This SITE has a graphic view of the unemployment picture in the Unites States from 2004 - 2009. Right now, Florida, Michigan, California and Arizona are bleeding red. But Nebraska is job heaven!
Right click on the graphic at the SITE to zoom and pan.
Friday, November 20, 2009
Wednesday, November 18, 2009
Greenblatt Magic Formula Returns
On October 19, Joel Greenblatt presented at the Value Investing Congress. Greenblatt is an acclaimed value investor and philanthropist.His presentation explained the Magic Formula which was first presented in his best selling book titled The Little Book That Beats the Market which was published about 4 years ago.
The video can be watched HERE. Be sure to first download his slide presentation which goes with the video. The slides can be obtained HERE.
If you had followed his methodology, then over the last 10 years your return would have been 288% versus -1.5% for the S&P 500. Even over the last three years, which to say the least have been difficult, the Magic Formula total return would be +15% versus -15% for the S&P 500.
His Magic Formula website is HERE.
Tuesday, November 3, 2009
India goes for the gold!
India's central bank bought 200 tons of gold from the IMF reserves. It is equivalent to 8% of annual world production of gold.
India's finance minister said: "We have money to buy gold. We have enough foreign exchange reserves."
What? They don't want paper dollars!
Gold closed at $1084 today - up almost 3%.
Er, or is it the case that the dollar fell in value 3%?
What yard stick should I use? I am so confused.
Full article HERE.
India's finance minister said: "We have money to buy gold. We have enough foreign exchange reserves."
What? They don't want paper dollars!
Gold closed at $1084 today - up almost 3%.
Er, or is it the case that the dollar fell in value 3%?
What yard stick should I use? I am so confused.
Full article HERE.
Tuesday, October 20, 2009
Democrats, the guardian of the little man against greedy Wall Street...
The conventional wisdom is that the Republicans are anti-regulation and that they allowed the free reign of Wall Street to line their pockets. And no doubt there is a lot of truth to this.
The other conventional wisdom as that the sainted Democrats are in the trenches doing battle against Wall Street greed and their Republican allies for the betterment and protection of the little man on main street.
If you believe that about the Democrats, then watch the PBS Frontline report, "The Warning" which aired tonight. You can view it on the Frontline website.
One example... Brooksley Born was the Director of the U.S. Commodities Futures Trading Commission (CFTC) in the Clinton administration. Among other things, she was responsible for the regulation of financial instruments such as derivatives.
In 1998, Ex-Goldman Sach's executive and then Clinton's Secretary of the Treasury, Robert Rubin, calls her to a meeting in his office to tell her to back off on her efforts to regulate the derivatives industry...
Robert Rubin said to her, "I am told that you do not have the jurisdiction to do this." And Brooksley said: "Well, that's interesting. That's the first time I've ever heard that. All my lawyers at the CFTC have assured me that we have the exclusive jurisdiction to do this." And Rubin said: "Oh, you're listening to government lawyers. You shouldn't be listening to government lawyers; you should be listening to private lawyers. All the private lawyers representing the banks say you don't have the jurisdiction."
This is the same Robert Rubin who pushed Congress and Clinton to repeal the Glass-Steagall legislation of the 1930s that prevented banks from also offering financial and investment services. Two months after Glass-Steagall was repealed, Rubin left Treasury to take an executive position with Citibank. And we all know what happened to Citi during his tenure as they jumped into all manner of financial products.
And all the current furor over egregious Wall Street executive pay? None other than Democratic wheeler-dealer, Robert Rubin received $127 million for his services while driving Citibank into the toilet.
Oh, and it's the very same Rubin, who after he left Treasury, sparked controversy in 2001 when he contacted an acquaintance at the Treasury Department and asked if the department could convince bond-rating agencies not to downgrade the corporate debt of Enron, a debtor of Citigroup.
In January 2009, Rubin was named by Marketwatch as one of the "10 most unethical people in business".
Who else eventually forced Brooksely Born out of the CFTC? None other than Deputy Secretary of the Treasury under Rubin, Larry Summers.
And what else has Summers done? During Summers' presidency at Harvard, the University entered into $3.52 billion of interest rate swaps, financial derivatives that can be used for either hedging or speculation. By late 2008, those positions had lost approximately $1 billion in value. This forced Harvard to borrow significant sums in distressed market conditions to meet margin calls on the swaps. The decision to enter into the swap positions has been attributed to Summers and has been termed a "massive interest-rate gamble" that ended badly.
Still more... During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation. Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets.
Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass-Steagall Act): "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Summers said. Many critics, including President Barack Obama, have suggested the 2007 subprime mortgage financial crisis was caused by the partial repeal of the 1933 Glass-Steagall Act.
And what does Summers do now? He is the Director of the National Economic Council in President Obama's administration.
So are the Democrats the "Good Hands People" or the Dirty Hands People? Or just one and the same as the Republicans?
The other conventional wisdom as that the sainted Democrats are in the trenches doing battle against Wall Street greed and their Republican allies for the betterment and protection of the little man on main street.
If you believe that about the Democrats, then watch the PBS Frontline report, "The Warning" which aired tonight. You can view it on the Frontline website.
One example... Brooksley Born was the Director of the U.S. Commodities Futures Trading Commission (CFTC) in the Clinton administration. Among other things, she was responsible for the regulation of financial instruments such as derivatives.
In 1998, Ex-Goldman Sach's executive and then Clinton's Secretary of the Treasury, Robert Rubin, calls her to a meeting in his office to tell her to back off on her efforts to regulate the derivatives industry...
Robert Rubin said to her, "I am told that you do not have the jurisdiction to do this." And Brooksley said: "Well, that's interesting. That's the first time I've ever heard that. All my lawyers at the CFTC have assured me that we have the exclusive jurisdiction to do this." And Rubin said: "Oh, you're listening to government lawyers. You shouldn't be listening to government lawyers; you should be listening to private lawyers. All the private lawyers representing the banks say you don't have the jurisdiction."
This is the same Robert Rubin who pushed Congress and Clinton to repeal the Glass-Steagall legislation of the 1930s that prevented banks from also offering financial and investment services. Two months after Glass-Steagall was repealed, Rubin left Treasury to take an executive position with Citibank. And we all know what happened to Citi during his tenure as they jumped into all manner of financial products.
And all the current furor over egregious Wall Street executive pay? None other than Democratic wheeler-dealer, Robert Rubin received $127 million for his services while driving Citibank into the toilet.
Oh, and it's the very same Rubin, who after he left Treasury, sparked controversy in 2001 when he contacted an acquaintance at the Treasury Department and asked if the department could convince bond-rating agencies not to downgrade the corporate debt of Enron, a debtor of Citigroup.
In January 2009, Rubin was named by Marketwatch as one of the "10 most unethical people in business".
Who else eventually forced Brooksely Born out of the CFTC? None other than Deputy Secretary of the Treasury under Rubin, Larry Summers.
And what else has Summers done? During Summers' presidency at Harvard, the University entered into $3.52 billion of interest rate swaps, financial derivatives that can be used for either hedging or speculation. By late 2008, those positions had lost approximately $1 billion in value. This forced Harvard to borrow significant sums in distressed market conditions to meet margin calls on the swaps. The decision to enter into the swap positions has been attributed to Summers and has been termed a "massive interest-rate gamble" that ended badly.
Still more... During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation. Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets.
Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass-Steagall Act): "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Summers said. Many critics, including President Barack Obama, have suggested the 2007 subprime mortgage financial crisis was caused by the partial repeal of the 1933 Glass-Steagall Act.
And what does Summers do now? He is the Director of the National Economic Council in President Obama's administration.
So are the Democrats the "Good Hands People" or the Dirty Hands People? Or just one and the same as the Republicans?
Friday, October 9, 2009
Just an illusion?
Like Alice in Wonderland, when one peers through the looking glass, one can see different views of reality.
If one considers the performance of the S&P since the March lows in a strictly dollar based measurement, the return has been spectacular.
But if one looks at the S&P performance using the prism of a trade weighted index of the dollar's value versus other currencies, the performance of the S&P has been in good measure an illusion. See HERE.
This is just another example of how the debasement of a currency can create the illusion of wealth when in reality it acts as a wealth destroyer.
If one considers the performance of the S&P since the March lows in a strictly dollar based measurement, the return has been spectacular.
But if one looks at the S&P performance using the prism of a trade weighted index of the dollar's value versus other currencies, the performance of the S&P has been in good measure an illusion. See HERE.
This is just another example of how the debasement of a currency can create the illusion of wealth when in reality it acts as a wealth destroyer.
Sunday, August 30, 2009
Gasoline refiners in for hard times ahead
This week's Barrons discusses falling U.S. oil consumption and the rocky road the refiners such as Valero, Tesoro, Frontier and others face going forward. More efficient cars on the road, an aging population that drives less and a slowing economy have all forced consumption down and thinned refining margins.
The chart included in the article is quite interesting. Note that for all the pain and complaining last year when prices hit a record $4 per gallon, gasoline expenditures as percent of disposable income was lower in 2008 than it was in the 1980. And in 2009 it is only half of what it was in 1980.
The chart included in the article is quite interesting. Note that for all the pain and complaining last year when prices hit a record $4 per gallon, gasoline expenditures as percent of disposable income was lower in 2008 than it was in the 1980. And in 2009 it is only half of what it was in 1980.
Barrons usually does a good job of putting numbers into perspective. Inflation is an insidious villain destroying savings and a way for governments to impose a stealth tax. Inflation also turns the dollar into a rubber yardstick - next to useless when comparing prices over time. So using inflation adjusted dollars, or in this case, expenditures as a percentage of disposable income gives a better perspective. Compare this article to how politicians and others with an agenda use unadjusted prices to whip up the public on various issues.
The full article can be found HERE [$].
Anyway, the memory of us old timers that things were harder back then is correct! We truly did have to "walk 10 miles to school, barefoot, in the snow, uphill both ways".
Anyway, the memory of us old timers that things were harder back then is correct! We truly did have to "walk 10 miles to school, barefoot, in the snow, uphill both ways".
Saturday, August 1, 2009
Inflation is your friend!...
Below is a news reel from 1933 making the case that inflation is a wonderful way to grow the economy, increase wages, and sell more beer...
Next time I thirst for my favorite beer and have to pay a bit more, I'll think of this film, smile and start whistling, "Happy days are here again!"
Next time I thirst for my favorite beer and have to pay a bit more, I'll think of this film, smile and start whistling, "Happy days are here again!"
Friday, July 31, 2009
The new "Sunshine State"
"New Jersey's biggest utility is outfitting 200,000 utility poles with solar panels, part of the state's embrace of a try-anything strategy that has made it the nation's second-biggest producer of solar energy behind California...
FedEx Corp., for example, said Thursday it will begin installing solar panels atop its distribution hub in Woodbridge, N.J., next month. Covering about three acres and capable of generating 2.42 megawatts of electricity, it is expected to be the largest rooftop solar facility in the U.S. when completed in November. The solar array will satisfy about 30% of the facility's electricity needs...
California also is on a solar tear. It wants "a million solar roofs" a decade from now, and is spending $3.3 billion on subsidies, hoping to get 3,000 megawatts installed. More than 158 megawatts of grid-tied solar power were installed in California last year, double the amount installed in 2007. Since the 1980s, California has installed nearly 500 megawatts of grid-tied solar power, equivalent to one large power plant, but still a tiny fraction of the 40,000 megawatts the state needs on a summer day..."
Petra Solar has the contract to provide the solar panels for the utility pole project.
FedEx Corp., for example, said Thursday it will begin installing solar panels atop its distribution hub in Woodbridge, N.J., next month. Covering about three acres and capable of generating 2.42 megawatts of electricity, it is expected to be the largest rooftop solar facility in the U.S. when completed in November. The solar array will satisfy about 30% of the facility's electricity needs...
California also is on a solar tear. It wants "a million solar roofs" a decade from now, and is spending $3.3 billion on subsidies, hoping to get 3,000 megawatts installed. More than 158 megawatts of grid-tied solar power were installed in California last year, double the amount installed in 2007. Since the 1980s, California has installed nearly 500 megawatts of grid-tied solar power, equivalent to one large power plant, but still a tiny fraction of the 40,000 megawatts the state needs on a summer day..."
Petra Solar has the contract to provide the solar panels for the utility pole project.
Sunday, July 19, 2009
Pathetic
One of MSNBC's lead stories today...
Geithner travels globe, pitching U.S. debt
Treasury secretary must convince foreign governments investment is safe
...Publicly traded U.S. debt — which excludes deficits the government owes to itself in Social Security and other trust funds — stood at 41 percent of the total economy in 2008. It is projected to climb to 82 percent of the entire economy by 2019...
"If these trends are not reversed, the world will stop buying our debt and the economy will break," said Mark Zandi, chief economist at Moody's Economy.com.
Full article HERE.
Geithner travels globe, pitching U.S. debt
Treasury secretary must convince foreign governments investment is safe
...Publicly traded U.S. debt — which excludes deficits the government owes to itself in Social Security and other trust funds — stood at 41 percent of the total economy in 2008. It is projected to climb to 82 percent of the entire economy by 2019...
"If these trends are not reversed, the world will stop buying our debt and the economy will break," said Mark Zandi, chief economist at Moody's Economy.com.
Full article HERE.
Wednesday, June 17, 2009
Sunday, May 31, 2009
U.S. Unemployment
For the first time since 1993, U.S. unemployment has caught up to Europe. As of March it was 8.5%.
See HERE for a chart.
See HERE for a chart.
Thursday, April 30, 2009
Obama orders cabinet to cut $100 million from budget. Really!
More than 40 years ago, one of Obama's predecessors to his Illinois senate seat, Everett Dirksen, famously said "A billion here, a billion there, pretty soon, you're talking real money".A few days ago I was watching TV while doing other things and I thought I had heard the president say that he was ordering his cabinet heads to cut $100 million dollars from the budget. Surely I had mis-heard. He must have said "cut $100 billion". Even then I thought $100 billion was trivial given the current budget. It passed from my mind.
Then I saw today that he actually did say $100 million. See HERE.
The President must be living in a time warp. Perhaps in Lincoln's time, $100 million was real money.
View this video to see how trivial $100 million is in the context of the government budget...
Monday, April 27, 2009
Glaxo-Smith-Kline and Swine Flu
With swine flu in the news, my brother suggested purchasing either Glaxo-Smith-Kline or Roche. Each have antiviral medications to shorten the illness and perhaps protect people against contracting the influenza. GSK has Relenza and Roche has Tamiflu. Relenza is reputed to be the more efficacious against this strain.As expected the growing concern caused both stocks to pop today. GSK was up 7.6% and Roche was up 4.3%. In truth, their anti-viral medications are only a small part of their businesses so surely emotions played a big part in the action.
I did take a look at GSK in particular and took a position. At the open, GSK had gapped up more than 5% before I could place a buy. For the day my position was up 2.3%.
Independent of the swine flu factor, GSK seemed attractive on a valuation basis. It is trading at PE of 12.2% (ttm) and sports a 5.6% dividend. But its revenue growth has been stagnant/down. It had been recently beaten down over concerns of patent expiration of some of its key products as well as concerns over its pipeline. And I suppose that there is the general over hang of concerns with Obama's yet to be revealed health initiative.
As insurance, I'll put a stop loss on it and let it play out for a while.
If one had been more prescient a smarter move would have been to buy some of the smaller players in this field as soon as the flu started to appear. Today's pops for Novavax, Biocryst and Biota were in the range of 80-125%. See HERE.
I suppose one could argue that this is like buying gold. That is, playing off of fears and bad news. The reality is I hope that the need for these medications does not come to pass. In which case I will instead rely on the valuation and overall strength of the company.
Sunday, April 26, 2009
How long will key minerals last?
The NEW SCIENTIST has a very interesting chart on the longevity of (that is, when we will run out of) key commodities based on various scenarios of consumption rates, population growth and recycling percentages.For example they estimate that there is enough platinum to last about 15 years, silver 15-20 years, zinc 20-30 years. So either we will have to use less, find even more than is projected to be available or see prices rise.
The chart can be seen HERE.
Saturday, April 25, 2009
Worst recession in the last 50 years?
The New York Times has an interesting chart on how the current recession compares with other recessions over the last 50 years."The current recession has become the second-worst in the last half-century and is close to surpassing the severe 1973-75 downturn, according to the Index of Coincident Indicators, based on government data and compiled each month by the Conference Board, a private organization.
Unlike the more widely followed Index of Leading Indicators, which is supposed to help forecast changes in the economy, the coincident index is aimed at simply recording how the economy is doing now.
The accompanying chart shows how far that index has declined from prerecession peaks during each downturn since 1960."
Click on the chart to view it full size. Full article is HERE.
Friday, April 24, 2009
China Going for the Gold... again
Bloomberg reports HERE that over the last 6 years China's GOLD holdings have increased by 76% to over 1,000 tons. China now has the 5th largest holding of the yellow stuff.The U.S. has the world’s biggest gold holdings at 8,134 tons, followed by Germany with 3,413 tons, World Gold Council data show. France has 2,487 tons and Italy 2,452 tons, while the IMF has 3,217 tons.
China has been looking for ways to diversify away from dollar holdings by buying under valued commodities.
As previously reported, the IMF is about to sell 400 tons of gold. China is viewed as a likely buyer which would support prices.
Today gold jumped 1% to $912.
And according to the TELEGRAPH, "Inflows into ETFs up by more than 300% Figures from the World Gold Council show that investors appetite for gold showed no sign of abating with record inflows in to gold exchange traded funds."
Just about every economist will tell you that gold has no utility. It does not generate dividends. Even Warren Buffett has said, “It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
So given that all this is true, then why does just about every government on the planet continue to hold gold?
I'm continuing to hold about 10% of my IRA in the IAU and GLD ETFs. I don't trust all the paper currency being printed. Do you?
Sunday, April 19, 2009
Diamond Dollars
University of Chicago graduate and former executive with Pepsico, Vince Gennaro, talks with Bloomberg's Tom Keene on this PODCAST about his book, "Diamond Dollars: The Economics of Winning in Baseball.''If you liked Michael Lewis' Money Ball, then Diamond Dollars would make for a great follow on baseball season read.
Saturday, April 18, 2009
Autos as a distressed value play?
Dennis Virag, president of Automotive Consulting Group Inc., talks with Bloomberg's Ken Prewitt in this PODCAST about partnership negotiations between Chrysler LLC and Fiat SpA, a looming bankruptcy for General Motors Corp. and his assessment of Ford Motor Co. and its Chief Executive Officer, Alan Mullaly.
Virag expects the GM shareholders to be wiped out. So GM is the ultimate value trap. Chrysler is of course private, so no play here. But Virag is surprisingly positive on Ford.
Also Mandel of Autoweek can be heard HERE giving his comments to Bloomberg on the Detroit 3.
Friday, April 17, 2009
Emerson Electric (EMR) - A Value Play?
I tend to think that we are in stock pickers market. That is, in this market, one can do better by selectively buying stocks rather than buying the broad indexes. If you are of that mindset, then perhaps consider Emerson Electric as a value play.
I had bought Emerson back in October (down 4% since then). As I am 6 months in to this stock, I spent some time looking at its current situation to see if I should still hold (I will). Since I did the research, I thought I would share my findings in case there is any interest.
Emerson has a PE of 11 and is paying a 4+% dividend. The dividend beats money in the bank. Its return on equity is 27%.
And while Emerson has been hit like just about everyone else, it has many businesses that I should think would do well under Washington's stimulus regime. Businesses like smart grid technology, heat pumps, process management systems and more.
I tend to think of Emerson as being somewhat like General Electric but without the GE Capital albatross around its neck.
Some links:
Some links:
Bloomberg: Emerson may acquire Rockwell Automation (usually negative for the acquiring company's stock)
Wednesday, April 15, 2009
President Obama's 2008 Tax Return
I just mailed my 2008 income tax return. For grins, HERE is President Obama's 2008 Form 1040 Federal Income Tax Return. His adjusted Gross Income was $2,656,902 on which he paid $855,323 in taxes.
Sunday, April 12, 2009
Black blasts Bush, Paulson, Obama, Geithner and Summers
After blasting Bush, Paulson, Obama, Geithner and Summers on Bill Moyer's PBS show this past week, now Bill Black is doing more of the same in this week's Barrons Magazine. What Black says is consistent with what Economist Simon Johnson said in the Atlantic Magazine HERE. Excerpts from Black's interview in Barrons is below.
"The scale of fraud is immense. This whole bank scandal makes Teapot Dome [of the 1920s] look like some kid's doll set. Unless the current administration changes course pretty drastically, the scandal will destroy Barack Obama's presidency. The Bush administration was even worse. But they are out of town. This will destroy Obama's administration, both economically and in terms of integrity.
We have failed bankers giving advice to failed regulators on how to deal with failed assets. How can it result in anything but failure? If they are going to get any truthful investigation, the Democrats picked the wrong financial team. Tim Geithner, the current Secretary of the Treasury, and Larry Summers, chairman of the National Economic Council, were important architects of the problems. Geithner especially represents a failed regulator, having presided over the bailouts of major New York banks.
It is worse than a lie. Geithner has appropriated the language of his critics and of the forthright to support dishonesty. That is what's so appalling -- numbering himself among those who convey tough medicine when he is really pandering to the interests of a select group of banks who are on a first-name basis with Washington politicians.
We are using taxpayer money via AIG to secretly bail out European banks like Société Générale, Deutsche Bank, and UBS -- and even our own Goldman Sachs. To me, the single most obscene act of this scandal has been providing billions in taxpayer money via AIG to secretly bail out UBS in Switzerland, while we were simultaneously prosecuting the bank for tax fraud. The second most obscene: Goldman receiving almost $13 billion in AIG counterparty payments after advising Geithner, president of the New York Fed, and then-Treasury Secretary Henry Paulson, former Goldman Sachs honcho, on the AIG government takeover -- and also receiving government bailout loans."
The full article is HERE[$].
"The scale of fraud is immense. This whole bank scandal makes Teapot Dome [of the 1920s] look like some kid's doll set. Unless the current administration changes course pretty drastically, the scandal will destroy Barack Obama's presidency. The Bush administration was even worse. But they are out of town. This will destroy Obama's administration, both economically and in terms of integrity.
We have failed bankers giving advice to failed regulators on how to deal with failed assets. How can it result in anything but failure? If they are going to get any truthful investigation, the Democrats picked the wrong financial team. Tim Geithner, the current Secretary of the Treasury, and Larry Summers, chairman of the National Economic Council, were important architects of the problems. Geithner especially represents a failed regulator, having presided over the bailouts of major New York banks.
It is worse than a lie. Geithner has appropriated the language of his critics and of the forthright to support dishonesty. That is what's so appalling -- numbering himself among those who convey tough medicine when he is really pandering to the interests of a select group of banks who are on a first-name basis with Washington politicians.
We are using taxpayer money via AIG to secretly bail out European banks like Société Générale, Deutsche Bank, and UBS -- and even our own Goldman Sachs. To me, the single most obscene act of this scandal has been providing billions in taxpayer money via AIG to secretly bail out UBS in Switzerland, while we were simultaneously prosecuting the bank for tax fraud. The second most obscene: Goldman receiving almost $13 billion in AIG counterparty payments after advising Geithner, president of the New York Fed, and then-Treasury Secretary Henry Paulson, former Goldman Sachs honcho, on the AIG government takeover -- and also receiving government bailout loans."
The full article is HERE[$].
Saturday, April 11, 2009
A taxing time?
Don't feel so bad. Forbes magazine has an interesting ARTICLE comparing US tax rates to that of other countries.
"Total taxation (federal, state and local) amounted to 28% of the GDP in the U.S. in 2006. Only four of the 30 OECD countries had a lower tax ratio. Taxes averaged 35.9% for the OECD as a whole and 38% in Europe. Citizens of Denmark and Sweden paid very close to 50% of their total income in taxes...
...Federal revenues as a prececent of GDP will be the lowest since 1950...
...Only 4 OECD countries, Japan, Korea, Turkey and Mexico, had lower tax rates than the US."
"Total taxation (federal, state and local) amounted to 28% of the GDP in the U.S. in 2006. Only four of the 30 OECD countries had a lower tax ratio. Taxes averaged 35.9% for the OECD as a whole and 38% in Europe. Citizens of Denmark and Sweden paid very close to 50% of their total income in taxes...
...Federal revenues as a prececent of GDP will be the lowest since 1950...
...Only 4 OECD countries, Japan, Korea, Turkey and Mexico, had lower tax rates than the US."
Friday, April 10, 2009
A Bear Market Rally?
"The Dow Jones industrial average gained 246 points on Thursday. The Standard & Poor’s 500 index has now risen more than 25 percent since stocks bottomed out on March 9, one of its best runs since the Great Depression."
The question at hand is whether the recent spurt in stock prices is a turn around or just a bear market rally? In the New York Times, three economists give their opinions HERE.
The question at hand is whether the recent spurt in stock prices is a turn around or just a bear market rally? In the New York Times, three economists give their opinions HERE.
Tuesday, April 7, 2009
You can't handle the truth!
On April 3, Bill Moyers interviewed Bill Black, a top regulator during the S&L scandal of the 1980s and now a Professor of Law and Economics at the University of Missouri.
Bill Black supported Obama in the election. Now he has scathing comments about Obama's Treasury Secretary, Geithner, his Economic Advisor, Summers, Bush's Treasury Secretary, Paulson, and others. He argues that the fraud committed on Wall Street is now knowingly being covered up by the economic team in Washington.
BILL MOYERS: Who's covering up?
WILLIAM K. BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it's going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they're allowing all the banks to report that they're not only solvent, but fully capitalized. Both statements can't be true. It can't be that they need $2 trillion, because they have masses losses, and that they're fine.
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because...
BILL MOYERS: What do you mean?
WILLIAM K. BLACK: Well, Geithner has, was one of our nation's top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he's a failed legacy regulator.
BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
WILLIAM K. BLACK: Absolutely.
BILL MOYERS: You are.
WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, "We just can't let the big banks fail." That's wrong.
BILL MOYERS: So, you're saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?
WILLIAM K. BLACK: That's right. And it's particularly a crisis that brings this out, because then the class of the banker says, "You've got to keep the information away from the public or everything will collapse. If they understand how bad it is, they'll run for the exits."
Watch the full interview HERE.
Bill Black supported Obama in the election. Now he has scathing comments about Obama's Treasury Secretary, Geithner, his Economic Advisor, Summers, Bush's Treasury Secretary, Paulson, and others. He argues that the fraud committed on Wall Street is now knowingly being covered up by the economic team in Washington.
BILL MOYERS: Who's covering up?
WILLIAM K. BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it's going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they're allowing all the banks to report that they're not only solvent, but fully capitalized. Both statements can't be true. It can't be that they need $2 trillion, because they have masses losses, and that they're fine.
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because...
BILL MOYERS: What do you mean?
WILLIAM K. BLACK: Well, Geithner has, was one of our nation's top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he's a failed legacy regulator.
BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
WILLIAM K. BLACK: Absolutely.
BILL MOYERS: You are.
WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, "We just can't let the big banks fail." That's wrong.
BILL MOYERS: So, you're saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?
WILLIAM K. BLACK: That's right. And it's particularly a crisis that brings this out, because then the class of the banker says, "You've got to keep the information away from the public or everything will collapse. If they understand how bad it is, they'll run for the exits."
Watch the full interview HERE.
To quote Jack Nicholson, "You can't handle the truth!"
Monday, April 6, 2009
Here's a TIP...
"In March, TIPS earned 6.1 percent, the best returns since the Treasury started selling the securities in 1997, according to Merrill Lynch & Co. index data." Bloomberg reports HERE.
Saturday, April 4, 2009
IMF Trillion Dollar Funding and Gold Sales
The Group of 20 has announced that they will pump up the world economy by funding the International Monetary Fund with an infusion of $1 trillion dollars.
It was also agreed that the IMF should sell off a portion of their bullion holdings to provide additional funds to impoverished countries . The IMF currently holds about 100 million ounces of gold. The day of the announcement, gold fell 2.5%. Some estimate that gold will fall to $855 per ounce by the end of April.
More HERE, HERE and HERE.
It was also agreed that the IMF should sell off a portion of their bullion holdings to provide additional funds to impoverished countries . The IMF currently holds about 100 million ounces of gold. The day of the announcement, gold fell 2.5%. Some estimate that gold will fall to $855 per ounce by the end of April.
More HERE, HERE and HERE.
Friday, April 3, 2009
Union Busting or Cold Hard Business?
The Boston Globe is reporting...
"The New York Times Co. has threatened to close the Boston Globe if it can't get the paper's unions to agree to $20 million in concessions... Management told union leaders Thursday that the Globe will lose $85 million in 2009, unless serious cutbacks are made..." MORE.
Now try and reconcile the above against a December 28, 2008 New York Times editorial in support of Obama's pro union agenda...
"Even modest increases in the share of the unionized labor force push wages upward, because nonunion workplaces must keep up with unionized ones that collectively bargain for increases. By giving employees a bigger say in compensation issues, unions also help to establish corporate norms, the absence of which has contributed to unjustifiable disparities between executive pay and rank-and-file pay.
The argument against unions — that they unduly burden employers with unreasonable demands — is one that corporate America makes in good times and bad...
...There is a strong argument that the slack labor market of a recession actually makes unions all the more important. Without a united front, workers will have even less bargaining power in the recession than they had during the growth years of this decade, when they largely failed to get raises even as productivity and profits soared. If pay continues to lag, it will only prolong the downturn by inhibiting spending." MORE
So is this a case of the New York Times not practicing what it preaches? A case of easier said than done? Or just cold hard reality?
"The New York Times Co. has threatened to close the Boston Globe if it can't get the paper's unions to agree to $20 million in concessions... Management told union leaders Thursday that the Globe will lose $85 million in 2009, unless serious cutbacks are made..." MORE.
Now try and reconcile the above against a December 28, 2008 New York Times editorial in support of Obama's pro union agenda...
"Even modest increases in the share of the unionized labor force push wages upward, because nonunion workplaces must keep up with unionized ones that collectively bargain for increases. By giving employees a bigger say in compensation issues, unions also help to establish corporate norms, the absence of which has contributed to unjustifiable disparities between executive pay and rank-and-file pay.
The argument against unions — that they unduly burden employers with unreasonable demands — is one that corporate America makes in good times and bad...
...There is a strong argument that the slack labor market of a recession actually makes unions all the more important. Without a united front, workers will have even less bargaining power in the recession than they had during the growth years of this decade, when they largely failed to get raises even as productivity and profits soared. If pay continues to lag, it will only prolong the downturn by inhibiting spending." MORE
So is this a case of the New York Times not practicing what it preaches? A case of easier said than done? Or just cold hard reality?
Thursday, April 2, 2009
My Greenblatt First Quarter Stock Returns
Below is my Greenblatt value holdings return for Quarter 1 of 2009. Lots of red! Including cash, my return was minus 4.4%. Boooh.
The consolation is that I beat the Total Stock Market Index by 6.3% as the Total Stock Market fell by -10.7% over the quarter. I currently hold 6.2% in cash in my Greenblatt portfolio.
What saved me was my purchase of GT Solar on March 16. It was up more than 70% in the last two weeks of the quarter.
1/1/2009 through 3/31/2009
Accenture -16.16
ADP -9.79
Amgen -14.25
Applied Materials 6.12
Biogen Idec 10.06
BJ Services -14.31
Cisco 2.88
Eli Lilly 5.74
Emerson Electric -21.93
Freightcar America -3.72
General Mills -17.19
GT Solar 70.11
Hasbro -13.37
Intel 2.52
Johnson and Johnson -12.08
Joy Global -6.95
Marathon Oil -3.91
MEMC 15.48
Microsoft -5.5
Pfizer -23.09
Sara Lee -16.34
Teva Pharmaceutical 2.41
United Technologies -19.81
Valero -17.28
Verigy -14.24
3M -13.59
Total Return Excluding Cash -4.69
Total Return Including Cash -4.41
Total Stock Market Index -10.72
The consolation is that I beat the Total Stock Market Index by 6.3% as the Total Stock Market fell by -10.7% over the quarter. I currently hold 6.2% in cash in my Greenblatt portfolio.
What saved me was my purchase of GT Solar on March 16. It was up more than 70% in the last two weeks of the quarter.
1/1/2009 through 3/31/2009
Accenture -16.16
ADP -9.79
Amgen -14.25
Applied Materials 6.12
Biogen Idec 10.06
BJ Services -14.31
Cisco 2.88
Eli Lilly 5.74
Emerson Electric -21.93
Freightcar America -3.72
General Mills -17.19
GT Solar 70.11
Hasbro -13.37
Intel 2.52
Johnson and Johnson -12.08
Joy Global -6.95
Marathon Oil -3.91
MEMC 15.48
Microsoft -5.5
Pfizer -23.09
Sara Lee -16.34
Teva Pharmaceutical 2.41
United Technologies -19.81
Valero -17.28
Verigy -14.24
3M -13.59
Total Return Excluding Cash -4.69
Total Return Including Cash -4.41
Total Stock Market Index -10.72
Wednesday, April 1, 2009
Yucca Mountain Nuclear Waste of Time
In 1987 the US Congress voted to site the nation's nuclear waste depository in tunnels miles under the desolate and arid Yucca mountains of Nevada.Nearly a quarter century later and $13 billion dollars, the project is complete needing only final regulatory approval. During all those years power plants have been holding nuclear waste in tanks which is growing at the rate of 2000 tons per year.
Now the Obama administration has decided to dump the whole project. The new energy secretary claims there is a better way to dispose of nuclear waste. (Why didn't he speak up 20 years ago?).
No doubt this is really Senate leader Harry Reid of Nevada's decision. He got the money and jobs for his state to dig the holes. And now he'll have the money and jobs to fill them back up.
Full story HERE.
Some thoughts...
I used to think a $13 billion boondoggle was a big deal. When one no longer views it as big money, then truly boondoggle inflation has already taken its toll.
Worse is the 22 years of wasted time. It will surely take another quarter century to arrive at another costly, make-work, non-decision to decide what not to do with the nuclear waste.
This goes to show that anyone who thinks we will ever build another nuclear plant in this country is inhaling u-238. One should look elsewhere for an alternative energy play. Nuclear energy has too much NIMBY baggage.
We in Illinois have some of the largest nuclear plants in the country providing clean power throughout the Midwest. Yet the spent nuclear waste is sitting in the midst of a populous state and in the midst of some of the most productive farm land in the world. What we need is a senator with both the cojones and integrity to stand up and face down Harry Reid! Tell him a thing or two! Put him in his place! Oh wait. I forgot. We have senator Roland (can't get his Blago story straight) Burris. Never mind.
Harry Reid is the same guy who has funds in the recent stimulus bill to build a high speed rail between Las Vegas and Los Angeles. Would it not be cheaper and quicker to simply legalize gambling in LA?
All this make-work "rail roads to casinos" and "hole digging to no where" reminds me of this story...
An economist visits China while under Mao Zedong. The economist sees hundreds of workers building a dam with shovels. He asks the project manager: "Why don't they use a mechanical digger?" "That would put people out of work," replies the project manager. "Oh," says the economist, "I thought you were making a dam. If it's jobs you want, take away their shovels and give them spoons."
;-)
Tuesday, March 31, 2009
Are we in a recession or depression?
The old joke is that if your neighbor lost his job, it is a recession. But if you lost your job, then it is a depression.
To reach 1930s depression levels, unemployment would have to rise to 25% and GDP would have to fall 28%. We have quite a ways to go to reach that level. The WSJ chart at the left compares today's conditions to that of the 1930s. Click on the image to enlarge it.
So how do economists define a depression? There does not appear to be any firm definition, but the Wall Street Journal takes a stab at it in this ARTICLE[$]. One definition requires a decline of at least 10% in per person output. Others say that unemployment must exceed 10% and stay there for several years. And based on a WSJ poll of economists, the odds that we will see a depression is at 15% on average. The estimate range was 1% to 30%.
To reach 1930s depression levels, unemployment would have to rise to 25% and GDP would have to fall 28%. We have quite a ways to go to reach that level. The WSJ chart at the left compares today's conditions to that of the 1930s. Click on the image to enlarge it.So do you think we are headed to a depression?
Monday, March 30, 2009
Sunrise or Sunset for Solar Power?
As we know, part of Obama's stimulus plans are to fund alternative energy. China has recently been doing the same. Of the alternatives, I have been interested in solar and to a lesser degree wind.This week Barrons had an article on the fall in solar panel pricing...
"Cheaper solar silicon is of course a great thing for the planet's living creatures. But solar companies and investors who planned for silicon that was scarce and high-priced must adjust their business models for a glut that looms larger than most anyone expected. New government subsidies will help in the U.S. and in China, which energized solar stocks last week with a plan to help China's struggling photovoltaic industry. Lower prices will also stimulate sales volumes as solar panels become cost-competitive with fossil-fueled power. The question is whether solar energy's volume producers will end up resembling the high-margined Intel or the profitless memory-chip makers." Full article HERE[$].
So perhaps a bad time to get into solar? Or not?
I continue to use the Greenblatt value filter to look for likely stock candidates. Back on March 16 I noticed that GT Solar (SOLR) showed up on the Greenblatt filter so I made an investment.
GT Solar does not make solar cells. Rather it makes the equipment that makes the solar cells. As has been said elsewhere, the ones who made the money in the gold rush of 1849 were not the miners but rather the merchants who sold the miners the picks and the shovels. That's GT Solar's business.
It is up 72.9% in the two weeks since I bought it on March 16. This compares with the Total Stock Market being up 8.4% over the same period. And even today while the market was down 3.6%, SOLR was up another 1.6%. Daily trading volume over the last three months was 800K shares. But over the last few days trading volume has rocketed. Today its volume was over 6M shares.
I continue to use the Greenblatt value filter to look for likely stock candidates. Back on March 16 I noticed that GT Solar (SOLR) showed up on the Greenblatt filter so I made an investment.
GT Solar does not make solar cells. Rather it makes the equipment that makes the solar cells. As has been said elsewhere, the ones who made the money in the gold rush of 1849 were not the miners but rather the merchants who sold the miners the picks and the shovels. That's GT Solar's business.
It is up 72.9% in the two weeks since I bought it on March 16. This compares with the Total Stock Market being up 8.4% over the same period. And even today while the market was down 3.6%, SOLR was up another 1.6%. Daily trading volume over the last three months was 800K shares. But over the last few days trading volume has rocketed. Today its volume was over 6M shares.
Financial oligarchs have captured the U.S. government
The upcoming May 2009 issue of the Atlantic Monthly features an article by Simon Johnson, of MIT and former chief economist of the International Monetary Fund.
Briefly, Johnson posits that the United States government has become the hand maiden to the financial oligarchs.
"The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time."
Briefly, Johnson posits that the United States government has become the hand maiden to the financial oligarchs.
"The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time."
The full article can be read HERE.
Sunday, March 29, 2009
Krugman and Obama at odds?
Nobel prize winner economist and liberal pundit Paul Krugman is featured as the cover story in the current issue of Newsweek. Long a critic of George Bush, Krugman is now highly critical of the Obama administration's economic plans...
"Krugman portrays Treasury Secretary Tim Geithner and other top officials as, in effect, tools of Wall Street (a ridiculous charge, say Geithner defenders). These men and women have "no venality," Krugman hastened to say in an interview with NEWSWEEK. But they are suffering from "osmosis," from simply spending too much time around investment bankers and the like. ... It's as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street."
"Krugman portrays Treasury Secretary Tim Geithner and other top officials as, in effect, tools of Wall Street (a ridiculous charge, say Geithner defenders). These men and women have "no venality," Krugman hastened to say in an interview with NEWSWEEK. But they are suffering from "osmosis," from simply spending too much time around investment bankers and the like. ... It's as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street."
MORE.
Saturday, March 28, 2009
Closing the Tax Gap
With record deficits, the Obama administration is looking for ways to increase tax revenue. One way is to improve tax compliance. For example, it is estimated that cash transactions that go unreported account for $100B in lost tax revenue.
But how to force compliance? Perhaps one way would be to eliminate legal tender currency and force everyone to use checks or debit/credit cards for all transactions.
Most businesses could easily work this way although I would assume many would prefer to stay with cash for obvious reasons.
Casual businesses such as street vendors present a different issue as they would have no way of processing a debit/credit card or validating a check in real time.
Others may raise privacy concerns since checks and debit/credit cards leave an electronic trail.
MORE and MORE.
But how to force compliance? Perhaps one way would be to eliminate legal tender currency and force everyone to use checks or debit/credit cards for all transactions.
Most businesses could easily work this way although I would assume many would prefer to stay with cash for obvious reasons.
Casual businesses such as street vendors present a different issue as they would have no way of processing a debit/credit card or validating a check in real time.
Others may raise privacy concerns since checks and debit/credit cards leave an electronic trail.
MORE and MORE.
Friday, March 27, 2009
Is Greenspan to Blame?
In a WSJ editorial on Feb 11, John Taylor of Stanford University laid the blame at Alan Greenspan's feet. Taylor and Greenspan had been long time friends. Perhaps no more. MORE[$].
Then on March 9, Greenspan responded with his own WSJ editorial blaming the Chinese saving rate as the root cause. MORE[$].
Today, the WSJ has a series of economists give their views on the controversy. The vast majority point the finger at Greenspan. MORE[$].
Water over the dam, I suppose. But if the Fed was a key cause of the problem, what does this say about what the Fed should be doing going forward?
One thing I think is good about the European Central Bank is that they only have one mandate... to maintain a stable value of the Euro (i.e., avoid debasement/inflation).
In the case of the US Federal Reserve it has several mandates: "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."
Easier said than done. These mandates are often at cross purposes.
We have had a chronically weak dollar and serial asset bubbles (isn't that known as inflation?). Now we have a weak dollar and high unemployment. And the Fed is now maintaining low interest rates by buying US treasuries and printing dollars - surely a new disaster in the making. And now we have calls by the Chinese, Russia and others for a new reserve currency to replace the dollar. So on what basis can one say that the Fed has done a good job since Alan Greenspan took over from Paul Volker?
Then on March 9, Greenspan responded with his own WSJ editorial blaming the Chinese saving rate as the root cause. MORE[$].
Today, the WSJ has a series of economists give their views on the controversy. The vast majority point the finger at Greenspan. MORE[$].
Water over the dam, I suppose. But if the Fed was a key cause of the problem, what does this say about what the Fed should be doing going forward?
One thing I think is good about the European Central Bank is that they only have one mandate... to maintain a stable value of the Euro (i.e., avoid debasement/inflation).
In the case of the US Federal Reserve it has several mandates: "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."
Easier said than done. These mandates are often at cross purposes.
We have had a chronically weak dollar and serial asset bubbles (isn't that known as inflation?). Now we have a weak dollar and high unemployment. And the Fed is now maintaining low interest rates by buying US treasuries and printing dollars - surely a new disaster in the making. And now we have calls by the Chinese, Russia and others for a new reserve currency to replace the dollar. So on what basis can one say that the Fed has done a good job since Alan Greenspan took over from Paul Volker?
And here Greenspan defends himself on 60 Minutes...
Thursday, March 26, 2009
Eurozone, a bystander or wise?
James Surowiecki of The New Yorker writes on what the Eurozone is not doing. Specifically the European Central Bank is not doing "quantitative easing" for two reasons. One is that they feel that they can sit on the side and simply benefit from the "quantitative easing" the US fed is doing. Secondly is their fear of stoking inflation / hyper inflation akin to that of the 1920s in Germany. MORE.
Wednesday, March 25, 2009
A New Reserve Currency?
The WSJ reports on China calling for the creation of a new international reserve currency to replace the dollar. Could it be a concern by the chinese that their huge us treasury holdings are in jeapordy of debasement by the fed's actions? MORE[$]
Tuesday, March 24, 2009
Quantitative Easing
The term "quantitative easing" that the fed and others use, seems so innocuous. I did a Google on "define: quantitative easing". Here are the two web definitions that came up...Quantitative easing is what non-economists call 'turning on the printing press'. In extreme circumstances, governments flood the financial system with money, easing pressure on banks by giving them extra capital.
This is the second one that came up:
The term quantitative easing refers to the creation of a pre-determined quantity of new money 'out of thin air' through open market operations by a central bank as the start of a process to increase the money supply. It can, more simply, be understood as an indirect method of printing money.
Monday, March 23, 2009
Washington Deflowered?
"People have been saying that Wall Street took their checkbooks down to Washington and lobbied to get the regulation they wanted rather than stricter regulation. And therefore, Congressmen were the victims of this. I’m sorry, but Wall Street was not debauching a virgin, it was paying a harlot." – John Steele Gordon as quoted in the Wall Street Journal
Sunday, March 22, 2009
$10 Trillion and Counting
PBS Frontline presented an hour long horror show on America's mountain of debt and the crisis of government debt titled Ten Billion and Counting.
Monday, March 16, 2009
The Good Hands People
The whole process of "fixing" the economy seems to me to be out of control and is being "fixed" by many of the same individuals who facilitated getting us into the mess.Don't get me wrong. The lion's share of the blame goes to us citizens as spendthrifts and Wall Street as the sheep shearers.
But there is a huge amount of grandstanding by the same politicians and government operatives who facilitated the mess. Some points.
Robert Rubin: Glass-Steagall was put in place in the 1930s to prevent banks from also setting up investment operations. It was repealed under the Clinton watch. On the Whitehouse end, the push to repeal was spear headed by Clinton's own Treasury Secretary, Robert Rubin. Within a few weeks of the repeal, Rubin left that post and took over a top position at Citibank. And we all know what has happened to Citi since then.
Larry Summers: As Treasury Secretary, also under Clinton, he gave approval that credit default swaps did not have to be regulated. Ooops.
US Representative Barney Frank and Senator Chris Dodd: Both had long pushed that Fannie Mayhem and Freddie Fraud take on more and more suspect mortgages in the interest of helping the disadvantaged buy homes. A noble goal. Except they should have helped them get jobs before they helped them get homes they could not pay for. Thus they enabled the likes of Countrywide and others to dump their crap on FM-FF. Not to worry. The government (taxpayer) would not be on the hook. Ha! Oh, did i mention that Dodd is under an investigation in Congress for the mortgage sweetheart deal he got from Angelo Mozilo, CEO of Countrywide before Countrywide blew up? That investigation will go no where as too many other pols are dirty also. And Dodd is under a similar housing cloud for another sweet heart real estate deal in, of all places, Ireland. Dodd, Frank and others in congress have gotten campaign donations from FM-FF, Countrywide and others. And now i see that the so-called "Dodd amendment" in the stimulus bill that was passed last month had a clause that specifically allowed bonus agreements to be paid out, such as AIG's. Dodd now claims that it was not in his amendment when it went to committee and he does not know how it got into the bill. So if you take that as true, then the more damning critique is that Dodd and congress do not even know what they are voting on. See THIS for the story on the Dodd Amendment.
George Bush #2: He let PAYGO (pay as you go) lapse. The odd thing is that it was in George Bush #1's administration that PAYGO was first put in place. Bush #2 should have listened to his father.
Tim Geithner: Prior to becoming Treasury Secretary he was the governor of the New York Federal Reserve Bank. The NY Fed is supposed to take the lead on recommendations and follow through on the overseeing of Wall Street. He was in the slot when the excess grew and finally blew up. Now he runs treasury. Was that position a reward or punishment? Oh yeah, Geither was also so busy managing the New York Fed, that somehow, he forgot to pay his Social Secuity Taxes he owed when he worked for the IMF. Now he has the IRS under him. As an aside, today I saw Obama on tv defending Geithner. It reminded me of Bush's infamous "you're doing a heck of a job, Brownie" fiasco in trying to defend the indefensible.
Alan Greenspan: Poor guy! He is all over the press trying to paper over and defend his blunders, easy money, poor eyesight when it came to bubbles and serial financial bailouts. Very sad. He should change his name to Greenspin.
Hank Paulson: What does one expect when the guy who is supposed to be the guardian of the people's treasury previously headed up Goldman Sucks.
Ben Bernanke: Protégé of Greenspin. Helicopter Ben. Depression expert. Fed governor from 2002-2006 and Fed Chairman from 2006-2009. What was he exactly doing at the Fed during the lead up to the current situation? And why is he the best guy to resolve the current situation?
As I said, the lion's share of the blame goes to US citizens as spendthrifts and Wall Street as the sheep shearers.
But it is very hard to believe that we are now in good hands and that all will be well.
Where did all the wealth go? To our kids.
Rob Atkinson of The Atlantic Magazine looks at the brighter side of the fall of housing and stock prices...
Like millions of Americans, I dread getting my quarterly 401k statement. Every time I open one I think, "I guess I won't be retiring at 65." And so it didn't really come as a surprise when the Federal Reserve reported that household net worth plunged $11.2 trillion in 2008, a stunning 18 percent loss in one year. No wonder The New York Times says that "the most recent loss of wealth is staggering."
So did this wealth actually disappear? Of course not. My house is still here. The companies in which my mutual funds own stock are still there. All that changed was this: The prices at which American asset owners can sell their assets fell by $11.2 trillion. But the prices that buyers have to pay for those assets also fell by $11.2 trillion. And that's not necessarily a bad thing.
Read the full article HERE.
Like millions of Americans, I dread getting my quarterly 401k statement. Every time I open one I think, "I guess I won't be retiring at 65." And so it didn't really come as a surprise when the Federal Reserve reported that household net worth plunged $11.2 trillion in 2008, a stunning 18 percent loss in one year. No wonder The New York Times says that "the most recent loss of wealth is staggering."
So did this wealth actually disappear? Of course not. My house is still here. The companies in which my mutual funds own stock are still there. All that changed was this: The prices at which American asset owners can sell their assets fell by $11.2 trillion. But the prices that buyers have to pay for those assets also fell by $11.2 trillion. And that's not necessarily a bad thing.
Read the full article HERE.
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