I'm burned out on politics and politicians. The Media have made it very clear that they control the message. That message is "Obama wins"
I will resume my Talk-Back Response to the debate when the transcripts are available... I realize I will lose the nuance of tone, inflection and body language. I don't think that matters as the media will tell us what we saw and why it's important.
The fools on the Hill see the sun going down and the eyes in their head see the sun spinning round... round, round, round... the conversation never stops and never reaches a point.
What is absolutely amazing is the paucity of knowledge about how our financial institutions work. We lack the ability to analyze the problem, understand the solution or see the opportunity this presents for everyone. We are no longer a nation of pioneers, risk takers or even aggressive business people. We have become a nation of wage slaves and shopkeepers. No wonder we flock o politicians who promise us free lunch, free medical care, free housing, free cars...all without risk or worry.
The Wall Street Journal has done an excellent job of describing the problems, its background, consequences and ramifications of the proposed solution. Please read the editorials, opinions and columns for this past week.
Or write me and I'll send you the links. Its all free now. www.opinionjournal.com has been free for some time.
This is the greatest opportunity to solve the Social Security problem, Medicare/Medicaid problem without raising taxes ever to come our way. Our fearless leaders are hiding under the bed and wishing they could vote "present". Others are larding up the plan to 102 pages of crap. i.e. 20% of all returns to be paid to ACORN. That's paying the community organizers more than the small town mayors. That could be as much as $440 Billion in taxpayer money going to a tax exempt organization that registers the dead, the never-living, and mythological citizens to vote for Barack Obama.
Have a good weekend. Watch little TV. Wait til Monday to see which way your stocks go. Only 40 days til election... One would think it was important the way the dirty tricks are being organized and pulled.
Read a good book-!
Saturday, September 27, 2008
Thursday, September 25, 2008
This is Serious Folks
Where are the adults-? Why is everyone in the media so ignorant-? Why are our thought leaders so unwise in the ways of finance, Wall Street, the world-? This ain't a TV show or an Oliver Stone movie. There are no "bad" guys... There seem to be a few good guys trying to get in insane and addicted to steer away from the iceberg... I am holding my breath, saying my prayers, hoping for the best and preparing for the worst... What are you doing-?
Watching the hotel TV and listening to idiots babble... I thought several things.... and I'd like to share.
1) Most people have no idea how capital is formed and wealth created. Most people get a paycheck and spend most, save some then buy house, car and save for college. Some get retirement plans pushed at work and take em cause they're free... Outside of paycheck and balancing the checkbook, they are lost
2) Most TV folks cannot do math. They cannot calculate simple interest. They cannot make a budget and know whether they will be able to afford a payment.
3) Our leaders have no clue. Our Senators and Congrespeople are simple fools. They are slightly less able than your average drunk. They get paid to drink but lack the skills of a good manipulative hustler...
4) They do not understand the problem. They do not understand the proposed solution. They just "want it fixed, now" and then they want to blame Bush and/or the rich...
This is a GREAT opportunity for every teacher in America to teach simple business math. Operating statement (and budget) and Balance Sheet... No need for any explanations of derivatives, Collateralized debt instruments or anything suave... Just basic family and business math...
Instead we'll get a bunch of demagoguing and populist rabble rousing...
Watching the credit markets seize up during the course of the year has been an education for me. I suspected some troubles in housing/mortage industry because of the articles in the WSJ and Forbes... I have had several deals crater as lenders got cold feet and ramped up their nervousness rate. I was just quoted an outrageous rate to lease equipment... We walk away when the deal gets stupid. My partner and I have some strict guidelines and walk away when the other party gets foolish.... I saw a big shift in investor confidence when Obama and Democrats Pelosi and Reid sarted coming against the rich... I think we'll have some great investment opportunities over the next 12 months... If you're gonna play; Have a chat with yourself first. High rewards come from high risk. Low risks bring low-moderate rewards...
Just remember when you see the idiots on TV saying we need higher taxes and we need to get the top 1%... To raise revenue, you cut taxes. Kennedy did it, Reagan did it, Clinton did it(well, he didn't but Republicans did and gave him credit) and Bush did it... If they are serious about needing more money to pay bailout, debt etc... cutting taxes raises money....
As Obama told Gibson "Raising taxes is a question of fairness"... It's not about raising cash or paying bills...
Whatever the Politicians do, the market will take it into account and react accordingly. I trust the markets more than I trust Congress to do the right thing in the long run...
I was speaking with someone this morning about the seriousness of it all...and they were quoting TV, newspaper editorials and wondering where "their" personal bailout is...
People doan geddit...
This is not a crisis of bad loans. There are some bad loans mixed in with a bunch of good loans -AND- an accounting rule (post-ENRON inspired FAS 157 lookit up) that says you mark -ALL- assets to market... There are very very few people who buy bundled mortgages. A note representing 1,000 mortgages is not gonna be held by a whole bunch of people... When ONE holder needs cash and sells their note at a firesale-all notes of this thinly traded type must be marked down to firesale prices... This causes some institutions to need much more equity or capital or cash to keep their ratios inline with regulatory authority... creating a cascade affect on all such holders of these instruments... The vast majority (95%) of mortgages are still being serviced every month...
The original plan was for the Feds to buy these illiquid notes and hold tle maturity... These notes represent some value. Right now, nobody knows what they are because they have been written down so hard. Merrill sold itself for $.22 on the dollar because it couldn't see itself raising the extra capital to meet required ratios... The notes are good, but the rules say not... What would you pay for one-?
If you bought a bundle of 1,000 mortgages for $.22 on the dollar and held them to maturity you'd get rich. If 5% (present mortgage foreclosure rate) went bad you'd still have the underlying asset. Would that asset have dropped 78% in value-? You'd still have something worth more than you paid for it. Even at $.50 on the dollar you'd probably make some very good money on the returns...
The issue of sub-Prime notes means first that the home owner is less than good creditworthy... That means they are paying a premium interest rate plus higher fees to get the note to begin with. Many are Adjustable Rate Mortgages that adjust when interest rates go up... Many-many-many buyers thought they would 1) re-finance at higher valuation, 2) sell at higher valuation 3) re-finance to fixed note. Many-many-many home buyers in Bay Area and elsewhere saw low risk-high reward for getting into many such homes and renting them out. Their good credit and renters payments would build equity forever... However, prices quit rising. Rates went up. Re-financing was not an option... That forced many to walk away and caused many renters to get pushed out of homes they where they had never missed a payment...
Freddy and Fannie bought these sub-Prime notes, bundled them, sold em to Wall Street. Took the money and bought more mortgages. Along the way they paid $15-$16M in donations and lobbying to Congress. They also paid their head guys nearly $100M in bonuses and minor flunkies prorated amounts from the top banana... They also had sloppy accounting. If Freddy and Fannie were a truly Public company their top bananas would be in jail... but because they paid protection they got to keep their bonuses...
The problem with all this is that because the financial institutions are holding "bad" paper... They are not making any more loans. They are raising rates and fees and hoarding cash everywhere they can... The affect is all the small institutions are also bumping up their fees and interest rates... Interest rates have jumped three times over what they were a few months ago. Even Ford is forced to pay 7.5% for its prime money...
People saw the institutions seizing up and started to pull money from their Money Market accounts... There was a run on money market funds starting last week. If it had gone unchecked... we would have toppled the world. You cannot pull $1.7 trillion out and put it under the mattress without bad things happening... Money Market funds are not insured-at present- under the bailout they will be.... That should stop the run... BUT since the banks are paying so little on CDs and savings and have limit of $100,000, it won't be long before people move lots of cash from banks to Money market funds for higher rates and unlimited protection... Ultimately this will drive up mortgage rates... at same time as excess inventory drives down prices... (average home price dropped 11% in August following a 5% drop in July)....
If the financial market seizes up... The ONLY availbe funds will be what people have in their hands and bank accounts... Credit cards won't work... Lines of Credit won't work, home equity notes will be called or rates raised, lines of credit based on home equity will stop... all small business working capital will be based on cashflow... Customers will have to pay COD for all deliveries or shipments... There will be no new loans for vehicles or equipment...
The Bailout is to lubricate the economy-not take on bad loans- They are "bad" only because nobody will buy one at anywhere near their full value...once a few are bought then the mark-to-market action will raise all boats... Balance Sheets will have lots of higher valued assets plus cash and equity... Loans will flow... and credit standards will be raised but loans will be made-homes will start to be bought which will stabilize their values and stop the decline...
Doing nothing is to jump off a cliff...larding up the bill with crap will do nothing to solve the problem short term and will screw things up long term...
AIG insured the loans. They had insurance policy that said the bundled notes would be good... all the claims forced because the mark-to-market criteria was forcing AIG to pay out... Again a run on the insurance company... The Bailout would raise the value of the bundles and reduce the AIG exposure... The present "bailout" is merely a standby loan with warrants that convert to 80% of the stock...diluting the present Shareholders and making the Feds VERY RICH...
Cash is King... "He who got gold make rule"... Congress has the gold...their rules will decide if we go forward or backward... This is a financial problem that needs a financial solution. Unfortunately, I fear we may get a political solution along with a financial one.
This is serious... it can be worse.... It should get better if we can get some adults in the room to speak up... Not Barney Frank and Chris Dodd... They are clowns who have no clue and care less...
So... Tell me if I'm reading this wrong-? Tell me where/what I need to understand better...
Watching the hotel TV and listening to idiots babble... I thought several things.... and I'd like to share.
1) Most people have no idea how capital is formed and wealth created. Most people get a paycheck and spend most, save some then buy house, car and save for college. Some get retirement plans pushed at work and take em cause they're free... Outside of paycheck and balancing the checkbook, they are lost
2) Most TV folks cannot do math. They cannot calculate simple interest. They cannot make a budget and know whether they will be able to afford a payment.
3) Our leaders have no clue. Our Senators and Congrespeople are simple fools. They are slightly less able than your average drunk. They get paid to drink but lack the skills of a good manipulative hustler...
4) They do not understand the problem. They do not understand the proposed solution. They just "want it fixed, now" and then they want to blame Bush and/or the rich...
This is a GREAT opportunity for every teacher in America to teach simple business math. Operating statement (and budget) and Balance Sheet... No need for any explanations of derivatives, Collateralized debt instruments or anything suave... Just basic family and business math...
Instead we'll get a bunch of demagoguing and populist rabble rousing...
Watching the credit markets seize up during the course of the year has been an education for me. I suspected some troubles in housing/mortage industry because of the articles in the WSJ and Forbes... I have had several deals crater as lenders got cold feet and ramped up their nervousness rate. I was just quoted an outrageous rate to lease equipment... We walk away when the deal gets stupid. My partner and I have some strict guidelines and walk away when the other party gets foolish.... I saw a big shift in investor confidence when Obama and Democrats Pelosi and Reid sarted coming against the rich... I think we'll have some great investment opportunities over the next 12 months... If you're gonna play; Have a chat with yourself first. High rewards come from high risk. Low risks bring low-moderate rewards...
Just remember when you see the idiots on TV saying we need higher taxes and we need to get the top 1%... To raise revenue, you cut taxes. Kennedy did it, Reagan did it, Clinton did it(well, he didn't but Republicans did and gave him credit) and Bush did it... If they are serious about needing more money to pay bailout, debt etc... cutting taxes raises money....
As Obama told Gibson "Raising taxes is a question of fairness"... It's not about raising cash or paying bills...
Whatever the Politicians do, the market will take it into account and react accordingly. I trust the markets more than I trust Congress to do the right thing in the long run...
I was speaking with someone this morning about the seriousness of it all...and they were quoting TV, newspaper editorials and wondering where "their" personal bailout is...
People doan geddit...
This is not a crisis of bad loans. There are some bad loans mixed in with a bunch of good loans -AND- an accounting rule (post-ENRON inspired FAS 157 lookit up) that says you mark -ALL- assets to market... There are very very few people who buy bundled mortgages. A note representing 1,000 mortgages is not gonna be held by a whole bunch of people... When ONE holder needs cash and sells their note at a firesale-all notes of this thinly traded type must be marked down to firesale prices... This causes some institutions to need much more equity or capital or cash to keep their ratios inline with regulatory authority... creating a cascade affect on all such holders of these instruments... The vast majority (95%) of mortgages are still being serviced every month...
The original plan was for the Feds to buy these illiquid notes and hold tle maturity... These notes represent some value. Right now, nobody knows what they are because they have been written down so hard. Merrill sold itself for $.22 on the dollar because it couldn't see itself raising the extra capital to meet required ratios... The notes are good, but the rules say not... What would you pay for one-?
If you bought a bundle of 1,000 mortgages for $.22 on the dollar and held them to maturity you'd get rich. If 5% (present mortgage foreclosure rate) went bad you'd still have the underlying asset. Would that asset have dropped 78% in value-? You'd still have something worth more than you paid for it. Even at $.50 on the dollar you'd probably make some very good money on the returns...
The issue of sub-Prime notes means first that the home owner is less than good creditworthy... That means they are paying a premium interest rate plus higher fees to get the note to begin with. Many are Adjustable Rate Mortgages that adjust when interest rates go up... Many-many-many buyers thought they would 1) re-finance at higher valuation, 2) sell at higher valuation 3) re-finance to fixed note. Many-many-many home buyers in Bay Area and elsewhere saw low risk-high reward for getting into many such homes and renting them out. Their good credit and renters payments would build equity forever... However, prices quit rising. Rates went up. Re-financing was not an option... That forced many to walk away and caused many renters to get pushed out of homes they where they had never missed a payment...
Freddy and Fannie bought these sub-Prime notes, bundled them, sold em to Wall Street. Took the money and bought more mortgages. Along the way they paid $15-$16M in donations and lobbying to Congress. They also paid their head guys nearly $100M in bonuses and minor flunkies prorated amounts from the top banana... They also had sloppy accounting. If Freddy and Fannie were a truly Public company their top bananas would be in jail... but because they paid protection they got to keep their bonuses...
The problem with all this is that because the financial institutions are holding "bad" paper... They are not making any more loans. They are raising rates and fees and hoarding cash everywhere they can... The affect is all the small institutions are also bumping up their fees and interest rates... Interest rates have jumped three times over what they were a few months ago. Even Ford is forced to pay 7.5% for its prime money...
People saw the institutions seizing up and started to pull money from their Money Market accounts... There was a run on money market funds starting last week. If it had gone unchecked... we would have toppled the world. You cannot pull $1.7 trillion out and put it under the mattress without bad things happening... Money Market funds are not insured-at present- under the bailout they will be.... That should stop the run... BUT since the banks are paying so little on CDs and savings and have limit of $100,000, it won't be long before people move lots of cash from banks to Money market funds for higher rates and unlimited protection... Ultimately this will drive up mortgage rates... at same time as excess inventory drives down prices... (average home price dropped 11% in August following a 5% drop in July)....
If the financial market seizes up... The ONLY availbe funds will be what people have in their hands and bank accounts... Credit cards won't work... Lines of Credit won't work, home equity notes will be called or rates raised, lines of credit based on home equity will stop... all small business working capital will be based on cashflow... Customers will have to pay COD for all deliveries or shipments... There will be no new loans for vehicles or equipment...
The Bailout is to lubricate the economy-not take on bad loans- They are "bad" only because nobody will buy one at anywhere near their full value...once a few are bought then the mark-to-market action will raise all boats... Balance Sheets will have lots of higher valued assets plus cash and equity... Loans will flow... and credit standards will be raised but loans will be made-homes will start to be bought which will stabilize their values and stop the decline...
Doing nothing is to jump off a cliff...larding up the bill with crap will do nothing to solve the problem short term and will screw things up long term...
AIG insured the loans. They had insurance policy that said the bundled notes would be good... all the claims forced because the mark-to-market criteria was forcing AIG to pay out... Again a run on the insurance company... The Bailout would raise the value of the bundles and reduce the AIG exposure... The present "bailout" is merely a standby loan with warrants that convert to 80% of the stock...diluting the present Shareholders and making the Feds VERY RICH...
Cash is King... "He who got gold make rule"... Congress has the gold...their rules will decide if we go forward or backward... This is a financial problem that needs a financial solution. Unfortunately, I fear we may get a political solution along with a financial one.
This is serious... it can be worse.... It should get better if we can get some adults in the room to speak up... Not Barney Frank and Chris Dodd... They are clowns who have no clue and care less...
So... Tell me if I'm reading this wrong-? Tell me where/what I need to understand better...
Patriotic Taxation
Been muddling over Biden's "Paying Taxes is Patriotic" theme... He says the rich should pay more...
But his logic would have the top 1% of tax payers THIRTY-FIVE TIMES more patriotic than the lower 40% of taxpayers... I don't think that's necessarily so...
I was also thinking about the affects on our society when 40% of all the people who are of working age pay NOTHING and in some cases get paid by the govt for making so little...
Surely that breeds a dependency on the politicians who promise more-more-more... It also breeds a complacency about the country, about elections, about the way got is run and about how the nation is working... after all... it costs nothing and occasionally is profitable to be poor.
Under Obama and Pelosi the number of people NOT paying taxes will rise to almost 50%... The top 5% will pay more-more-more and not change any habits or behavior... But if the top 5% is so smart, won't they opt out-? Start their own companies, pay themselves whatever is left over and build equity-? Won't they buy ever bigger houses to get the homeowner decduction... won't lots and lots of tax games get played that are tax avoidance driven vs profit driven-?
When 5% goes from paying 70% of all bills to paying 100%...won't those numbers shrink-? Even taxing the dead won't raise enough to pay even greater freebies for the bottom 50%...
Didn't LBJ try something like this in the '60s...and didn't it lead to ever higher inflation-?
I see some huge rounds of inflation coming if Obama-Pelosi get their way... We'll go broke feeling rich...
I remember reading a tale of Eskimo hunters coating a double edged knife blade with seal grease and freexing the handle in the ice. The wolves would come along and lick the blade. Every lick would bring more warm blood into their belly. And they would die feeling warm, full and happy...
Is that us-?
But his logic would have the top 1% of tax payers THIRTY-FIVE TIMES more patriotic than the lower 40% of taxpayers... I don't think that's necessarily so...
I was also thinking about the affects on our society when 40% of all the people who are of working age pay NOTHING and in some cases get paid by the govt for making so little...
Surely that breeds a dependency on the politicians who promise more-more-more... It also breeds a complacency about the country, about elections, about the way got is run and about how the nation is working... after all... it costs nothing and occasionally is profitable to be poor.
Under Obama and Pelosi the number of people NOT paying taxes will rise to almost 50%... The top 5% will pay more-more-more and not change any habits or behavior... But if the top 5% is so smart, won't they opt out-? Start their own companies, pay themselves whatever is left over and build equity-? Won't they buy ever bigger houses to get the homeowner decduction... won't lots and lots of tax games get played that are tax avoidance driven vs profit driven-?
When 5% goes from paying 70% of all bills to paying 100%...won't those numbers shrink-? Even taxing the dead won't raise enough to pay even greater freebies for the bottom 50%...
Didn't LBJ try something like this in the '60s...and didn't it lead to ever higher inflation-?
I see some huge rounds of inflation coming if Obama-Pelosi get their way... We'll go broke feeling rich...
I remember reading a tale of Eskimo hunters coating a double edged knife blade with seal grease and freexing the handle in the ice. The wolves would come along and lick the blade. Every lick would bring more warm blood into their belly. And they would die feeling warm, full and happy...
Is that us-?
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