Wednesday, January 26, 2011

Draft Text of President Obama’s State of the Union address



http://dailycaller.com/2011/01/25/text-of-president-obamas-state-of-the-union-address-as-prepared-for-delivery/#ixzz1C6CouYdM


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Text of President Obama's State of the Union address

Remarks of President Barack Obama – As Prepared for Delivery
State of the Union Address
Tuesday, January 25, 2011
Washington, DC

As Prepared for Delivery—

Mr. Speaker, Mr. Vice President, Members of Congress, distinguished
guests, and fellow Americans:

Tonight I want to begin by congratulating the men and women of the
112th Congress, as well as your new Speaker, John Boehner. And as we
mark this occasion, we are also mindful of the empty chair in this
Chamber, and pray for the health of our colleague – and our friend –
Gabby Giffords.

It's no secret that those of us here tonight have had our differences
over the last two years. The debates have been contentious; we have
fought fiercely for our beliefs. And that's a good thing. That's what
a robust democracy demands. That's what helps set us apart as a
nation.

But there's a reason the tragedy in Tucson gave us pause. Amid all the
noise and passions and rancor of our public debate, Tucson reminded us
that no matter who we are or where we come from, each of us is a part
of something greater – something more consequential than party or
political preference.

We are part of the American family. We believe that in a country where
every race and faith and point of view can be found, we are still
bound together as one people; that we share common hopes and a common
creed; that the dreams of a little girl in Tucson are not so different
than those of our own children, and that they all deserve the chance
to be fulfilled.

That, too, is what sets us apart as a nation.

Now, by itself, this simple recognition won't usher in a new era of
cooperation. What comes of this moment is up to us. What comes of this
moment will be determined not by whether we can sit together tonight,
but whether we can work together tomorrow.

I believe we can. I believe we must. That's what the people who sent
us here expect of us. With their votes, they've determined that
governing will now be a shared responsibility between parties. New
laws will only pass with support from Democrats and Republicans. We
will move forward together, or not at all – for the challenges we face
are bigger than party, and bigger than politics.

At stake right now is not who wins the next election – after all, we
just had an election. At stake is whether new jobs and industries take
root in this country, or somewhere else. It's whether the hard work
and industry of our people is rewarded. It's whether we sustain the
leadership that has made America not just a place on a map, but a
light to the world.

We are poised for progress. Two years after the worst recession most
of us have ever known, the stock market has come roaring back.
Corporate profits are up. The economy is growing again.

But we have never measured progress by these yardsticks alone. We
measure progress by the success of our people. By the jobs they can
find and the quality of life those jobs offer. By the prospects of a
small business owner who dreams of turning a good idea into a thriving
enterprise. By the opportunities for a better life that we pass on to
our children.

That's the project the American people want us to work on. Together.

We did that in December. Thanks to the tax cuts we passed, Americans'
paychecks are a little bigger today. Every business can write off the
full cost of the new investments they make this year. These steps,
taken by Democrats and Republicans, will grow the economy and add to
the more than one million private sector jobs created last year.

But we have more work to do. The steps we've taken over the last two
years may have broken the back of this recession – but to win the
future, we'll need to take on challenges that have been decades in the
making.

Many people watching tonight can probably remember a time when finding
a good job meant showing up at a nearby factory or a business
downtown. You didn't always need a degree, and your competition was
pretty much limited to your neighbors. If you worked hard, chances are
you'd have a job for life, with a decent paycheck, good benefits, and
the occasional promotion. Maybe you'd even have the pride of seeing
your kids work at the same company.

That world has changed. And for many, the change has been painful.
I've seen it in the shuttered windows of once booming factories, and
the vacant storefronts of once busy Main Streets. I've heard it in the
frustrations of Americans who've seen their paychecks dwindle or their
jobs disappear – proud men and women who feel like the rules have been
changed in the middle of the game.

They're right. The rules have changed. In a single generation,
revolutions in technology have transformed the way we live, work and
do business. Steel mills that once needed 1,000 workers can now do the
same work with 100. Today, just about any company can set up shop,
hire workers, and sell their products wherever there's an internet
connection.

Meanwhile, nations like China and India realized that with some
changes of their own, they could compete in this new world. And so
they started educating their children earlier and longer, with greater
emphasis on math and science. They're investing in research and new
technologies. Just recently, China became home to the world's largest
private solar research facility, and the world's fastest computer.

So yes, the world has changed. The competition for jobs is real. But
this shouldn't discourage us. It should challenge us. Remember – for
all the hits we've taken these last few years, for all the naysayers
predicting our decline, America still has the largest, most prosperous
economy in the world. No workers are more productive than ours. No
country has more successful companies, or grants more patents to
inventors and entrepreneurs. We are home to the world's best colleges
and universities, where more students come to study than any other
place on Earth.

What's more, we are the first nation to be founded for the sake of an
idea – the idea that each of us deserves the chance to shape our own
destiny. That is why centuries of pioneers and immigrants have risked
everything to come here. It's why our students don't just memorize
equations, but answer questions like "What do you think of that idea?
What would you change about the world? What do you want to be when you
grow up?"

The future is ours to win. But to get there, we can't just stand
still. As Robert Kennedy told us, "The future is not a gift. It is an
achievement." Sustaining the American Dream has never been about
standing pat. It has required each generation to sacrifice, and
struggle, and meet the demands of a new age.

Now it's our turn. We know what it takes to compete for the jobs and
industries of our time. We need to out-innovate, out-educate, and
out-build the rest of the world. We have to make America the best
place on Earth to do business. We need to take responsibility for our
deficit, and reform our government. That's how our people will
prosper. That's how we'll win the future. And tonight, I'd like to
talk about how we get there.

The first step in winning the future is encouraging American innovation.

None of us can predict with certainty what the next big industry will
be, or where the new jobs will come from. Thirty years ago, we
couldn't know that something called the Internet would lead to an
economic revolution. What we can do – what America does better than
anyone – is spark the creativity and imagination of our people. We are
the nation that put cars in driveways and computers in offices; the
nation of Edison and the Wright brothers; of Google and Facebook. In
America, innovation doesn't just change our lives. It's how we make a
living.

Our free enterprise system is what drives innovation. But because it's
not always profitable for companies to invest in basic research,
throughout history our government has provided cutting-edge scientists
and inventors with the support that they need. That's what planted the
seeds for the Internet. That's what helped make possible things like
computer chips and GPS.

Just think of all the good jobs – from manufacturing to retail – that
have come from those breakthroughs.

Half a century ago, when the Soviets beat us into space with the
launch of a satellite called Sputnik¸ we had no idea how we'd beat
them to the moon. The science wasn't there yet. NASA didn't even
exist. But after investing in better research and education, we didn't
just surpass the Soviets; we unleashed a wave of innovation that
created new industries and millions of new jobs.

This is our generation's Sputnik moment. Two years ago, I said that we
needed to reach a level of research and development we haven't seen
since the height of the Space Race. In a few weeks, I will be sending
a budget to Congress that helps us meet that goal. We'll invest in
biomedical research, information technology, and especially clean
energy technology – an investment that will strengthen our security,
protect our planet, and create countless new jobs for our people.

Already, we are seeing the promise of renewable energy. Robert and
Gary Allen are brothers who run a small Michigan roofing company.
After September 11th, they volunteered their best roofers to help
repair the Pentagon. But half of their factory went unused, and the
recession hit them hard.

Today, with the help of a government loan, that empty space is being
used to manufacture solar shingles that are being sold all across the
country. In Robert's words, "We reinvented ourselves."

That's what Americans have done for over two hundred years: reinvented
ourselves. And to spur on more success stories like the Allen
Brothers, we've begun to reinvent our energy policy. We're not just
handing out money. We're issuing a challenge. We're telling America's
scientists and engineers that if they assemble teams of the best minds
in their fields, and focus on the hardest problems in clean energy,
we'll fund the Apollo Projects of our time.

At the California Institute of Technology, they're developing a way to
turn sunlight and water into fuel for our cars. At Oak Ridge National
Laboratory, they're using supercomputers to get a lot more power out
of our nuclear facilities. With more research and incentives, we can
break our dependence on oil with biofuels, and become the first
country to have 1 million electric vehicles on the road by 2015.

We need to get behind this innovation. And to help pay for it, I'm
asking Congress to eliminate the billions in taxpayer dollars we
currently give to oil companies. I don't know if you've noticed, but
they're doing just fine on their own. So instead of subsidizing
yesterday's energy, let's invest in tomorrow's.

Now, clean energy breakthroughs will only translate into clean energy
jobs if businesses know there will be a market for what they're
selling. So tonight, I challenge you to join me in setting a new goal:
by 2035, 80% of America's electricity will come from clean energy
sources. Some folks want wind and solar. Others want nuclear, clean
coal, and natural gas. To meet this goal, we will need them all – and
I urge Democrats and Republicans to work together to make it happen.

Maintaining our leadership in research and technology is crucial to
America's success. But if we want to win the future – if we want
innovation to produce jobs in America and not overseas – then we also
have to win the race to educate our kids.

Think about it. Over the next ten years, nearly half of all new jobs
will require education that goes beyond a high school degree. And yet,
as many as a quarter of our students aren't even finishing high
school. The quality of our math and science education lags behind many
other nations. America has fallen to 9th in the proportion of young
people with a college degree. And so the question is whether all of us
– as citizens, and as parents – are willing to do what's necessary to
give every child a chance to succeed.

That responsibility begins not in our classrooms, but in our homes and
communities. It's family that first instills the love of learning in a
child. Only parents can make sure the TV is turned off and homework
gets done. We need to teach our kids that it's not just the winner of
the Super Bowl who deserves to be celebrated, but the winner of the
science fair; that success is not a function of fame or PR, but of
hard work and discipline.

Our schools share this responsibility. When a child walks into a
classroom, it should be a place of high expectations and high
performance. But too many schools don't meet this test. That's why
instead of just pouring money into a system that's not working, we
launched a competition called Race to the Top. To all fifty states, we
said, "If you show us the most innovative plans to improve teacher
quality and student achievement, we'll show you the money."

Race to the Top is the most meaningful reform of our public schools in
a generation. For less than one percent of what we spend on education
each year, it has led over 40 states to raise their standards for
teaching and learning. These standards were developed, not by
Washington, but by Republican and Democratic governors throughout the
country. And Race to the Top should be the approach we follow this
year as we replace No Child Left Behind with a law that is more
flexible and focused on what's best for our kids.

You see, we know what's possible for our children when reform isn't
just a top-down mandate, but the work of local teachers and
principals; school boards and communities.

Take a school like Bruce Randolph in Denver. Three years ago, it was
rated one of the worst schools in Colorado; located on turf between
two rival gangs. But last May, 97% of the seniors received their
diploma. Most will be the first in their family to go to college. And
after the first year of the school's transformation, the principal who
made it possible wiped away tears when a student said "Thank you, Mrs.
Waters, for showing… that we are smart and we can make it."

Let's also remember that after parents, the biggest impact on a
child's success comes from the man or woman at the front of the
classroom. In South Korea, teachers are known as "nation builders."
Here in America, it's time we treated the people who educate our
children with the same level of respect. We want to reward good
teachers and stop making excuses for bad ones. And over the next ten
years, with so many Baby Boomers retiring from our classrooms, we want
to prepare 100,000 new teachers in the fields of science, technology,
engineering, and math.

In fact, to every young person listening tonight who's contemplating
their career choice: If you want to make a difference in the life of
our nation; if you want to make a difference in the life of a child –
become a teacher. Your country needs you.

Of course, the education race doesn't end with a high school diploma.
To compete, higher education must be within reach of every American.
That's why we've ended the unwarranted taxpayer subsidies that went to
banks, and used the savings to make college affordable for millions of
students. And this year, I ask Congress to go further, and make
permanent our tuition tax credit – worth $10,000 for four years of
college.

Because people need to be able to train for new jobs and careers in
today's fast-changing economy, we are also revitalizing America's
community colleges. Last month, I saw the promise of these schools at
Forsyth Tech in North Carolina. Many of the students there used to
work in the surrounding factories that have since left town. One
mother of two, a woman named Kathy Proctor, had worked in the
furniture industry since she was 18 years old. And she told me she's
earning her degree in biotechnology now, at 55 years old, not just
because the furniture jobs are gone, but because she wants to inspire
her children to pursue their dreams too. As Kathy said, "I hope it
tells them to never give up."

If we take these steps – if we raise expectations for every child, and
give them the best possible chance at an education, from the day
they're born until the last job they take – we will reach the goal I
set two years ago: by the end of the decade, America will once again
have the highest proportion of college graduates in the world.

One last point about education. Today, there are hundreds of thousands
of students excelling in our schools who are not American citizens.
Some are the children of undocumented workers, who had nothing to do
with the actions of their parents. They grew up as Americans and
pledge allegiance to our flag, and yet live every day with the threat
of deportation. Others come here from abroad to study in our colleges
and universities. But as soon as they obtain advanced degrees, we send
them back home to compete against us. It makes no sense.

Now, I strongly believe that we should take on, once and for all, the
issue of illegal immigration. I am prepared to work with Republicans
and Democrats to protect our borders, enforce our laws and address the
millions of undocumented workers who are now living in the shadows. I
know that debate will be difficult and take time. But tonight, let's
agree to make that effort. And let's stop expelling talented,
responsible young people who can staff our research labs, start new
businesses, and further enrich this nation.

The third step in winning the future is rebuilding America. To attract
new businesses to our shores, we need the fastest, most reliable ways
to move people, goods, and information – from high-speed rail to
high-speed internet.

Our infrastructure used to be the best – but our lead has slipped.
South Korean homes now have greater internet access than we do.
Countries in Europe and Russia invest more in their roads and railways
than we do. China is building faster trains and newer airports.
Meanwhile, when our own engineers graded our nation's infrastructure,
they gave us a "D."

We have to do better. America is the nation that built the
transcontinental railroad, brought electricity to rural communities,
and constructed the interstate highway system. The jobs created by
these projects didn't just come from laying down tracks or pavement.
They came from businesses that opened near a town's new train station
or the new off-ramp.

Over the last two years, we have begun rebuilding for the 21st
century, a project that has meant thousands of good jobs for the
hard-hit construction industry. Tonight, I'm proposing that we
redouble these efforts.

We will put more Americans to work repairing crumbling roads and
bridges. We will make sure this is fully paid for, attract private
investment, and pick projects based on what's best for the economy,
not politicians.

Within 25 years, our goal is to give 80% of Americans access to
high-speed rail, which could allow you go places in half the time it
takes to travel by car. For some trips, it will be faster than flying
– without the pat-down. As we speak, routes in California and the
Midwest are already underway.

Within the next five years, we will make it possible for business to
deploy the next generation of high-speed wireless coverage to 98% of
all Americans. This isn't just about a faster internet and fewer
dropped calls. It's about connecting every part of America to the
digital age. It's about a rural community in Iowa or Alabama where
farmers and small business owners will be able to sell their products
all over the world. It's about a firefighter who can download the
design of a burning building onto a handheld device; a student who can
take classes with a digital textbook; or a patient who can have
face-to-face video chats with her doctor.

All these investments – in innovation, education, and infrastructure –
will make America a better place to do business and create jobs. But
to help our companies compete, we also have to knock down barriers
that stand in the way of their success.

Over the years, a parade of lobbyists has rigged the tax code to
benefit particular companies and industries. Those with accountants or
lawyers to work the system can end up paying no taxes at all. But all
the rest are hit with one of the highest corporate tax rates in the
world. It makes no sense, and it has to change.

So tonight, I'm asking Democrats and Republicans to simplify the
system. Get rid of the loopholes. Level the playing field. And use the
savings to lower the corporate tax rate for the first time in 25 years
– without adding to our deficit.

To help businesses sell more products abroad, we set a goal of
doubling our exports by 2014 – because the more we export, the more
jobs we create at home. Already, our exports are up. Recently, we
signed agreements with India and China that will support more than
250,000 jobs in the United States. And last month, we finalized a
trade agreement with South Korea that will support at least 70,000
American jobs. This agreement has unprecedented support from business
and labor; Democrats and Republicans, and I ask this Congress to pass
it as soon as possible.

Before I took office, I made it clear that we would enforce our trade
agreements, and that I would only sign deals that keep faith with
American workers, and promote American jobs. That's what we did with
Korea, and that's what I intend to do as we pursue agreements with
Panama and Colombia, and continue our Asia Pacific and global trade
talks.

To reduce barriers to growth and investment, I've ordered a review of
government regulations. When we find rules that put an unnecessary
burden on businesses, we will fix them. But I will not hesitate to
create or enforce commonsense safeguards to protect the American
people. That's what we've done in this country for more than a
century. It's why our food is safe to eat, our water is safe to drink,
and our air is safe to breathe. It's why we have speed limits and
child labor laws. It's why last year, we put in place consumer
protections against hidden fees and penalties by credit card
companies, and new rules to prevent another financial crisis. And it's
why we passed reform that finally prevents the health insurance
industry from exploiting patients.

Now, I've heard rumors that a few of you have some concerns about the
new health care law. So let me be the first to say that anything can
be improved. If you have ideas about how to improve this law by making
care better or more affordable, I am eager to work with you. We can
start right now by correcting a flaw in the legislation that has
placed an unnecessary bookkeeping burden on small businesses.

What I'm not willing to do is go back to the days when insurance
companies could deny someone coverage because of a pre-existing
condition. I'm not willing to tell James Howard, a brain cancer
patient from Texas, that his treatment might not be covered. I'm not
willing to tell Jim Houser, a small business owner from Oregon, that
he has to go back to paying $5,000 more to cover his employees. As we
speak, this law is making prescription drugs cheaper for seniors and
giving uninsured students a chance to stay on their parents' coverage.
So instead of re-fighting the battles of the last two years, let's fix
what needs fixing and move forward.

Now, the final step – a critical step – in winning the future is to
make sure we aren't buried under a mountain of debt.

We are living with a legacy of deficit-spending that began almost a
decade ago. And in the wake of the financial crisis, some of that was
necessary to keep credit flowing, save jobs, and put money in people's
pockets.

But now that the worst of the recession is over, we have to confront
the fact that our government spends more than it takes in. That is not
sustainable. Every day, families sacrifice to live within their means.
They deserve a government that does the same.

So tonight, I am proposing that starting this year, we freeze annual
domestic spending for the next five years. This would reduce the
deficit by more than $400 billion over the next decade, and will bring
discretionary spending to the lowest share of our economy since Dwight
Eisenhower was president.

This freeze will require painful cuts. Already, we have frozen the
salaries of hardworking federal employees for the next two years. I've
proposed cuts to things I care deeply about, like community action
programs. The Secretary of Defense has also agreed to cut tens of
billions of dollars in spending that he and his generals believe our
military can do without.

I recognize that some in this Chamber have already proposed deeper
cuts, and I'm willing to eliminate whatever we can honestly afford to
do without. But let's make sure that we're not doing it on the backs
of our most vulnerable citizens. And let's make sure what we're
cutting is really excess weight. Cutting the deficit by gutting our
investments in innovation and education is like lightening an
overloaded airplane by removing its engine. It may feel like you're
flying high at first, but it won't take long before you'll feel the
impact.

Now, most of the cuts and savings I've proposed only address annual
domestic spending, which represents a little more than 12% of our
budget. To make further progress, we have to stop pretending that
cutting this kind of spending alone will be enough. It won't.

The bipartisan Fiscal Commission I created last year made this crystal
clear. I don't agree with all their proposals, but they made important
progress. And their conclusion is that the only way to tackle our
deficit is to cut excessive spending wherever we find it – in domestic
spending, defense spending, health care spending, and spending through
tax breaks and loopholes.

This means further reducing health care costs, including programs like
Medicare and Medicaid, which are the single biggest contributor to our
long-term deficit. Health insurance reform will slow these rising
costs, which is part of why nonpartisan economists have said that
repealing the health care law would add a quarter of a trillion
dollars to our deficit. Still, I'm willing to look at other ideas to
bring down costs, including one that Republicans suggested last year:
medical malpractice reform to rein in frivolous lawsuits.

To put us on solid ground, we should also find a bipartisan solution
to strengthen Social Security for future generations. And we must do
it without putting at risk current retirees, the most vulnerable, or
people with disabilities; without slashing benefits for future
generations; and without subjecting Americans' guaranteed retirement
income to the whims of the stock market.

And if we truly care about our deficit, we simply cannot afford a
permanent extension of the tax cuts for the wealthiest 2% of
Americans. Before we take money away from our schools, or scholarships
away from our students, we should ask millionaires to give up their
tax break.

It's not a matter of punishing their success. It's about promoting
America's success.

In fact, the best thing we could do on taxes for all Americans is to
simplify the individual tax code. This will be a tough job, but
members of both parties have expressed interest in doing this, and I
am prepared to join them.

So now is the time to act. Now is the time for both sides and both
houses of Congress – Democrats and Republicans – to forge a principled
compromise that gets the job done. If we make the hard choices now to
rein in our deficits, we can make the investments we need to win the
future.

Let me take this one step further. We shouldn't just give our people a
government that's more affordable. We should give them a government
that's more competent and efficient. We cannot win the future with a
government of the past.

We live and do business in the information age, but the last major
reorganization of the government happened in the age of black and
white TV. There are twelve different agencies that deal with exports.
There are at least five different entities that deal with housing
policy. Then there's my favorite example: the Interior Department is
in charge of salmon while they're in fresh water, but the Commerce
Department handles them in when they're in saltwater. And I hear it
gets even more complicated once they're smoked.

Now, we have made great strides over the last two years in using
technology and getting rid of waste. Veterans can now download their
electronic medical records with a click of the mouse. We're selling
acres of federal office space that hasn't been used in years, and we
will cut through red tape to get rid of more. But we need to think
bigger. In the coming months, my administration will develop a
proposal to merge, consolidate, and reorganize the federal government
in a way that best serves the goal of a more competitive America. I
will submit that proposal to Congress for a vote – and we will push to
get it passed.

In the coming year, we will also work to rebuild people's faith in the
institution of government. Because you deserve to know exactly how and
where your tax dollars are being spent, you will be able to go to a
website and get that information for the very first time in history.
Because you deserve to know when your elected officials are meeting
with lobbyists, I ask Congress to do what the White House has already
done: put that information online. And because the American people
deserve to know that special interests aren't larding up legislation
with pet projects, both parties in Congress should know this: if a
bill comes to my desk with earmarks inside, I will veto it.

A 21st century government that's open and competent. A government that
lives within its means. An economy that's driven by new skills and
ideas. Our success in this new and changing world will require reform,
responsibility, and innovation. It will also require us to approach
that world with a new level of engagement in our foreign affairs.

Just as jobs and businesses can now race across borders, so can new
threats and new challenges. No single wall separates East and West; no
one rival superpower is aligned against us.

And so we must defeat determined enemies wherever they are, and build
coalitions that cut across lines of region and race and religion.
America's moral example must always shine for all who yearn for
freedom, justice, and dignity. And because we have begun this work,
tonight we can say that American leadership has been renewed and
America's standing has been restored.

Look to Iraq, where nearly 100,000 of our brave men and women have
left with their heads held high; where American combat patrols have
ended; violence has come down; and a new government has been formed.
This year, our civilians will forge a lasting partnership with the
Iraqi people, while we finish the job of bringing our troops out of
Iraq. America's commitment has been kept; the Iraq War is coming to an
end.

Of course, as we speak, al Qaeda and their affiliates continue to plan
attacks against us. Thanks to our intelligence and law enforcement
professionals, we are disrupting plots and securing our cities and
skies. And as extremists try to inspire acts of violence within our
borders, we are responding with the strength of our communities, with
respect for the rule of law, and with the conviction that American
Muslims are a part of our American family.

We have also taken the fight to al Qaeda and their allies abroad. In
Afghanistan, our troops have taken Taliban strongholds and trained
Afghan Security Forces. Our purpose is clear – by preventing the
Taliban from reestablishing a stranglehold over the Afghan people, we
will deny al Qaeda the safe-haven that served as a launching pad for
9/11.

Thanks to our heroic troops and civilians, fewer Afghans are under the
control of the insurgency. There will be tough fighting ahead, and the
Afghan government will need to deliver better governance. But we are
strengthening the capacity of the Afghan people and building an
enduring partnership with them. This year, we will work with nearly 50
countries to begin a transition to an Afghan lead. And this July, we
will begin to bring our troops home.

In Pakistan, al Qaeda's leadership is under more pressure than at any
point since 2001. Their leaders and operatives are being removed from
the battlefield. Their safe-havens are shrinking. And we have sent a
message from the Afghan border to the Arabian Peninsula to all parts
of the globe: we will not relent, we will not waver, and we will
defeat you.

American leadership can also be seen in the effort to secure the worst
weapons of war. Because Republicans and Democrats approved the New
START Treaty, far fewer nuclear weapons and launchers will be
deployed. Because we rallied the world, nuclear materials are being
locked down on every continent so they never fall into the hands of
terrorists.

Because of a diplomatic effort to insist that Iran meet its
obligations, the Iranian government now faces tougher and tighter
sanctions than ever before. And on the Korean peninsula, we stand with
our ally South Korea, and insist that North Korea keeps its commitment
to abandon nuclear weapons.

This is just a part of how we are shaping a world that favors peace
and prosperity. With our European allies, we revitalized NATO, and
increased our cooperation on everything from counter-terrorism to
missile defense. We have reset our relationship with Russia,
strengthened Asian alliances, and built new partnerships with nations
like India. This March, I will travel to Brazil, Chile, and El
Salvador to forge new alliances for progress in the Americas. Around
the globe, we are standing with those who take responsibility –
helping farmers grow more food; supporting doctors who care for the
sick; and combating the corruption that can rot a society and rob
people of opportunity.

Recent events have shown us that what sets us apart must not just be
our power – it must be the purpose behind it. In South Sudan – with
our assistance – the people were finally able to vote for independence
after years of war. Thousands lined up before dawn. People danced in
the streets. One man who lost four of his brothers at war summed up
the scene around him: "This was a battlefield for most of my life. Now
we want to be free."

We saw that same desire to be free in Tunisia, where the will of the
people proved more powerful than the writ of a dictator. And tonight,
let us be clear: the United States of America stands with the people
of Tunisia, and supports the democratic aspirations of all people.

We must never forget that the things we've struggled for, and fought
for, live in the hearts of people everywhere. And we must always
remember that the Americans who have borne the greatest burden in this
struggle are the men and women who serve our country.

Tonight, let us speak with one voice in reaffirming that our nation is
united in support of our troops and their families. Let us serve them
as well as they have served us – by giving them the equipment they
need; by providing them with the care and benefits they have earned;
and by enlisting our veterans in the great task of building our own
nation.

Our troops come from every corner of this country – they are black,
white, Latino, Asian and Native American. They are Christian and
Hindu, Jewish and Muslim. And, yes, we know that some of them are gay.
Starting this year, no American will be forbidden from serving the
country they love because of who they love. And with that change, I
call on all of our college campuses to open their doors to our
military recruiters and the ROTC. It is time to leave behind the
divisive battles of the past. It is time to move forward as one
nation.

We should have no illusions about the work ahead of us. Reforming our
schools; changing the way we use energy; reducing our deficit – none
of this is easy. All of it will take time. And it will be harder
because we will argue about everything. The cost. The details. The
letter of every law.

Of course, some countries don't have this problem. If the central
government wants a railroad, they get a railroad – no matter how many
homes are bulldozed. If they don't want a bad story in the newspaper,
it doesn't get written.

And yet, as contentious and frustrating and messy as our democracy can
sometimes be, I know there isn't a person here who would trade places
with any other nation on Earth.

We may have differences in policy, but we all believe in the rights
enshrined in our Constitution. We may have different opinions, but we
believe in the same promise that says this is a place where you can
make it if you try. We may have different backgrounds, but we believe
in the same dream that says this is a country where anything's
possible. No matter who you are. No matter where you come from.

That dream is why I can stand here before you tonight. That dream is
why a working class kid from Scranton can stand behind me. That dream
is why someone who began by sweeping the floors of his father's
Cincinnati bar can preside as Speaker of the House in the greatest
nation on Earth.

That dream – that American Dream – is what drove the Allen Brothers to
reinvent their roofing company for a new era. It's what drove those
students at Forsyth Tech to learn a new skill and work towards the
future. And that dream is the story of a small business owner named
Brandon Fisher.

Brandon started a company in Berlin, Pennsylvania that specializes in
a new kind of drilling technology. One day last summer, he saw the
news that halfway across the world, 33 men were trapped in a Chilean
mine, and no one knew how to save them.

But Brandon thought his company could help. And so he designed a
rescue that would come to be known as Plan B. His employees worked
around the clock to manufacture the necessary drilling equipment. And
Brandon left for Chile.

Along with others, he began drilling a 2,000 foot hole into the
ground, working three or four days at a time with no sleep.
Thirty-seven days later, Plan B succeeded, and the miners were
rescued. But because he didn't want all of the attention, Brandon
wasn't there when the miners emerged. He had already gone home, back
to work on his next project.

Later, one of his employees said of the rescue, "We proved that Center
Rock is a little company, but we do big things."

We do big things.

From the earliest days of our founding, America has been the story of
ordinary people who dare to dream. That's how we win the future.

We are a nation that says, "I might not have a lot of money, but I
have this great idea for a new company. I might not come from a family
of college graduates, but I will be the first to get my degree. I
might not know those people in trouble, but I think I can help them,
and I need to try. I'm not sure how we'll reach that better place
beyond the horizon, but I know we'll get there. I know we will."

We do big things.

The idea of America endures. Our destiny remains our choice. And
tonight, more than two centuries later, it is because of our people
that our future is hopeful, our journey goes forward, and the state of
our union is strong.

Thank you, God Bless You, and may God Bless the United States of America



http://dailycaller.com/2011/01/25/text-of-president-obamas-state-of-the-union-address-as-prepared-for-delivery/#ixzz1C6CouYdM



Tuesday, January 25, 2011

Tuesday Investment meeting

Dear All,

My partner Jesper Christiansen chairs our Tuesday Macro Meeting and this week presentation was best yet and with his permission I have enclosed the pdf-file below to share with you.

A couple of notes:

The early part of presentation is macro incoming data vs expectations, then it's forward looking (Consumer Metrics et al), then it moves on to performance measures - Note how DIVERGENT the portfolio are!  European investors losing their shirt so far this year despite ok performance in Dow etc!!!!  (Port. value in DKK = EUR).....

Then theme based analysis ... State of Union (Hat tip to my friend Mr. E for his look at performance post FOMC)......and finally looking ahead.

Enjoy,

Limus Capital Macro Meeting Jan. 21st, 2011

--

Wednesday, January 19, 2011

2011 Jan. 19: Macroblog: The option of buying time is running out of.....time?

The option of buying time is running out of.....time?

I had the pleasure of meeting some very smart shipping people last week and it got me thinking, yes major surprise I know, about the inflation vs debt quality issue on rates.

The 2011 call I am most confident about remains that 2010 was the CYCLICAL LOW for interest rates. Period.

This is a combination of technical studies, but more importantly also a fundamental reasoning:

The policy makers are constantly trying to 'buy more time' - Thinking they can restart a positive cycle of confidence through cheap funding, put guarantees on stocks, refinancing of debt(now indirectly through syndication as market does not want to play this game anymore) and a strong almost abusive talk to investors which reminds me of scolding a child(to no avail as we parents very well know).

The problem with buying time is that it's pretty similar to being long an option, the decay in time value, the Theta, is cheap in the early phase(you have almost full length of time value, i.e you have 1-month option 22 tradings days out of 22 ergo 21/22 ish.....) but towards the expiry(In terms of Europe it's March 24-25 EU Summit & the US the imploding Local- and State Debt) the time value is 2/22)......

With the decay in time the price of DEBT will rise unless there is STRUCTURAL SOLUTION to the ever rising debt, otherwise any solutions becomes substituting debt for more debt.

The new game in town is now the idea of moving debt obligations from a national/ECB level to a new vehicle EFSF. This is supposed to impress us despite all the logical shortcoming in its design, which is much better described by this article from Minyanville: European Debt Crisis Redux by Mr. Das

Looking at different gauges for "pressure/boiling points" in marginal cost of capital I find it's certainly the case. Take 30 Year CDS for California - it's now trading at yield levels only seen during the peak of the 2008 Financial Crisis, a market with no liquidity and no outlook to solutions. Desperate? Looks like it to me:


From technical point of view I found an interesting major indicator this morning: The so called Death-Cross:


As the chart shows the moving average cross over has been an excellent indicator of cyclical trends around a stable mean-reversion game - if this chart is correct we could have a test of 4.00% shortly.

The impact from higher yield/rates is path dependent: The Ivory Tower Banks will be positive as they see rising rates as a confirmation of HIGHER GROWTH in economy (although everything being equal: Cash flow re-based at higher rates should be negative)

OR - if this is due to my conclusion: The time decay is working - faster and faster, we have now had almost two years of time buying by policy makers. The general public is now SUPER CONFIDENT on economy, their earnings, the world, despite the fact there is LESS IN WORK today than before financial crisis, much less and despite their REAL EARNINGS seriously eroding as food- and energy prices are showing more and more upward pressure.

A concept of inflation / rising prices can be gained through using Google Trends, despite all its shortfalls a statistical indicator:

The conclusion is inconclusive although clearly there is more and more talks about 'rising prices' and 'inflation'.  EMG on the other hand is clearly experiencing increased both prices but more troublesome social tension as can be seen by this link: Indian Riots on Petrol Prices

Conclusion:

I'm bullish on the prospect of policy makers continuing to play: 'buy more time' and I'm getting increasingly bearish on their ability to fight the Theta(time decay) of their option, as the marginal cost of capital continues its slow but steady rise higher across the world.

Investment Outline

Clearly all models are GO!  Long RISK ON across the board.

FX:

Models are short US Dollar in size (almost every single market)
JPY - seeing signals for weaker JPY...... long EURJPY
AUD, CAD - Long

Metals:

Difficult, very. Gold and Silver is playing up-down-up consolidation game - the failure to break above 1400 in GC February contract is troublesome, and Silver inability to trend across 29.50 likewise. It does not change that this is MERELY CONSOLIDATION before the final phase of speculative fever takes the market to new highs...

Commodities:

Easy! Long everything and I mean everything: Grains, Energy et al.

Fixed Income:

Cautiously short US market and German Bunds

It's time to reload investment scenario from here - I'm fading this Monday-Tuesday move to go neutral on most markets awaiting confirmation for top in place.

Good luck,

Steen Jakobsen



Tuesday, January 11, 2011

The week of reckoning......


The week of reckoning......


Tomorrow will be critical event of the week with Portugal rolling over a relative small amount but with yield on 10 year exceeding 7% now it's more an issue of "confidence" in Portugal

The expected issuance tomorrow from Ministry of Finance, Portugal's web-site:


Watch this link for live updates on Portugal's 10 year yield during the next 24 hours:
Bloomberg: Portugal 10 Year Bond Yield

Meanwhile the confusion on where we are in the economic cycle continues: The Ivory Tower Investment Banks looking forward to their bonus' being paid out in February and March are bid through the roof for growth, some even thinks this is going be inflationary year! Quelle Scandale!

But.... I remain extremely sceptical this time of year - true the incoming data for December will probably be good, but it will also be tail-end of positive manipulation by both companies and government, so I expect data to be good but to be lower than expectations. Confused? You should be!

I am very bullish on Fixed Income from here as per earlier blog comments - this is first time in long, long time, while I still keep my extremely bullish year-end target of doubling of short-term US rates we need to revisit low-end of Q4 range in rates first on the combination of lower growth expectations but also "flight-to-quality" and finally the oversoldness of Fixed Income relative to equities.

The bullishness in stocks may be over soon - yes over! There is 50/50 chance though, that we need to move into early March before it really happens but I have had a few early warning signals lately:

SPX w. MFI channel


Note how the MFI - Money-Flow-Index has broken down, always the first warning signal!

Meanwhile in Freight-land - where we transport all this great global growth we are now at levels not seen since............drum roll ….... Low in stocks in mid-2008!

Meanwhile ----- The growth Asia currency of prefence: AUD is coming down hard.....


And in CONSUMER-land, THE consumer stock Wal-Mart brok down technically yesterday?



What is all means? I do not really know to be honest except there is more friction in the market than perception dictates - personally, I think this market is high on "guaranteed puts" on the market - Capital rules, BIS II+III, solvency et al all dictates the CREDIT CAKE will be smaller in 2011 and going into 2012,, meanwhile NO ONE is doing anything to attack the structural issues, can this continue through 2011 ? Maybe, but keep watching the marginal-cost of financing..........

I'm off to Germany for two days, back post the Portugal auction.

Friday, January 7, 2011

Non-farm payroll was like most New Years Parties - lots of hype and expectations

105K!!! 105K!!! New jobs - after the useless ADP report earlier this week, the Investment Banks and their useless linear-projection team went to work all pretty much ending with 'whisper' estimates above 500K! 

Now, the Unemployment rate came down to 9.4% on nothing but statistical flukes while the CREATION of jobs continues below the magic 250K  (needed to just keeping the economy growing) 

Unfortunately this number became a Ben Bernanke number - Manipulation and more of the same in terms of transperency looking forward. This is NOT a number which makes companies go out and hire.

It's NOT a number which confirm all the bullishness embedded in everyones forecast for 2011 - we are heading, and let me add, with ligthning speed, towards a big correction of outlooks less than 5 days into the new trading year. Not since early 2008 have I seen a bigger gap between the economic reality and the true economy - let me games begin!

I will add long FIXED INCOME to my portfolio for the first time in more than six month due to the model. Link here.  The model is so simple it makes you weep! Never the less look at prior signals and the crying should start. Markets - not data - indicates to me we are heading into considerable slow-down in growth and hence new jobs.
 
I wish you an excellent weekend with a music link - the title mimicks my view of the US: American Beauty - too bad the Beuaty is fading under Obama fascination with Chinese Planned Economy thinking.
--

Thursday, January 6, 2011

False starts and the Paul Breitner rule of thumb

Dear All,

Wow, wow and more wow! Market seems deliberately setting up signals and wrong ones this past two days alone I have had a buy signal in EURUSD invalidated by failure to close above, and yesterday three stocks signals:  Short DAX and STOXX50 both failed, while long S&P (72.50 being the entry also managed barely to fail). Lesson? Market is in testing mode and there are yet to be a significant trend and bias.

Commodities seems making early signs of exhaustion but I would be very careful to allow myself to get carried away with anything.

Now the ADP report was clearly "good news" - but maybe good news is the last thing this market needs! Note how when the market was falling 'bad news' was good news, and hence now I feel good news is bad news why?

Good news - and we need to see Friday Non-farm payroll numbers first, but if jobs are being created, if growth momentum is as strong as market think it is, and if GDP growth will be increased then with Crude @ almost 100 US again there is rising wage- and commodity inflation which combined with EXTREMELY LOW ARTIFICIAL LENDING RATES will create a potential inflation monster. Watch the inflation expectations post FOMC tomorrow. 

There is evidence jobs are for real coming back - I guess - this link talks about different metric, the Help Wanted index and the author concludes(maybe high on confirmation from ADP statistical flukes) that 2011 will be year of job creation. A Bizarre Labor Market

IF - the impressive jobs growth survives the Friday data, then it raises odds of:

  • Much stronger US Dollar - combined with continued underperformance of European bonds and equities indicates 1.10-1.00 EUR could happen......(Ultimately we will end 2011 with much weaker US Dollar)
  • We could be proved right on the 2011 call for MUCH HIGHER interest rates
  • Early rotation from fixed income to equities will continue, but the ever higher rates will remove the marginal return on capital for companies and we will quickly see how the EPS numbers did peak last year and not this year. (Inverse cost structure - higher employmen less productivity?)..but ultimately gravity will prevail maybe we need to go to March before the first real set-back for the market.
Meanwhile I stay with my rule from Paul Breitners time:  (Picture enclosed)

Safe trading,

Wednesday, January 5, 2011

Initial Macro Comment, Jan. 5, 2011

Dear All,

Running late this morning, but...... a couple of key things playing out:
  1. US Dollar did trade through 1.3424 yday but failed to close above which gives us excellent 'mean-reversion' short with known stop loss (@ 1.3450). Euro auction started this a.m with Germany selling less than 4 bln. EUR with bid-to-coverage of 1.6 (up from 1.2 and 1.4) France tomorrow probably worse. Jesper tells me PMI Southern Europe was DISASTER territory underlining need for something "else" to solve this EUR crisis ==> For now short EUR from 1.33708 with stop @ 1.3450.
  2. DAX initiated short today @ 6.920 (as per yesterdays signal) - IMPORTANT note being: It needs to close below tonight to validate! Note also STOXX50 @ 2.784 in reach, but yet not reached (spot @ 2805.00)
  3. IEF - my long-term leading indicator of Fixed Income overall has done turn-around indicating some upside potential in bonds from here (More on this in later post today)
  4. Commodities - as noted in "model run" yday, the charts indicated massive "Inverse Hammer" in most market, which turned out to be major signal for short. Crude continues down this morning, while Gold/Silver holds the levels of late last night ...for now...
  5. Also please read Yves Merch editorial in WSJ today:  Cut the deficit now - Yves Mersch
More later

Tuesday, January 4, 2011

Finally! New year.


Dear All,

Old rule of thumb from back when Macro trading used to be macro trading and Paul Breitner hair was still in style used to be to stay away from the market in the first two weeks of January. The lesson being too much new risk capital is at play and is eager to commit to the extension of last years trend.

In this light the major boost to stocks yesterdays made a lot of sense - add to this that Goldman Sachs seems eager to let their internal clients pay 50 bln. US dollar for a small stake in Facebook (while GS ripes the huge IPO fee for themselves - nothing wrong in that, just smart......) and we had perfect day as the 1st day of trading also constitutes the best day to be long of all days according to the increasing numbers of 'counters' in the market.

I will not be the one to suggest that going into 2011 most investors and commentators are too bullish the extension of 2011, but I note from the model work I did this morning a few surprising signals:

  • I will have to sell US Dollars if either or both EURUSD (March contract) trades above 1,3424 or DX (March) trades below 79,025. Considering the vast majority of all FX watchers expects EURO to go to parity this year this goes against some conventional wisedom.
  • Stock market divergences.  All my US index' are long on the model, while the equivalent European ones are neutral, but...... with sell signals. DAX (March) have sell signal @ 6920,00 & STOXX50(March) have sell signal @ 2784,00
  • Short-term Fixed Income seems to have turned around to bullish - I need to buy 2y notes @ 109'160 (March) in the model...........
  • Finally, and most significant to me at least: Most commodities shows signs of trend reversal. I have "Inverted Hammers" in just about every single market and in particular in the grains segment (but also Crude og Gold). Is it the 'tangible safe haven' premium going out as market optimism reaches new highs? I do not know

Next two weeks have major macro events, with issuance dominating most of the European traders - Germany and France comes to the market Wednesday and Thursday this week, while the PIIGS Circus restarts next week with Portugal and Spain (Wed+Thurs) most likely. 

The US Congress will be back in session Wednesday and the new Speaker of the House John Boehner will be sworn in - Congress will be at war for sure. Keep a close eye on Illinois Budget (one of the states I got going into volentary bankruptcy in 2001) as indicator of action and reaction from Washington and investors this week. Headline from Bloomberg goes: Illinois has days to play $13 Billion deficit that took years to produce.

Attached is my partner Jesper Christiansen's excellent timeline overview from our Investment Meeting this morning.

Good luck in 2011