When it Comes to the Facts and Figures, America is in Trouble

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW •

Shah GilaniShah Gilani

There are always at least two sides to every story.

That's true when it comes to trading (there's always a buyer and a seller). It's also true when it comes to politics.

But, just like in trading or investing, when it comes to politics, it's not about being "right" or "wrong." It's about distilling rhetoric and opinions down to facts and figures that can then (hopefully) be more objectively observed and used to fashion compromises that lead to winning positions, financially and socially.

I try to let the facts and figures speak for themselves and peel back others' opinions to get at what's really happening and why.

I change my opinions all the time, whenever there are new facts that warrant consideration. But in the end, I take a stance.

I'm telling you this because I'm about to lay out some insights and some indictments regarding the economy, Wall Street, and oil, and then delve into something that's so charged that some of you are going to flip out.

But before you do, remember, there are two sides to every story.

First up: poverty.

Just look at the numbers out this morning...

According to the American Community Survey of some 3.3 million households (ACS is a run by the U.S. Census Bureau), the 2011 median income level in the U.S. dropped or was flat since 2010 in almost every state in our Union.

The median income level is that fulcrum point that is halfway there. It is the dividing line above which half of the population earns more than the half that earns less. For example, the median income level in Maryland (the highest in the country) is $70,004; in Mississippi (the lowest), it is $36,919.

If the median income level is rising or falling, that tells us whether people are better off or worse off. The absolute number itself is telling. (In Maryland, it tells me that a lot of people, lobbyists, and politicians who live there and "work" Washington are fat pigs.) But trends moving the median level tell another story.

In 2011, 18 states saw their median levels fall. Most of the rest were flat, and only a few were higher. In 2010, 35 states saw median levels fall. So maybe the negative trend is abating.

But no matter what absolute number makes up the median level (a few billionaires can make a big difference), the fact that people are being crushed under a falling median mark tells us that America is going in the wrong direction.

All I have to say about that is that we're in a state of decline because our politicians have opinions that they don't want to compromise for the good of the nation.

Their opinions may be steeped in beliefs, in theories, in expectations, in other ethereal energies, or they may be steeped in self-perpetuating, self-aggrandizing motives. Who knows?

All I know is, when it comes to the facts and figures, America is in trouble.

I think America needs smart compromises. Smart compromises are smart - not because they are absolutely right, but because if they are wrong and we see they aren't working, smart politicians will make smarter compromises and change what isn't working.

America is a com-promise. It "promises" a lot of things to a lot of people, and the only way a lot of those promises can be kept is by compromising.

If your representatives aren't willing to compromise for the good of the nation, ask them why not? Ask them what's wrong with compromising - along with a promise to make another compromise if what's compromised in the first place isn't working?

Second, Senator Jack Reed (D-RI) of the Banking Committee held hearings in Washington Thursday on high frequency trading (HFT) and its impact on markets and the public's perception of "the game."

All I have to say about that is thank goodness Jack takes money from a bunch of Wall Street players. Because at least we know his rhetoric - which will be over the top in favor of the public, of course - won't be overly compromised due to his balanced campaign contributors.

The whole HFT thing does need to be addressed, inside and out. I'll be watching to see what happens as a result and report back to you.

Be prepared for some good comedy. There are going to be a lot of stories told, and I'll break down and peel back the layers of lies for you.

Third: about the price of oil. On Monday, the price of oil tanked when, in a matter of minutes, 13,000 WTI (West Texas Intermediate) futures over at the CME (Chicago Mercantile Exchange) were dumped, and almost simultaneously over at the ICE (Intercontinental Exchange), 10,000 Brent futures contracts were exited.

There was no "flash crash" and no gaming the system by some nefarious agents of Armageddon.

One of two things happened. More than likely, a hedge fund or some huge player in oil (could be an oil company hedging, too) made the trades.

After all, there has been a lot of speculation about what stimulus would come our way, and we got it in Europe and then here in the U.S. just a few days later. In light of the expected push stimulus is supposed to engender, speculators over the past 10 weeks had taken a net 100,000 long position in oil futures contracts. That's equivalent to 100 million barrels.

Maybe they bought the rumor and sold the news? There was enough talk about stimulus, and when we got it, markets moved to four- and five-year highs and stalled. Maybe it was the fact that the Saudis are saying they will ramp up production to keep the price under control? Maybe it was the buildup of inventories?

Or maybe it was our government dumping futures to tank the price of oil to bring down gas prices to keep intact whatever fragile recovery we're supposed to be having (the recovery in the markets is real, although it too may be fragile)? Maybe. Who knows?

All I know is, as far as markets, oil is one of my bellwethers. If oil prices are falling, then demand (for production, consumption and growth) can't be that strong. Watch oil.

Lastly, are riots in the Middle East and North Africa, or anywhere where there are radical Muslims, anything to be surprised about?

Unfortunately not.

But I just want to say one thing about the riots in Libya, Tunisia, Indonesia, Sudan, Pakistan, Egypt, Yemen, and Afghanistan. As awful and frightening and tragic as they are, and unjustified by any measure, the imbecile(s) that put out the video that caused this latest upheaval ought to be held accountable.

I know, I know. I believe in free speech. Believe me, I do. I practice it here all the time.

But, if you haven't seen the video, you should look at it. It is garbage by any measure. It has no redeeming value whatsoever. It isn't funny. It was made to insult. It is the kind of hatemongering that everyone should be up in arms about.

Don't get me wrong. There's a lot about Islam that I don't get. And a lot that I don't understand. And that ends up meaning that there's a lot that I really dislike about what Islam condones and such. But that doesn't mean that I would ever be disrespectful of Islam, any more than I would of Catholicism, or Protestantism, or Judaism, or Buddhism, or anybody's beliefs in God, or that there may not be a god.

But whatever the story is about the video - and I'm sure its creators have a story - I can't find any excuse for ever purposely insulting, in such a vulgar way, anybody's beliefs, no matter what I believe.

That's my story and I'm sticking to it. What's yours?

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Shah GilaniShah Gilani

About the Author

Browse Shah's articles |

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.

The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.

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