism cannot think outside that box. He sold the partnership, and an unintended side-effect that I overlooked was that the resulting capital gain threw many of the partners into the Alternative Minimum Tax, costing them far more than elimination of the Bush tax cuts would have done (had that even been contemplated).So what am I saying? Am I some kind of genius? If you read this blog with regularity, you know that not to be the case. I’m as apt to write about ionized hair dryers and quarrel with Monty as write anything intelligent. But in poker there is a strategy known as “sandbagging,” where the object is to maximize the winnings on a good hand. If I am playing Texas Hold-em and draw pocket aces, I don’t move on them. Instead I hope that others think they have good hands as well, and wait for them to bet. I don’t raise on them, and just stay in the game, and allow them to put as many chips in the pot as they want, and don’t slam the trap until that river card is turned, and then go all-in.
Of course, I only do that in computer Texas Hold-em where the stakes are not real. In a real poker game, a smart player would ‘read them aces shinin’ in my eyes’ and fold.
Here is my pocket pair: Obama is a con man. If party membership actually mattered, he would be a Republican. He was that in his post-grad years, after all.
In 2008 there was a tremendous backlash against Bushism, and so it was natural that a Democrat would be elected. Obama did not magically rise because of his charisma. Rather, those who know surfing saw him out there on his board, and realized that he might be able to ride a wave into office. His candidacy could have been destroyed at any time, as Howard Dean’s was, if he truly had a reformist streak in him. But Obama is truly intelligent, and a good poker player to boot. He knew that anti-Bush sentiment could sweep him into office. An advertising agency got behind him and devised the “Hope and Change” campaign, knowing that people would fill in the blanks for themselves. (At the heart of every successful ad agency are behavioral psychologists.) Everything was in place, and money fell out of the sky for his campaign.
He has but one job in office: To prevent backsliding. He was the Manchurian candidate. (And by the way, “he” could as easily been “she.” Hilary Clinton is also very intelligent and is regarded as reliable. The Obama-Clinton contest was an oddity in American politics: Even though it made no difference in terms of policy, it was real.)
Those are my pocket aces. Looking at those cards, I knew shortly after my Obama-fog lifted that every Bush policy would stay in place. Life is full of unintended consequences and random events, so it is impossible to predict the financial future. Politics is different. It is predictable to a large degree if one knows how the game is played.
That in mind, it is easy to see a few things in current politics:
1): The “stand-off” is fake. It’s a Kabuki dance. The money powers are far too wise to allow the US to default on its debt. It would be catastrophic and would unleash untold unforeseen consequences. The debt ceiling will be raised. That has never been in question, which is why money keeps flowing into the American economy. US Treasury bonds are still seen as rock-solid.
2): There will be no “balanced budget amendment.” That’s stupid. There are stupid people in the Congress who believe that such a thing would be good policy and they are humored for the time being, as its a useful diversion.
3): There is no debt crisis. Debt is well in hand, as is interest expense on the debt.)4): There will be massive cuts to social spending, although it is not known yet how deep that knife will cut. It’s a question of management of sleeping dogs … there cannot be cuts to Social Security and Medicare without some awakening, so its a question of managing the backlash. The whole of the “debt ceiling” scam has been to justify cuts while at the same time keeping the dogs snoozing.
5): There will be no real cuts to military aggression spending, or “defense,” as expressed in our Orwellian dialect. Nothing will be done that in any way hampers the ongoing wars in Colombia, Iraq, Afghanistan and Pakistan, or affects the suppression of the Arab Spring. There are often cuts in various aggression spending programs when they are seen as being not terribly effective. If military spending cuts are even real, an open question, they will be of the sacrificial lamb variety, and not meaningful.
6): Deficits will not decrease. They are not that big a deal. “Keynesianism” has been the extant bipartisan policy since 1980. Put simply, without deficits, the economy contracts. We are a house of cards, but a very durable one. Whenever it appears we are going to collapse, we rise again. Optimism is the order of the day.
7): Obama will be re-elected. He is very useful. But there’s nothing in it for us.
That’s the value of pocket aces.
I just learned that Obama has now come out in favor of repeal of DOMA. This is well-timed. It is a bone tossed at the progressives to keep them busy while he closes the budget deal. I could not have predicted that, of course, but it is easy to see through it.