Risk Assessment

The purpose of good management and good investing is to find the most realistic/likely scenario out of all the rosy and frightening scenarios. As the risk of loss goes up the rate of return must also go up. We expect more for the amount of risk we are willing to face. Natural and prudent in almost all situations. The problem these days is that it is really hard to accurately see what the future holds 12-18-36 months from now. Is it truly as rosy as the Administration says-? If so, why do they "fudge" the numbers-? I say "fudge" because it seems someone is selecting the data that will support their political needs.
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From Yahoo News/Reuters comes the report that "Nervous Investors Demand Bigger Returns".

"The world looks a lot more dangerous than it did only a few months ago and signs are that U.S. stock investors are starting to demand more for the added risk.

With important manufacturing and jobs data due next week, it could start to get even riskier.

That means nervous investors are likely to keep a lid on equity prices this year as they grapple with slowing global growth and a host of geopolitical risks from the Arab Spring to debt defaults in the euro zone."

Are we facing a period of higher economic and military risks. Will our political leaders/masters actually do something responsible and adult-? will we get words and spin or action-?

I have little faith in those sheep who claim to be our leaders but act like masters. Deeds count for more than words. Washington and our politicians generate words by the metric ton. Yet, even they do not know for what they are voting. They know little and careless about the effects of their pounds of verbiage. If it has a good sounding title, then what devilment is inside is fine. Their only concern is that no angry responses come back to them, specifically. Words are easy to hide behind. What have they done-? The Democrats haven't offered any budget proposals for over two years. Why-? Do they lack ideas or fear the reality that comes from standing for something-?

A question I have not found anyone able to answer; " We have borrowed and spent over one trillion dollars in something called stimulus. Have we received as much national economic good as if we had chosen one million citizens at random and given them one million dollars, tax-free-?"

I doubt that most people can tell you that a trillion is one million, millions. That number is simply too large for most of us to comprehend. We are running a debt of almost one million, five hundred thousand millions at present. We are strapped. If we have a national disaster we will be hard pressed to respond.

The usual answers are to raise taxes. But most often our sheepish leaders sell us a tax increase as applying only to the rich. What they do not tell us is that there are not enough rich people to pay for the mess we're in.

Their forecasts imply that a tax increase will bring no change in behavior on the part of those feeling the brunt. we all now that if our taxes go up, much like the cost of food and transportation, we have less to support the lifestyle. It does not take a leap of genius to realize that those who earn less also pay less. The rich own things. Our tax structure is based on income. Their income can be adjusted to earn less with much less pain than the poor or middle classes. As a past company owner I know that if we needed new equipment that cost would come from my income. Same with new facilities, repairs, upgrades, and increased wages. The owner gets paid last. Raise my taxes and I spend more on my company. I doubt that I am the only one who would make that choice.

The middle class has no such option. They are stuck with what they earn. If the company can't pay more then change jobs. But with this current high level of unemployment there are easily a couple of hundred people who will step up for that "low" paying job... So in reality, any tax increase is going to hit the middle class hardest. Our leaders cannot understand that -or- they think we can't. Either way, we're being lied to.

If we raise taxes and they hit the middle class will they demand higher wages or buy fewer consumer goods or simply hunker down and wait for this cycle to end-? My guess is a bit of all. Raising wages would work if customers would pay a higher price. If they refuse to buy the company goes under. A bankrupt company gets no praise for raising wages and paying more in taxes...

How does a country go bankrupt-? When we have no more credit and have refused again and again to cut our expenses what happens-? When a country spends itself into insolvency-what happens-? We don't know. It hasn't happened to the U.S. before. smaller countries have been rescued and placed on strict fiscal austerity budget. Do we turn over our country to the IMF and World Bank-?

So, yes. These are perilous times. Things must change and change quickly. will our "leaders" actually lead-? They claim to be Leaders every two years. Yet, now, when we really need some leadership we seem to be lacking.

Always Surprised-?

The headline says "Pro-Obama media always shocked by bad economic news"

The article then goes on to explain, expand and support the headline. What it also explains is who is surprised and why.

Michael Barone (author of article) is very good with numbers. He is too much a gentleman(?) or has too much to lose by saying what most of us would say...

"We're being lied to." Like children who will be frightened if we know the truth.

Unemployment figures are -only- the numbers of people drawing unemployment checks. It does not include the numbers of people who have exhausted they benefits, who never had them (contractors, consultants, sole proprietors, etc) or those who have given up looking. Some wise people estimate that the true number of those without a job and who wish they had one is double the official figures. Why not simply count the numbers reporting income pre-depression and subtract the numbers of people reporting today-? They do not include everyone who has graduated from college, high school, graduate school or released from active military service... -Why-? These are surely people who are unemployed... But they are ignored in official numbers.

Inflation numbers are rigged. They do not include the cost of food or transportation. The most obtuse and dense shopper knows thhttp://www.blogger.com/img/blank.gifat food prices are going up and not coming down. Food makers are doing two things to hide the fact. Some use smaller packaging. Some use "bonus" extra sizing and some are doing both... The fact is that food prices are up. Gasoline and diesel costs more. That means it costs more to get to/from work, go shopping, go on vacation, go anywhere. It also means that the average family is spending $168 dollars per month more on fuel. Higher prices dry-up demand for consumer impulse and non-essential products.

Companies, big and small, are sitting on their cash. The WSJ's Intelligent Investor column on Saturday ran an article asking "What Will It Take for Companies to Unlock Their Cash Hoards? "

He says "There is a cash crisis in corporate America—although it comes not from a shortage of the stuff, but from a surplus.

In the first quarter, the five companies with the greatest cash hoards—Micrhttp://www.blogger.com/img/blank.gifosoft, Cisco Systems, Google, Apple and Johnson & Johnson—added $15 billion in cash and marketable securities to their balance sheets. Microsoft alone packed away roughly $9 billion, or $100 million a day. All told, the companies in the Standard & Poor's 500-stock index are sitting on more than $960 billion in cash, a record.

To be sure, at many companies the cash piling up is at global operations that generate "undistributed foreign earnings" that can't be brought home, under U.S. law, without incurring taxes of up to 35%. But hundreds of billions in cash remain available—and idle."

What the author fails to report/recognize is that 1) Bank lending criteria has changed. 2) SEC regulations have changed 3) The affects of Obama Regulations and legal judgements are unknown 4) If the cash is paid out and a disaster or opportunity arises, the company will have a hard time replacing it. Even re-tooling to remain compliant and up-to-date will require cash, from where will it come-?

The biggest culprit is the affect of unknown/unknowable regulations. The new financial act creates new agencies that write new regulations. It creates a czar who cannot be fired by the President. Who Congress cannot control and cannot even de-fund. Who is unaccountable to the Chairman of the Federal Reserve. And finally, who can tap the public Treasury for unlimited funds at any time, for any reason. Sarbanes-Oxley has killed the IPO market without touching -any- of the ills that led Congress to act. The new financial act will do nothing to regulate or control the root cause of this depression. FASB is still thinking of another mark-to-market rule. Fannie and Freddie are still alive and draining the Treasury of unknown future amounts. They are also still not being addressed as the problems they are. The fools who created them, ran the and enjoyed the perks/benefits of their irresponsible behavior have not been chastised or punished. Probably never will either. Crimes and moral turpitude at high levels and among the political class are never punished...

As a small/mid-sized businessman, -at this moment-. I am glad I have no employees, no business involvement, no exposure to the unknowns and the scary knowns, implied or implicit, or possible future unknowns... I have no payroll or employees for the first time in 40 years. It is a strange feeling. I never planned to retire this way. I don't like it. Being idle is uncomfortable.

I keep looking for opportunities. I see some. However, before -anyone- makes a commitment to invest time, money or reputation; they want to see a reasonable chance of success 3-5-10 years down the road. At this moment, I cannot see any opportunities that justify risk. The future is frightening. As entrepreneurs and managers our jobs are -not- to run away from risk. We must mitigate risk vs reward and choose the path(s) that best provide a shot at producing a return that justifies the expense. Breaking even/staying alive is good, but it's not enough.


The future will change. How an in what direction is unknown, by me, at this time. I cannot make a reasonable forecast and discuss it with others... Are the changes permanent-?

What affect will regulations have on the cost of supplies, transportation, funding, employees, taxes-? If I know the costs, I can compute the necessary price. Is the public ready to pay -that- amount so that my products/services will provide the return I need to repay lenders, trade creditors, investors for what they have put at risk-? will my competitors allow the price in their marketplace-? How will they respond-? Yes, unlike the governments, colleges, NGO's and other parasites; private enterprise has competition. We must serve the customer a good value for a fair price. We do not re-distribute the profits from the efforts of others. I am a bit blinded by the current economic mess.

I am open to suggestions.

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-?

Women, Politics, Real Issues

"Thinking is the desire to gain reality by means of ideas."

José Ortega y Gasset

A sentiment I can champion...besides it's a pleasant way to spend the weekend.

In S.F. visit, Obama takes aim at Clinton's strength: women's votes

Sen. Barack Obama's appearance in San Francisco today is designed to attack a key strength of his prime rival for the Democratic presidential nomination: former first lady and current New York Sen. Hillary Rodham Clinton's support from women of all backgrounds.

Hundreds of women are expected to pay anywhere from $250 to $2,300 to meet Obama at a lunch at the Bill Graham Civic Auditorium, and he'll speak at a $25-a-head event after the lunch.

On Saturday night, the Illinois senator's outreach to female voters gets another boost: Talk show host Oprah Winfrey, America's most successful female entrepreneur and opinion-maker, is the host for an A-list fundraiser for the senator at her estate in Montecito (Santa Barbara County).

We all have a sense of pride in the fact that a woman is being taken seriously," Harris said. "Hillary is obviously appealing to anybody who cares about having have equal opportunity for women, and all of us applaud her candidacy."

But, she said, "support for Barack isn't denying that or exclusive of that fact."

Harris said Obama has shown "a proven commitment to women and women's issues. ... He's pro-choice, pro-public education and pro-immigrant." (Oh Really-? ed.)

Mack now heads Obama's grassroots Sacramento effort - spending her weekends canvassing, calling voters and raising money for her candidate.

"As much as I would like to have a woman president, I want to have the right woman," she said.

Stephanie Chan, 20, a junior at UC Berkeley, was spurred by Obama's candidacy to become involved for the first time in a presidential campaign.

"I've heard things like, 'Hillary is a woman, you should be in her camp,' " Chan said. "She's an amazing woman and a great candidate, but for me, Obama is the candidate who brings it all together." (oh-oh... Scroll down to follow -ed.)

Chick, the Los Angeles controller, said many women are "tired of hearing about women's issues - because I believe our issues are human issues, universal issues."

"Half of the kids we bear are boys," she said. "Women's issues are everybody's issues - and I believe that Barack, as a candidate, speaks to all of these issues equally as well as Hillary."

Read the whole thing: Follow the links and read the story, then the comments. The SF Chronicle blog 2Cents has some more SF Bay Area views. There is something happening here. It looks like a ground swell or earthquake that may break apart the Hillary Foundations and assumptions of her slow walk to a coronation. If this most Liberal Bastion can look around and if Oprah can shift some of the quieter Hollywood types into action... We may have a horse race. That means we'll see more of Hubba-Hubba-Bubba. We'll get to watch her flail about as he makes her look small and very un-Presidential. Presidential-level experience means running your own campaign




Kimberly Strassel has some answers from the other side of the aisle

What Women Want
How the GOP can woo the ladies.
(I liked Republicans better in blue. But since some TV twit declared red states Republican... I'll post some extensive points from this editorial. It's good. It's smart. It resonates with the women in my household. -ed.)

Expect to hear a lot about lady voters over the next few months, though most of it from Democrats. Women make up 60% of the left's primary electorate, and the front-runners are already going to the mat for their vote. It's why Ms. Clinton has six full-time staffers for women's outreach; why Mr. Obama sports a women's "policy committee"; and why Bill Richardson recently told a cheering mob that "women are better workers than men" (you go, Bill!).

The Democrats' own views of what counts for "women's issues" are stuck back in the disco days, about the time Ms. Clinton came of political age. Under the title "A Champion for Women," the New York senator's Web site promises the usual tired litany of "equal pay" and a "woman's right to choose." Mr. Richardson pitches a new government handout for women on "family leave" and waxes nostalgic for the Equal Rights Amendment. Give these Boomers some bell bottoms and "The Female Eunuch," and they'd feel right at home. Polls show Ms. Clinton today gets her best female support from women her age and up.

The rest of the female population has migrated into 2007. Undoubtedly quite a few do care about abortion rights and the Violence Against Women Act. But for the 60% of women who today both scramble after a child and hold a job, these culture-war touchpoints aren't their top voting priority. Their biggest concerns, not surprisingly, hew closely to those of their male counterparts: the war in Iraq, health care, the economy. But following close behind are issues that are more unique to working women and mothers. Therein rests the GOP opportunity.

Ms. Clinton likes to bang on about "inequality" in pay. The smart conservative would explain to a female audience that there indeed is inequality, and that the situation is grave. Only the bad guy isn't the male boss; it's the progressive tax code.

• Most married women are second-earners. That means their income is added to that of their husband's, and thus taxed at his highest marginal rate. So the married woman working as a secretary keeps less of her paycheck than the single woman who does the exact same job. This is the ultimate in "inequality," yet Democrats constantly promote the very tax code that punishes married working women. In some cases, the tax burdens and child-care expenses for second-earners are so burdensome they can't afford a career. But when was the last time a Republican pointed out that Ms. Clinton was helping to keep ladies in the kitchen?
  
• Should President Bush's tax cuts expire, tens of thousands of middle-class women will see more of their paychecks disappear into the maw of their husband's higher bracket. A really brave candidate would go so far as to promise eliminating this tax bias altogether. Under a flat tax, second-earner women would pay the same rate as unmarried women and the guy down the hall.
• Ask almost any working woman what the toughest part of her life is, and she'll say the complications of scheduling both work and family life. What makes that task so tough is a dusty piece of legislation called the 1938 Fair Labor Standards Act, which requires that hourly workers who put in more than 40 hours a week get overtime. Some women like overtime. But in a 1995 poll, an extraordinary 81% said they'd prefer compensatory time off. Put another way, many women would like to pack 45 hours into the first four days of work, then knock off early on Friday
  
• The mod term for this is "flex time" and Democrats pay it lip service. But what the left won't mention--and Republicans have failed to mention--is that Democrats are the obstacle to changing the overtime law. Organized labor likes the 40-hour-week law, and union leaders prefer to be the ones to arrange any flex-time agreements on behalf of their members. So in 1997, when Republican Sen. John Ashcroft put forward legislation to allow flexible scheduling in the private workforce, it was Democrats, at the beck of unions, who killed it
• The majority of health-care decisions are made by women, yet neither Rudy Giuliani nor Mitt Romney has explained how their innovative proposals to put individuals back in charge of care would help women in particular. No candidate has explained that only through private Social Security accounts will women ever see the full fruits of their payroll taxes.

Read the whole editorial. I like smart well written articles. This one is very good-! It's also free.



Have a good weekend-! Take the family somewhere fun.

Bush Healthcare

I was surprised to hear the President's healthcare proposals during the State of the Union speech. I liked the ideas. I have paid for my own health insurance with after tax dollars for most of my life.

I have often felt frustrated at the inequity between what I pay and what a company pays and provides at no charge to their employees, This free insurance has generated a sense of entitlement among the recipients. They say "Yeah but, What have you done for me lately" Insurance costs have risen as there is no connection between what is received and the costs paid to the medical providers.

We all watch what is happening with our auto industry. we see that large companies and their suppliers may soon be forced out of business or into bankruptcy due to health and pension obligations. Bankruptcy will shred the safety net for millions of retired and soon-to-be retired workers. The anger and resentment will spill over into the political scene with shallow demagogue pols promising huge socialist entitlements...

Bush's proposal to level the playing field goes a long way to resolve many of the issues. The market works. In every product or service we buy we can see the effect of competition and innovation on prices that we consumers pay. The long term benefits would allow insurance companies, pharmaceutical companies, technologies to innovate and find new ways to lower costs while improving efficiency and customer satisfaction. We consumers are not stupid. We just get treated that way by government monopolies and those who would be our caretakers.

Unfortunately, his ideas were declared Dead-On-Arrival by the incoming Democrat majority. Knowing their penchant for warehousing and restricting human ingenuity while rewarding a few and entrenching themselves, I was not surprised.

What was a surprise was the recent report by the Congressional Joint Committee on Taxation. This group has used static scoring to make assumptions that Democrats have used to murder many innovative ideas and proposals on tax legislation. On Monday March 19, the WSJ ran an editorial explaining the change in assumptions.

President Bush proposed to restructure the $250 billion of annual federal tax subsidies for employer-sponsored health insurance by treating it as taxable income and then capping the tax deduction at $15,000 a year per family. The savings would be used to provide new tax incentives for uninsured low-income workers to purchase private insurance.

the JCT, which "scores" tax policy changes, has breathed new life into the Bush plan by estimating that it would actually save the federal government $333 billion over the next 10 years. (Its first estimate was $526 billion.) This means that the Bush proposal would not only reduce the inequitable tax treatment of health care and the number of uninsured, but it would do so while saving the government lots of money.

how could Joint Tax and the Bush Treasury, which had estimated that the Bush plan would be revenue neutral, come up with "cost" estimates a half-trillion dollars apart? The answer comes back to the age-old complaint with Joint Tax: Its bean counters fail to assume any change in behavior from tax changes. So Joint Tax believes that the Bush plan will have zero impact on the rate of health care inflation over time.

Mr. Bush has an attractive, workable, and now -- as certified, by the Democratic Joint Tax Committee -- affordable health care reform. If Democrats lack the courage to debate it, then the GOP Presidential candidates ought to pick it up and run with it in 2008.

This is too good an idea to succeed in Washington. It will need the support of all of us self employed, small business employed, and doing-without people. It will need the mass of employed workers to realize that this will eliminate the COBRA issues that come when they lose a job. The employed workers will need to see that it is in their own long term self interest to take control of their future.

We need to spread the word.... The WSJ has done a great job of discovering, expanding and expounding the news. It's up to us, average working folks to talk to each other. we need to get this before politicians who will act on -OUR BEHALF-

It's gonna be a long 19 months and change until we get to vote. Let's look early and spread the news about the politicians who will work for us.... No more bought-and-paid-for pols-!