A Day of Independence

For those who would rather not read the Declaration of Independence in its entirety, just skip ahead about 4 pages. Much of the middle part, starting on the next page won’t make a lot of sense, because you’ve been protected from such actions by a government that doesn’t look upon its citizens as cogs on a wheel, to be trampled whenever it suits it. But, you will also see why when the founding fathers were finally finished with the Constitution, they added the Bill of Rights right away.

“In Congress, July 4, 1776.

“The unanimous Declaration of the thirteen united States of America,

“~ When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter of to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

“Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

“He has refused his Assent to Laws, the most wholesome and necessary for the public good.

“He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

“He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.

“He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.

“He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

“He has refused for a long time, after such disolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

“He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.

“He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.

“He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.

“He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.

“He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.

“He has affected to render the Military independent of and superior to the Civil power.

“He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:

For Quartering large bodies of armed troops among us:

For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:

For cutting off our Trade with all parts of the world:

For imposing Taxes on us without our Consent:

For depriving us in many cases, of the benefits of Trial by Jury:

For transporting us beyond Seas to be tried for pretended offences

For abolishing the free System of English Laws in a neighboring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:

For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:

For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

“He has abdicated Government here, by declaring us out of his Protection and waging War against us.

“He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.

“He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

“He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.

“He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

“In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

“Nor have We been wanting in attentions to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

“We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.”


We had already been fighting with the British for over a year before the Declaration of Independence was sent to the King. We’d driven the King’s Army out of Boston and now it was sailing for New York. Not long after the petition reached King George III in London, the British Army would route the American Army under George Washington and take New York. Later that year, they would take Philadelphia, the home of the Continental Congress. From the perspective of 1776, independence seemed like a bad idea. Luckily, they persevered.

Issue of the Week

We ought to rename this segment the Greek of the Week. But, here we go again on the European debt crisis and all that it entails. The Greeks had some grand political theatre with their riots, midnight votes and tense negotiations. But, in the end the Greek parliament went along with the deal struck between their creditors and the government and voted for more austerity measures. This really P-O’d the otherwise easygoing Greeks, who took to the streets. Well, maybe not quite took to the streets. Evidently a lot of the demonstrators were actually paid demonstrators. That doesn’t mean that there wasn’t some injustice felt, just not enough to get out of the comfort of their own homes and riot. Leave that to the professionals.

The Greek parliament had two votes. A midnight Athens time vote of no confidence on Wednesday which the current government survived and a specific vote to approve the deal struck. After weeks of worrying that Greece would spark some kind of global financial collapse, this was sort of anti-climatic. The Greeks still have to fashion specific bills to implement the austerity, which could lead to lots more worrying, but the deed was largely done.

While all this was going on, the US Congress (the opposite of progress) was not addressing the US debt ceiling. Rather, all the talking lead to lots of arguing and then to all sorts of folks walking out. So, with about a month to go before we run out of budget authority, we have to start over and find some sort of compromise where everybody gives up something, so we can raise the debt ceiling and pay for the government we think we want.

It is good to be in such illustrious company as the Greeks, the Portuguese, the Irish and maybe the Spaniards. There are a lot of countries with financial constraints. Japan owes nearly twice their annual GDP in debt and will now have to spend gobs more on relief and reconstruction after their earthquake and tsunami.

The bigger issue here is – What is the proper role of government in the economy and financial markets? No one raised this issue when governments started bailing-out every industry that seemed to need a boost. You can go back to the Great Depression to find governments supporting or outright taking-over industries. Many utilities that were privately-owned prior to the 1930s became publically-owned. When an essential service must continue, it makes sense for government to step in. At least that is the basis for a lot of what governments have done in the intervening years. Is the coal industry essential? How about steel? Airlines? Railroads?

One big difference between the US and much of Europe is that more of our economy is still in private hands. It is run to make a profit. It is run to satisfy its customers.

Economic News

Consumer spending was unchanged, below expectations. Weak employment gains and high gas prices combined with a general ennui to keep people from the malls and stores.  Even the modest expectation of a 0.1% gain in spending wasn’t met. Limited inventory of popular cars may have also impacted this number. After adjustment for inflation, consumer spending actually declined 0.1%.

Personal incomes rose 0.3%, in line with expectations.

Case-Shiller home prices rose for the first time in months. The gain of 0.7% in the 20-city index but that still puts it down 4.0% year over year. 13 of the 20 cities gained in value for the month, but only one city is higher over the past year. Yep, you guessed it, Washington, DC.

Consumer confidence fell again in June, this time to 58.5 from 61.7 in May. The poor employment outlook, higher gasoline prices and general angst about the fiscal situation combined to bring us back to levels in confidence not seen since late last year.

Consumer sentiment slipped again in June to a level of 71.5 from 71.8 in May. After consumer confidence rose, the guess was that sentiment would also rise, but the surveys once again go their separate ways.

Institute of Supply Management manufacturing index rose unexpectedly in June. The index rose to 55.3% from 53.5% in May. It was widely expected to drop, since so many other economic statistics have been weak lately. The sub-indexes for new orders, hiring, production and inventories were all higher while the prices paid index was lower.

Weekly Stuff

All these comments pretty much pertain to the week ended Thursday, June 30th, because we like to have ‘weeks’ that end on month-end dates, we often take the odd Friday or Monday and tack it onto the following week. But, since Friday pretty much followed the same script as Monday through Thursday, this is one instance when you’d be forgiven being a bit confused about how that worked.

To say it mildly, last week was a good week for stock investors. After markets had given back a good piece of the earlier gains from January to April, we added immensely to the year-to-date gains again last week. Given just how putrid the background sentiment had gotten, any good news would unnerve some of the bears and encourage all of the bulls, which gave us just about the mirror image of the prior couple of months. Instead of pervasive negativity with sudden bouts of positive, we got a powerful bout of positive news that was totally unexpected by the crowd.

The coming together of so many parties to the Greek solution shows just how easy it is to work some of these issues out. Of course, we will have to endure further episodes of this on-going drama, but we now have a framework for the next time. We also have a framework for Portugal, Ireland and maybe Spain. We haven’t really fixed the European debt problems, but we have figured-out a way to keep the flare-ups from spreading beyond the specific debt markets and specific countries.

Stocks gained around the world. The gains were greatest in Europe with Greece up about 8% on the week; most major markets up 4% give or take. The US was next 4% gains. Asia wasn’t all that concerned and some markets there had very pedestrian results. Japan was up 1.5% and China, Korea and others less than half that.

Bonds didn’t fare so well. US Treasuries were lower and rates rose across the curve. The rise was most felt at the 10-year area. High grade corporate bonds also slipped, but not as much. High yield bonds followed the stock market higher. Foreign markets generally fell, but those losses were more than offset by the dollar falling over 1.6%.

Real estate markets were encouraged by gains in financial stocks. Here, the markets were just overcoming a little shock in the last couple of weeks. The underlying fundamentals in commercial real estate are actually improving, but the prices of REITs are way ahead of the fundamentals now.

Commodities had a very mixed picture. Energy overcame the surprise release of strategic reserves by several nations the week before and rallied on the better outlook for demand encapsulated in the better mood of markets last week. Most agricultural commodities fell due to a combination of crop outlooks in the US (where farmers are planting fencepost to fencepost to capture the high prices available) and the comments of several major importers who said inventories are higher than had been thought. Industrial metals tended to gain, but precious metals were generally soft, due to the lower level of angst in the world.

Generally speaking, what is good for gold isn’t good for anything else.

Have a great week.

Karl Schroeder, RFC, CSA

Investment Advisor Representative

Schroeder Financial Services, Inc.