I stepped back from the post-election insanity. I walked away and calmed down, sorta.
We didn't have anyone worthy of the job running in the final stretch. The economy was headed off a cliff and it was time to play politics vs doing something serious.
The Mark-to-market requirement was dumped in April and surprise the crisis slowed dramatically. Mark-to-market for regulated financial institutions is a recipe for disaster. Once again we have been taught that lesson... The hard way.
Fannie and Freddie have been proved to be what everybody thought they were; government agencies with the full faith and credit of the U.S. Government behind them. Now that they have been bailed out and are floating under the radar... what should be done with em-? Looks like they will wind up restructuring over a trillion dollars in mortgages and dumping additional losses onto the Treasury.
Politics trumps economics. Politics trumps science. Politics trumps Hollywood. And all we get are more people playing politician as either a professional or an amatuer... My TV seems to be saying "It's easy. Any fool can do it. We'll report and make money from the fools"... And they do... hour after hour, night after night. Even the professional politicians, you know, Our Natural Masters, are caught up in being found the fool...
With it easy and everybody doing it... what purpose should -THIS- blog serve... ?
1) Should I ramble along and join the herd, hoping that my brilliance and wit will bring me an audience-?
2) Should I turn inward and mine my soul and history to try and explain mysef to myself and any passers by-?
3) Should I return to my spade and pick to turn a dollar examining the ins and outs of basic business in general and transportation in specific-?
4) Should I write poetry-? Knowing full well that poets like bloggers exist mainly as producers and not consumers... Yes, many write, few write well. Many read but mostly the writ which ha been approved, sanctioned and blessed by a critical voice....
5) Should I simply pop in and ramble away, occasionally giving voice to my rants as events warrant-? I wouldn't visit a site that was only infrequently posted no matter how brilliant and sophisticated I found the work... Why would you-?
Drop a comment and vote or not... I'll be back and slowly find my voice and topics... or you can suggest some...
Thanks for visiting...
Friday, March 12, 2010
Monday, November 17, 2008
"Whatever It Takes"
"Yes We Can." or so the saying goes. Looks more like wishful thinking leading to changes we did not anticipate. Is this an example of The Law of Unintended Consequences or will we find other/better examples ahead-?
From yesterday's Bloomberg:
Why do I not expect to see 1) cutting taxes to relieve the taxpayer or to raise revenues 2) reducing the size or scope of government to use scarce tax money more wisely to be on the list of things to try early.
Ignore the deficit-?
When Congress just added $5 thousand billion in new debt to the government balance sheet, PLUS tossed $300 billion in air-dropped stimulus, PLUS $700 billion in Financial Rescue, PLUS are planning an additional (pick-a-number) $300 billion, $500, billion, $600 billion in new air drop stimulus PLUS another unknown number in "infrastructure and unemployment befit extensions. (We haven't gotten to the expanded health and welfare freebies that bought the election)
Where does all the new money come from-? Selling U.S. Govt Bonds-? To foreign buyers-? Who really thinks we will -NOT- devalue the dollar to repay the fixed term debt with inflated greenbacks... Will Congress be able to avoid telling businesses how to run their businesses-? They are already demanding that banks loan good money to get the economy rolling. Don't they know how we got in this mess and why it's dragging along-? How can anyone loan against an asset when you don't know what the asset will be worth in 3-6-12 months-?
PLUS GM, FORD, CHRYSLER and their UNIONS need LIFESUPPORT for next two years... They have no way to find profits and pay back-EVER. The UAW is growing older and at $71.++/hr they are not competitive. PLUS the UAW retirees may get screwed and turn to the Pension Benefit Guarantee Funds for salvation... But find Lehman, GE and others ahead of them in line. (meaning yet-more govt money needed to bailout retirees) The NYTimes has already reduced its medical benefits to retirees. There will be many more companies dumping retiree obligations onto the government. Cleaning up balance sheets is going to be difficult and painful. No loans will flow to companies with an ugly Balance Sheet.
The Democrats cannot let the United Auto Workers suffer. I guess it means we all will share the pain of bad contracts and Congressional meddling for two to five years before they get consolidated and largely liquidated. Penn Central Auto Makers-? AmAuto Manufacturers-?
Didn't we see this with the railroads-? How successful was that-?
PLUS we still have a shooting war in Iraq and Afghanistan... And a still active and aggressive Islam-o-Terrorist enemy.
PLUS Mexico still has a shooting war against Narco-Terrorists
PLUS Venezuela is funding revolution in Argentina, Ecuador, Bolivia, Nicaragua
PLUS Russia and China are heading to Cuba to test the Monroe Doctrine.
PLUS ongoing Pentagon commitments for new toys, replacement of old equipment, expanded size of the forces to avoid burn-out from combat tours.
All of which means shrinking the military ain't gonna happen, unless we want embolden all our enemies at one time. Sorry, Barney.
Tightening the belt, shrinking personal debt and consumer demand for one-to-two years is probably not gonna be considered at all... Not politically popular... Until we find a bottom price on assets, inventories, capacity and can release the cash that America is holding- Nothing Moves...
I expect the next air drop stimulus to go towards home and small holiday bills. Credit card bills will become the next discretionary payable if they haven't already. Home Mortgage possibly already is. All the talk of mortgage renegotiation is making even those with ability wonder if they are The Fool to keep paying when the Mortgage Holder is willing to reduce-reset-renegotiate... (Is this a Moral Hazard-?)
I guess this is one way to have Gen X, Gen Y, Gen Z, all learn about economics, responsibility, frugality and work... Good thing us Boomers were inoculated early and avoided those lessons... "We" never learned em so we couldn't teach them to anyone, or so it seems many of these recent days.
"Hope" and "Change" are words into which we can toss our aspirations. "Work", "Responsibility" and "Frugality" are old fashioned ideas we will rediscover before we finish and return to the "Bush-Prosperity-Years". We will be changed but not in the way we anticipated when 2008 began. We will still have "Hope" for Americans take Hope add it to Work and Responsibility to create a better future for all of us. This is what we do. This is who we are. No people or nation does it better.
I wish our New President the best. His success (or failure) is deeply tied to that of the entire nation. His Party affiliates on The Hill may need to be reminded early that he is The President, separate but equal to all of them combined.
How's your Monday going-? Obviously, I'm ranting away trying to make sense of my newspapers and emails...
From yesterday's Bloomberg:
The government will do ``whatever it takes'' to revive the economy, Obama said. That means ``we shouldn't worry about the deficit next year or even the year after,'' he said, adding that in the short term, ``the most important thing is that we avoid a deepening recession.''
Why do I not expect to see 1) cutting taxes to relieve the taxpayer or to raise revenues 2) reducing the size or scope of government to use scarce tax money more wisely to be on the list of things to try early.
Ignore the deficit-?
When Congress just added $5 thousand billion in new debt to the government balance sheet, PLUS tossed $300 billion in air-dropped stimulus, PLUS $700 billion in Financial Rescue, PLUS are planning an additional (pick-a-number) $300 billion, $500, billion, $600 billion in new air drop stimulus PLUS another unknown number in "infrastructure and unemployment befit extensions. (We haven't gotten to the expanded health and welfare freebies that bought the election)
Where does all the new money come from-? Selling U.S. Govt Bonds-? To foreign buyers-? Who really thinks we will -NOT- devalue the dollar to repay the fixed term debt with inflated greenbacks... Will Congress be able to avoid telling businesses how to run their businesses-? They are already demanding that banks loan good money to get the economy rolling. Don't they know how we got in this mess and why it's dragging along-? How can anyone loan against an asset when you don't know what the asset will be worth in 3-6-12 months-?
PLUS GM, FORD, CHRYSLER and their UNIONS need LIFESUPPORT for next two years... They have no way to find profits and pay back-EVER. The UAW is growing older and at $71.++/hr they are not competitive. PLUS the UAW retirees may get screwed and turn to the Pension Benefit Guarantee Funds for salvation... But find Lehman, GE and others ahead of them in line. (meaning yet-more govt money needed to bailout retirees) The NYTimes has already reduced its medical benefits to retirees. There will be many more companies dumping retiree obligations onto the government. Cleaning up balance sheets is going to be difficult and painful. No loans will flow to companies with an ugly Balance Sheet.
The Democrats cannot let the United Auto Workers suffer. I guess it means we all will share the pain of bad contracts and Congressional meddling for two to five years before they get consolidated and largely liquidated. Penn Central Auto Makers-? AmAuto Manufacturers-?
Didn't we see this with the railroads-? How successful was that-?
PLUS we still have a shooting war in Iraq and Afghanistan... And a still active and aggressive Islam-o-Terrorist enemy.
PLUS Mexico still has a shooting war against Narco-Terrorists
PLUS Venezuela is funding revolution in Argentina, Ecuador, Bolivia, Nicaragua
PLUS Russia and China are heading to Cuba to test the Monroe Doctrine.
PLUS ongoing Pentagon commitments for new toys, replacement of old equipment, expanded size of the forces to avoid burn-out from combat tours.
All of which means shrinking the military ain't gonna happen, unless we want embolden all our enemies at one time. Sorry, Barney.
Tightening the belt, shrinking personal debt and consumer demand for one-to-two years is probably not gonna be considered at all... Not politically popular... Until we find a bottom price on assets, inventories, capacity and can release the cash that America is holding- Nothing Moves...
I expect the next air drop stimulus to go towards home and small holiday bills. Credit card bills will become the next discretionary payable if they haven't already. Home Mortgage possibly already is. All the talk of mortgage renegotiation is making even those with ability wonder if they are The Fool to keep paying when the Mortgage Holder is willing to reduce-reset-renegotiate... (Is this a Moral Hazard-?)
I guess this is one way to have Gen X, Gen Y, Gen Z, all learn about economics, responsibility, frugality and work... Good thing us Boomers were inoculated early and avoided those lessons... "We" never learned em so we couldn't teach them to anyone, or so it seems many of these recent days.
"Hope" and "Change" are words into which we can toss our aspirations. "Work", "Responsibility" and "Frugality" are old fashioned ideas we will rediscover before we finish and return to the "Bush-Prosperity-Years". We will be changed but not in the way we anticipated when 2008 began. We will still have "Hope" for Americans take Hope add it to Work and Responsibility to create a better future for all of us. This is what we do. This is who we are. No people or nation does it better.
I wish our New President the best. His success (or failure) is deeply tied to that of the entire nation. His Party affiliates on The Hill may need to be reminded early that he is The President, separate but equal to all of them combined.
How's your Monday going-? Obviously, I'm ranting away trying to make sense of my newspapers and emails...
Tuesday, November 4, 2008
Election Day
"There is much to be said for not saying much."
-Frank Tyger
Today is the day we all get to vote. After almost two years we have hashed the candidates pretty finely. We have endured leaks, gaffs, spin-sound bites, spin and more spin.
By the end of the week we may know who will be our Fearless Leader. I say "end of the week" because I suspect there is enough voter fraud to slow things down and cloud the outcome. I hope I am wrong. I feel I am right.
I think that either candidate will only serve one term. McCain due to age. Obama due to his difficulty in -ACTUALLY- having to accomplish something. Pelosi and Reid will ram thru lots of stuff without consideration of the other 49% of Americans. When these actions fail, they will blame Obama and walk away like the Siamese cats leaving the fish bowl in "Lady and the Tramp"... The cats song applies to them as well.
In any event, we will still be one America. We will have tens of thousands who will do what they believe best for America at the sacrifice of their own comfort. We will also have a few thousand who will do what ever they can to advance their own comfort and ease. They will be assured that "someone else" will clean up the mess... They have lived this way all their life.
I am glad that the contest too so long. It winnowed out some very likely looking candidates who seemed to have the whole game in a suitcase and were waiting for the limo to sweep them to their coronation.
We will have a chance to vote our concerns, pleasures and outrage in two years. 435 Members of Congress and 33 Senators will be up for re-election...
The wisdom of our Founding Fathers is amazing. Their understanding of human weakness and passions was clear and unfazed by any fantasies of human nobility. We are not angels with a few frail and weak among us. We are cowards, lusting for more and willing to do any act for our own success...with a very few angels in our midst.
Tonight, when its all over. Hoist a tall glass of something strong and propose a toast to "America, Long may our banner waive. Long may our people be better than our politicians"... I will... The American people are better than any that we have every elected... We may deserve better. But we keep voting our wishes and hopes instead of our practical demands.
-Frank Tyger
Today is the day we all get to vote. After almost two years we have hashed the candidates pretty finely. We have endured leaks, gaffs, spin-sound bites, spin and more spin.
By the end of the week we may know who will be our Fearless Leader. I say "end of the week" because I suspect there is enough voter fraud to slow things down and cloud the outcome. I hope I am wrong. I feel I am right.
I think that either candidate will only serve one term. McCain due to age. Obama due to his difficulty in -ACTUALLY- having to accomplish something. Pelosi and Reid will ram thru lots of stuff without consideration of the other 49% of Americans. When these actions fail, they will blame Obama and walk away like the Siamese cats leaving the fish bowl in "Lady and the Tramp"... The cats song applies to them as well.
In any event, we will still be one America. We will have tens of thousands who will do what they believe best for America at the sacrifice of their own comfort. We will also have a few thousand who will do what ever they can to advance their own comfort and ease. They will be assured that "someone else" will clean up the mess... They have lived this way all their life.
I am glad that the contest too so long. It winnowed out some very likely looking candidates who seemed to have the whole game in a suitcase and were waiting for the limo to sweep them to their coronation.
We will have a chance to vote our concerns, pleasures and outrage in two years. 435 Members of Congress and 33 Senators will be up for re-election...
The wisdom of our Founding Fathers is amazing. Their understanding of human weakness and passions was clear and unfazed by any fantasies of human nobility. We are not angels with a few frail and weak among us. We are cowards, lusting for more and willing to do any act for our own success...with a very few angels in our midst.
Tonight, when its all over. Hoist a tall glass of something strong and propose a toast to "America, Long may our banner waive. Long may our people be better than our politicians"... I will... The American people are better than any that we have every elected... We may deserve better. But we keep voting our wishes and hopes instead of our practical demands.
Saturday, September 27, 2008
Debate
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-!
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-!
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-?
Monday, June 2, 2008
The War in Iraq- Thoughts
The drumbeats are sounding. Even the Washington Post has an editorial saying "We're winning". They are urging Obama to change his Iraq strategy now that he has cinched the nomination. He can dump the Ultra-Left and move to the Center where most of America lives. They conclude with
Jeff Lukens at American Thinker has some thoughts on "Was it worth it?"
It's nice that some people remember the poison gas. The Iranians do. The Kurds do. Saddams generals do. We took the treat seriously.
What should the President of the United States do when 1) we've been attacked by terrorists 2) a state sponsor of terrorism, with Weapons of Mass destruction and willingness to use them, continues to flaunt UN sanctions? 3) When the state sponsor of terrorism corrupts the UN and most of European bureaucracy with his "Oil-For-Food Program" bribes? 4) When we suspect another attack is imminent? Should he wait for another attack-?
The movies are the only places where the Good Guys let the Bad Guys draw first. The Old West Bad Guys were shot in the back, usually with shotguns wielded by farmers. Letting the bad guy fire first gets a lot of innocent bystander type good guys killed.
The question none of the anti-war Bush haters will answer: How many dead Americans before we act-? I've never been told the acceptable level of American dead we should suffer before we commit our forces.
The thought of terrorists with WMDs is scary. However, the worse thought is that we have no way to retaliate. Unlike the Cold War, we can have no Mutual Assured Destruction balance. If we lost a city, who do we nuke-? Do we really nuke the Mountains of Pakistan-? Tehran-? Damascus-? How do we respond to a WMD attack-?
We have learned to do counter-insurgency fairly well. Actually, we have re-learned it. We first learned it in Nicaragua, then forgot it. We were trying to re-learn it in Vietnam, but ran out of citizen patience. We were able to re-learn it and be effective in Iraq. Now, our Pentagon Chiefs want more troops trained for a battle in Europe or Asia against uniformed troops. They want bigger weapons systems, more toys... we may soon go back to sleep and have to re-learn how to do counter-insurgency. Generals need flagpoles and stuff to park beneath it. They need troops to stand in formation around em. A peacetime military needs to justify it's existence by asking Congress for more flagpoles and everything that surrounds it. Otherwise, you don't need all those generals.
From the terrorist, narco-trafficante, narco-terrorist, rogue state perspective; insurgency works. It's cheap, scalable, effective . Forces need little training or discipline so no bases. No uniforms, just used weapons. New recruits can be rounded up either by the press-gangs or internet trolling. They will not likely face trained and disciplined troops who will have the will to fight a lengthy counter-insurgency... Russia has not been successful in Chechnya. Just tramped them down for now. China the same with Tibet.
Was Iraq it worth it-?
I think so. We would have lost more civilians in a WMD attack by terrorists. We would have seen the UN and most of Europe corrupted by seven more years of Oil-for-Food bribes. We may have seen more radicals in control of more oil producing countries in the Middle East. (Would we really have invaded Saudi Arabia if al Quaida had overthrown the govt-? Mecca and Medina off limits to pursuit or attack-? )
It's easy to rant and scream rabid vitriol... it's harder to explain where someone went wrong and why the path not taken was better... Until we invaded, everyone thought Saddam had WMDs and would not hesitate to use them... Should we live with that kind of threat-?
When Mr. Obama floated his strategy for Iraq last year, the United States appeared doomed to defeat. Now he needs a plan for success.
Jeff Lukens at American Thinker has some thoughts on "Was it worth it?"
No one likes to go to war, but even an elective war is sometimes necessary. With all the consternation these past years, President Bush may finally be able to say "Mission Accomplished" to what he originally set out to do.
This we know, Saddam had Weapons of Mass Destruction. He even gassed his own Kurd and Shiite populations in the 1980s. What happened to those chemical weapons? Who knows? Whether they buried them in the ground somewhere or trucked off to Syria, we had every reason to believe he had them.
It's nice that some people remember the poison gas. The Iranians do. The Kurds do. Saddams generals do. We took the treat seriously.
What should the President of the United States do when 1) we've been attacked by terrorists 2) a state sponsor of terrorism, with Weapons of Mass destruction and willingness to use them, continues to flaunt UN sanctions? 3) When the state sponsor of terrorism corrupts the UN and most of European bureaucracy with his "Oil-For-Food Program" bribes? 4) When we suspect another attack is imminent? Should he wait for another attack-?
The movies are the only places where the Good Guys let the Bad Guys draw first. The Old West Bad Guys were shot in the back, usually with shotguns wielded by farmers. Letting the bad guy fire first gets a lot of innocent bystander type good guys killed.
The question none of the anti-war Bush haters will answer: How many dead Americans before we act-? I've never been told the acceptable level of American dead we should suffer before we commit our forces.
The thought of terrorists with WMDs is scary. However, the worse thought is that we have no way to retaliate. Unlike the Cold War, we can have no Mutual Assured Destruction balance. If we lost a city, who do we nuke-? Do we really nuke the Mountains of Pakistan-? Tehran-? Damascus-? How do we respond to a WMD attack-?
We have learned to do counter-insurgency fairly well. Actually, we have re-learned it. We first learned it in Nicaragua, then forgot it. We were trying to re-learn it in Vietnam, but ran out of citizen patience. We were able to re-learn it and be effective in Iraq. Now, our Pentagon Chiefs want more troops trained for a battle in Europe or Asia against uniformed troops. They want bigger weapons systems, more toys... we may soon go back to sleep and have to re-learn how to do counter-insurgency. Generals need flagpoles and stuff to park beneath it. They need troops to stand in formation around em. A peacetime military needs to justify it's existence by asking Congress for more flagpoles and everything that surrounds it. Otherwise, you don't need all those generals.
From the terrorist, narco-trafficante, narco-terrorist, rogue state perspective; insurgency works. It's cheap, scalable, effective . Forces need little training or discipline so no bases. No uniforms, just used weapons. New recruits can be rounded up either by the press-gangs or internet trolling. They will not likely face trained and disciplined troops who will have the will to fight a lengthy counter-insurgency... Russia has not been successful in Chechnya. Just tramped them down for now. China the same with Tibet.
Was Iraq it worth it-?
I think so. We would have lost more civilians in a WMD attack by terrorists. We would have seen the UN and most of Europe corrupted by seven more years of Oil-for-Food bribes. We may have seen more radicals in control of more oil producing countries in the Middle East. (Would we really have invaded Saudi Arabia if al Quaida had overthrown the govt-? Mecca and Medina off limits to pursuit or attack-? )
It's easy to rant and scream rabid vitriol... it's harder to explain where someone went wrong and why the path not taken was better... Until we invaded, everyone thought Saddam had WMDs and would not hesitate to use them... Should we live with that kind of threat-?
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