The push is on for voters to approve several budget initiatives in the State of California to help dig the state out of a self induced budget black hole. Anyone watching TV in the area is blessed to see commercials supporting these initiatives sponsered by the Firefighter, Police and Teachers Unions working in conjunction.
Being registered to permanently recieve an absentee ballot I received my ballot and a bunch of booklets explaining these initiatives to me. I sat down and read through the first few of them and read what the supposed effects and costs would be. Once more the politicians are simply putting a band-aid over a severed artery and failing to deal with the real problems.
Any initiative written by the politicians and supported by the public unions that is supposed to 'control' the politicians is garbage. May these initiatives go down in flames forcing the state to face up to the issues and pay the true cost of all that it has been doing.
Monday, May 11, 2009
Tuesday, March 31, 2009
Unions
I have been thinking about Unions in America again. A lot of publicity has been given to the union drive for new regulations making it easier to unionize American companies, I think this is the opposite way that our regulations should be going.
I still believe that Unions have a place in capitalism and the US Economy but I feel that we have given them too much power as things currently stand. Their exemption from the anti-trust regulations needs to be tempered. It should be illegal for a union to represent workers across firms! If one firm is paying more the workers will tend to gravitate in that direction irregardless forcing greater costs on the 'cheap' firm and bringing them into line.
The auto industry is the shining example of why I feel this way. When the existing regulations were first implemented I don't question their value and legitimacy but I think the time has come for a change. One Union should not contain all of the auto workers in America and have the power to play one companies employees off against another companies. The UAW was well known for picking a target and forcing them into submission by striking the target and letting the remaining US firms operate to force the target to submit and then once they did using this as a cudgel to beat the other companies into falling in line. At the same time, it was illegal for the auto companies to band together and resist the union pressure being applied.
Unions should be allowed to represent the workers from one company and one company only. Any cooperation across unions should be treated as cooperation across firms and deemed illegal.
At the same time I feel that out marketplace needs to place greater emphasis upon its workers, a consideration that has not been totally forgotten but is easily placed behind the interest of shareholders, especially institutional shareholders demanding maximum corporate profits. Karl Marx will probably smile at this suggestion but I feel that companies should be required to contribute a minimum percentage of their yearly profits to a bonus pool for their employees. Guaranteed compensation is important but so is a strong company that can weather downturns as well as profit during growth periods. Penalties can be applied to firms in the form of increased tax rates on profits if a minimum percentage of profits is not awarded to the firms employees each year. This requirement should be made into law and not require the impetus of a union to 'earn' it for the employees. General language should be included preventing wily operators from outsourcing everything and then claiming there are no employees, janitors are as deserving as everyone else.
I further believe that many American companies have lost the recognition that they have a significant impact upon their communities. Deductions for charitable donations should be deductible at a shifting scale based upon the percentage of profits contributed to communities and charitable causes, the greater the percentage the greater the deduction. For example, a firm that donates 1% of profits to charity might get to deduct 20% of this from their reportable profits while one that donates 10% can deduct it in full. For balance the percentage contributed should likely be a rolling average over a period of years or somehow normalized so that firms are incentivized to maintain contributions during down periods to smooth out the effects to recipients.
Yes, I am a registered Republican but I have always considered myself to lean to the left within the Republican party and I feel that a lot of Americans and perhaps other nationalities would agree with these views. This thought is a fairly new concept to me although it has come about as the result of considerable thought on the subject so I can't spell out the specific details and promise not to adjust my views as new facts come to my attention.
Would the politicians in America, or anywhere, have the fortitude to stand behind these ideas? We shall see. There needs to be a balance between corporate interests, employees and society. Government was designed to provide the rules and regulations to maintain this balance, lets hope it can do so now.
President Obama's stance on the US Auto Industry is laudable although I don't feel he really had any choice. A lot of political goodwill is being utilized to take the position that he and his team have selected. I wish them the best of luck and hope they don't attempt to compensate Unions by bowing to their demands for more power when it was their existing power that forced the President to take the stand he has.
May the debate rage!
I still believe that Unions have a place in capitalism and the US Economy but I feel that we have given them too much power as things currently stand. Their exemption from the anti-trust regulations needs to be tempered. It should be illegal for a union to represent workers across firms! If one firm is paying more the workers will tend to gravitate in that direction irregardless forcing greater costs on the 'cheap' firm and bringing them into line.
The auto industry is the shining example of why I feel this way. When the existing regulations were first implemented I don't question their value and legitimacy but I think the time has come for a change. One Union should not contain all of the auto workers in America and have the power to play one companies employees off against another companies. The UAW was well known for picking a target and forcing them into submission by striking the target and letting the remaining US firms operate to force the target to submit and then once they did using this as a cudgel to beat the other companies into falling in line. At the same time, it was illegal for the auto companies to band together and resist the union pressure being applied.
Unions should be allowed to represent the workers from one company and one company only. Any cooperation across unions should be treated as cooperation across firms and deemed illegal.
At the same time I feel that out marketplace needs to place greater emphasis upon its workers, a consideration that has not been totally forgotten but is easily placed behind the interest of shareholders, especially institutional shareholders demanding maximum corporate profits. Karl Marx will probably smile at this suggestion but I feel that companies should be required to contribute a minimum percentage of their yearly profits to a bonus pool for their employees. Guaranteed compensation is important but so is a strong company that can weather downturns as well as profit during growth periods. Penalties can be applied to firms in the form of increased tax rates on profits if a minimum percentage of profits is not awarded to the firms employees each year. This requirement should be made into law and not require the impetus of a union to 'earn' it for the employees. General language should be included preventing wily operators from outsourcing everything and then claiming there are no employees, janitors are as deserving as everyone else.
I further believe that many American companies have lost the recognition that they have a significant impact upon their communities. Deductions for charitable donations should be deductible at a shifting scale based upon the percentage of profits contributed to communities and charitable causes, the greater the percentage the greater the deduction. For example, a firm that donates 1% of profits to charity might get to deduct 20% of this from their reportable profits while one that donates 10% can deduct it in full. For balance the percentage contributed should likely be a rolling average over a period of years or somehow normalized so that firms are incentivized to maintain contributions during down periods to smooth out the effects to recipients.
Yes, I am a registered Republican but I have always considered myself to lean to the left within the Republican party and I feel that a lot of Americans and perhaps other nationalities would agree with these views. This thought is a fairly new concept to me although it has come about as the result of considerable thought on the subject so I can't spell out the specific details and promise not to adjust my views as new facts come to my attention.
Would the politicians in America, or anywhere, have the fortitude to stand behind these ideas? We shall see. There needs to be a balance between corporate interests, employees and society. Government was designed to provide the rules and regulations to maintain this balance, lets hope it can do so now.
President Obama's stance on the US Auto Industry is laudable although I don't feel he really had any choice. A lot of political goodwill is being utilized to take the position that he and his team have selected. I wish them the best of luck and hope they don't attempt to compensate Unions by bowing to their demands for more power when it was their existing power that forced the President to take the stand he has.
May the debate rage!
AIG Rescue
Since the first infusion of cash from the federal government into AIG it has been stated that AIG was 'too big to fail' and that its failure could have led to the collapse of the entire US Financial System. The release of data on AIG Counterparties who have received cash and collateral drove this point home as no government argument could.
Virtually every firm listed by AIG has received significant capital infusions from a government and/or private investors. Solomon Brothers received around $12 billion alone, if AIG had been allowed to collapse the entire investment by Warren Buffett plus a few extra billion would have been wiped out. Could Solomon Brothers have withstood such a dramatic hit? This would likely have been even worse as open hedge contracts for which they have not been fully paid or for which they are offsetting other risks they hold would have instantly lapsed and additional write downs would have been required. I am only naming Solomon as they topped the list of receipients this story plays out again and again down AIG's list.
What is highlighted by this fiasco is that a particular industry participant could insure/hedge away their risk and work to contain the exposure to a particular counterparty but they can't control other market participants. It is very likely that Solomon maintained hedges with other firms then AIG on the same products and in the same direction to limit their counterparty exposure. These other firms may have then gone to AIG independently and hedged their exposure so that Solomon's true exposure to AIG was much greater then their internal systems could track due to a lack of information.
Regulatory reform that requires market participants to publish their exposure to Swap contracts is welcome as a means to minimize this market risk. Sure lots of hedge funds will be upset as they try to hard their investment strategies from competitors but the greater good must be considered.
One needs to remember that hedging doesn't reduce absolute risk, it simply shifts it to another party. Amazingly AIG seems to have taken on a significant portion of the risk that existed within the mortgage market and no one was aware or they ignored it and hoped for the best.
Virtually every firm listed by AIG has received significant capital infusions from a government and/or private investors. Solomon Brothers received around $12 billion alone, if AIG had been allowed to collapse the entire investment by Warren Buffett plus a few extra billion would have been wiped out. Could Solomon Brothers have withstood such a dramatic hit? This would likely have been even worse as open hedge contracts for which they have not been fully paid or for which they are offsetting other risks they hold would have instantly lapsed and additional write downs would have been required. I am only naming Solomon as they topped the list of receipients this story plays out again and again down AIG's list.
What is highlighted by this fiasco is that a particular industry participant could insure/hedge away their risk and work to contain the exposure to a particular counterparty but they can't control other market participants. It is very likely that Solomon maintained hedges with other firms then AIG on the same products and in the same direction to limit their counterparty exposure. These other firms may have then gone to AIG independently and hedged their exposure so that Solomon's true exposure to AIG was much greater then their internal systems could track due to a lack of information.
Regulatory reform that requires market participants to publish their exposure to Swap contracts is welcome as a means to minimize this market risk. Sure lots of hedge funds will be upset as they try to hard their investment strategies from competitors but the greater good must be considered.
One needs to remember that hedging doesn't reduce absolute risk, it simply shifts it to another party. Amazingly AIG seems to have taken on a significant portion of the risk that existed within the mortgage market and no one was aware or they ignored it and hoped for the best.
Investment Management Fees
Mutual Fund Management Fees
Imagine my surprise and great pleasure to read that the Supreme Court is considering a case regarding excessive Mutual Fund Management Fees, see http://bluelobsta.blogspot.com/2005/11/mutual-funds-and-other-ways-to-go.html.
In winding its way to the Supreme Court 2 lower court judges disagreed with one stating the determinant should be what the same manager charges institutional clients while another felt intra-fund comparisons were appropriate. I clearly come down on the side of comparing to other clients within a firm. I feel the management fees charged a mutual fund should be no more then that charged to an institutional investor and most likely lower. Mutual Funds already pay additional fees for the additional services they require such as accounting, auditing, and custody.
Investment Managers are already struggling with lower revenue due to the falling markets so a decision in this case could be catastrophic for some. Perhaps costs will finally become a serious consideration in running an investment management firm.
Tuesday, March 17, 2009
Andrew Cuomo
Yesterday I asked for Barney Frank to be removed and sent home from office as he so richly deserves. His actions are equivalent to those of the management of AIG, Fannie Mae, Freddie Mac and numerous other firms whose heads he called for and generally got.
Today it is Andrew Cuomo. His predecesor, Mr. Spitzer, was as headline grabbing and in your face as Mr. Cuomo but Mr. Spitzer was ahead of the crowd. Mr. Cuomo is johnny come lately, the public is upset about this today so lets start sending subpeonas. His latest missive is unexplainable, subpeonas to AIG over the bonuses? Did he forget that AIG is 80% owned by the US Government so there is nothing he can do that the US can't do better? Where does he even get the authority to send these subpeonas? There is no allegations of wrong doing and bonuses get paid every year to thousands of happy workers, is he going to start asking every company that he can find in the yellow pages?
The US Government is all over the bonuses and Mr. Cuomo's actions simply cost AIG additional funds to comply thus costing you and I, the taxpayer more money.
Thank you Mr. Cuomo and please, New York, send Mr. Cuomo home as well.
Today it is Andrew Cuomo. His predecesor, Mr. Spitzer, was as headline grabbing and in your face as Mr. Cuomo but Mr. Spitzer was ahead of the crowd. Mr. Cuomo is johnny come lately, the public is upset about this today so lets start sending subpeonas. His latest missive is unexplainable, subpeonas to AIG over the bonuses? Did he forget that AIG is 80% owned by the US Government so there is nothing he can do that the US can't do better? Where does he even get the authority to send these subpeonas? There is no allegations of wrong doing and bonuses get paid every year to thousands of happy workers, is he going to start asking every company that he can find in the yellow pages?
The US Government is all over the bonuses and Mr. Cuomo's actions simply cost AIG additional funds to comply thus costing you and I, the taxpayer more money.
Thank you Mr. Cuomo and please, New York, send Mr. Cuomo home as well.
Monday, March 16, 2009
China's Fears on American Debt
Did you happen to notice the headlines over some comments made by China regarding their concern about American Government Debt Levels? I would have missed this one entirely amongst the general angst about our current deficit spending and concern that China might not keep buying our bonds as they have been. That is until President Obama himself felt he had to address the comments directly and essentially immediately. This reaction in itself tells me that something is wrong in Dodge, or America in this case.
When your top banker expresses concern about debt levels and you immediately jump on the comments everyone should stand up and take notice - you are desperate. I am scratching my head wondering why the markets only hiccuped and then moved on. I think China accomplished more then they could have hoped for and have clearly shown their power in the world has risen while America's tanks are running on empty.
America is not weak physically and enjoys a lot of residual goodwill around the globe as economically solid but China just showed it could bring America and the rest of the world to its knees simply by reducing or eliminating its holdings in American Government Debt. Historians will look back and determine that the balance of power has officially shifted.
When your top banker expresses concern about debt levels and you immediately jump on the comments everyone should stand up and take notice - you are desperate. I am scratching my head wondering why the markets only hiccuped and then moved on. I think China accomplished more then they could have hoped for and have clearly shown their power in the world has risen while America's tanks are running on empty.
America is not weak physically and enjoys a lot of residual goodwill around the globe as economically solid but China just showed it could bring America and the rest of the world to its knees simply by reducing or eliminating its holdings in American Government Debt. Historians will look back and determine that the balance of power has officially shifted.
Corporate Cash Balances
Over the weekend I read Jason Zweig's article on Corporate Cash Umbrellas (balances) in the Wall Street Journal several times trying to comprehend his reasoning for the article - I couldn't. Investors, especially activist shareholders as they are called, love to harangue companies and their management for items like carrying too much cash. Their has been a general distrust of companies with large cash hoards with arguments about how they don't know what to do with it so disburse it and let the shareholders decide and so on. A company didn't even have to hold a large cash balance to fall victim to these claims - leverage up, you don't use enough debt in your financial structure.
At this point in time it is easy to see the firms that leveraged up, they all have 'For Sale' or 'Going Out of Business' signs in their doors. The firms with large cash hordes don't have this problem but here Mr. Zweig is saying they have pushed the envelope too far in the opposite direction. Who is he to decide this? Does he know what the firms have planned for the future?
He names 4 companies - Exxon Mobil, Cisco, Apple and Johnson & Johnson. Exxon is involved in a capital intensive industry that is subject to wild swings as we have seen with the price of oil recently. If it were to keep cash levels low what would happen when it needed to invest in new fields or technologies at the same time that oil prices were dropping? I would like to believe that with oil prices at low levels Exxon is scouting out opportunities to acquire additional reserves which will surely rise in value given time.
Cisco is an acquisition engine, they use their cash to acquire competitors and to extend their reach. I grant that $30 or so billion is a lot of money but what if they do something earth shattering like buy a depressed stock such as HP ($70B), IBM ($124B) or more realistically EMC ($21B)?
Apple? Steve Jobs is sick so they need all the backup they can muster - or perhaps that is a great reason to pay it out now before they blow it trying to survive Steve Jobs.
Johnson & Johnson, has Mr. Zweig noticed the mergers in pharmaceuticals lately? Although I will readily admit that J&J doesn't have a great track record in acquisitions.
I find Mr. Zweig's attack on cash hard to swallow. With that said, I fully concur with his advice to actively participate in the Proxy Season. Shareholders have a responsibility to monitor their companies activities in general, cash is simply one aspect of this. American Investors are as apethetic as American Voters, perhaps more so, and both need to take a more active role in the management of thier investments and America.
At this point in time it is easy to see the firms that leveraged up, they all have 'For Sale' or 'Going Out of Business' signs in their doors. The firms with large cash hordes don't have this problem but here Mr. Zweig is saying they have pushed the envelope too far in the opposite direction. Who is he to decide this? Does he know what the firms have planned for the future?
He names 4 companies - Exxon Mobil, Cisco, Apple and Johnson & Johnson. Exxon is involved in a capital intensive industry that is subject to wild swings as we have seen with the price of oil recently. If it were to keep cash levels low what would happen when it needed to invest in new fields or technologies at the same time that oil prices were dropping? I would like to believe that with oil prices at low levels Exxon is scouting out opportunities to acquire additional reserves which will surely rise in value given time.
Cisco is an acquisition engine, they use their cash to acquire competitors and to extend their reach. I grant that $30 or so billion is a lot of money but what if they do something earth shattering like buy a depressed stock such as HP ($70B), IBM ($124B) or more realistically EMC ($21B)?
Apple? Steve Jobs is sick so they need all the backup they can muster - or perhaps that is a great reason to pay it out now before they blow it trying to survive Steve Jobs.
Johnson & Johnson, has Mr. Zweig noticed the mergers in pharmaceuticals lately? Although I will readily admit that J&J doesn't have a great track record in acquisitions.
I find Mr. Zweig's attack on cash hard to swallow. With that said, I fully concur with his advice to actively participate in the Proxy Season. Shareholders have a responsibility to monitor their companies activities in general, cash is simply one aspect of this. American Investors are as apethetic as American Voters, perhaps more so, and both need to take a more active role in the management of thier investments and America.
AIG Bonuses
Some days I have nothing to say - others I am overwhelmed. Today I will start with the brouhaha around the AIG Bonuses - Just SHUT UP!
The US Government invested in AIG, they did not send them to bankruptcy court. As such, AIG has to continue operating essentially as it always did with all its responsibilities and contracts in place. That is why we got the report yesterday showing that billions were paid out to investment banks and regular banks from the government funds, the government wanted them to honor their obligations. The US Government with all of its meddling is destroying any remaining value within AIG and jeopardizing the chance to recoup the money invested.
Shareholders appoint a Board of Directors who hires managers to run a firm, the shareholders do not stand up every day and impose another arbitrary idea on the firm.
To the great Citizens of Massachusetts, something I was formerly, please remove Barney Franks from office. He has now shown his ability to ignore the truth, his ignorance of finance and general disregard for the citizens of Massachusetts and the United States. I truly wish I were in his district to work and vote against him.
The US Government invested in AIG, they did not send them to bankruptcy court. As such, AIG has to continue operating essentially as it always did with all its responsibilities and contracts in place. That is why we got the report yesterday showing that billions were paid out to investment banks and regular banks from the government funds, the government wanted them to honor their obligations. The US Government with all of its meddling is destroying any remaining value within AIG and jeopardizing the chance to recoup the money invested.
Shareholders appoint a Board of Directors who hires managers to run a firm, the shareholders do not stand up every day and impose another arbitrary idea on the firm.
To the great Citizens of Massachusetts, something I was formerly, please remove Barney Franks from office. He has now shown his ability to ignore the truth, his ignorance of finance and general disregard for the citizens of Massachusetts and the United States. I truly wish I were in his district to work and vote against him.
Sunday, March 15, 2009
The Fall of Western Civilization
My family recently received a Costco catalog for Costco.com Spring 2009 for instant online savings. Being a regular shopper at Costco who frequently uses the coupons they send for in store usage I was interested in what they had to offer. Among the usual assortment of furniture and electronics I spotted a 'Fully Automatic Espresso Machine' which you could receive, including delivery, for ONLY $899.99 plus applicable sales tax I am sure.
As soon as I saw this item I started scratching my head, how much do you have to enjoy your espresso to pay $900 to have a maker in your own home? I reread the offering to see if there was some indication it was a commercial model for your neighborhood coffee store but they really don't give complete descriptions in the catalog so maybe this is the reasoning - maybe not.
I started looking at the catalog to see what I could 'get' for my money. How about a springfree trampoline with all the safety features for your children to play on? That is only $800 delivered. So hours of pleasure, enjoyment and supposed safety for my children is $100 less then an espresso maker. A 46" TV was $700, $200 less and clearly something I would utilize way too much. A laptop for $580 where I could run my new online business, manage my finances, read the news and twitter away hours, an elliptical machine for $1000 that could extend my life if I ever got on it and so on.
The causes of our nations economic plight are many and varied but the availability of an Espresso Maker to sit on my counter and collect dust for $900 highlights to me the extravagance and waste of our time. I have to assume Costco believes this items will sell since they aren't a speciality store with one of a kind unique items, this stuff is for the masses.
If you are considering purchasing this item please reconsider, there are families losing their homes and going hungry right down the street. Poverty and disease are endemic in many regions of the world. How much value will you get out of a $900 espresso machine (don't forget you need supplies to actually make the espresso) versus the assistance that money could provide others not as fortunate?
As soon as I saw this item I started scratching my head, how much do you have to enjoy your espresso to pay $900 to have a maker in your own home? I reread the offering to see if there was some indication it was a commercial model for your neighborhood coffee store but they really don't give complete descriptions in the catalog so maybe this is the reasoning - maybe not.
I started looking at the catalog to see what I could 'get' for my money. How about a springfree trampoline with all the safety features for your children to play on? That is only $800 delivered. So hours of pleasure, enjoyment and supposed safety for my children is $100 less then an espresso maker. A 46" TV was $700, $200 less and clearly something I would utilize way too much. A laptop for $580 where I could run my new online business, manage my finances, read the news and twitter away hours, an elliptical machine for $1000 that could extend my life if I ever got on it and so on.
The causes of our nations economic plight are many and varied but the availability of an Espresso Maker to sit on my counter and collect dust for $900 highlights to me the extravagance and waste of our time. I have to assume Costco believes this items will sell since they aren't a speciality store with one of a kind unique items, this stuff is for the masses.
If you are considering purchasing this item please reconsider, there are families losing their homes and going hungry right down the street. Poverty and disease are endemic in many regions of the world. How much value will you get out of a $900 espresso machine (don't forget you need supplies to actually make the espresso) versus the assistance that money could provide others not as fortunate?
Friday, March 13, 2009
Native Hawaiian Land Claims
Last night I read an article regarding a lawsuit by native Hawaiians making a claim along the lines that all land still owned by the State should belong to the Native Hawaiians since it was seized from them/the Kingdom of when the Kingdom was overthrown by some over zealous Americans.
The American Government apologized to the Hawaiians and they are using this apology to push their claims. Essentially the claim is that the land was theirs and it was stolen from them. This is a common claim that for centuries meant nothing, only in our self righteous do no wrong times would such a claim even exist. Ask the American Indians.
Following the logic of 'the land was mine and you took it so give it back' where would you stop. The first location that comes to mind is Isreal. The Palestinians 'owned' the land in and around Isreal for centuries prior to WW II and the creation of Isreal. Shouldn't the Palestinians have the right to claim their land from Isreal and I don't mean just the land seized during wars? If the Huns or Mongols drove you from your native lands in Asia or Europe can you sue to get them back from the current residents?
The former lands of Yugoslavia had a lot of displacement recently, Russia has moved entire groups around, perhaps they should sue in a US Court since we seem to make it a habit of extending our laws beyond our borders regularly.
Why aren't the Hawaiians simply suing to have the Kingdom restored and the US presence removed? I seem to remember there being a couple of groups who want this and based on the claims in the lawsuit it seems only logical to support them - hello 49 states. Imagine the stimulus of everyone having to buy new flags.
The American Government apologized to the Hawaiians and they are using this apology to push their claims. Essentially the claim is that the land was theirs and it was stolen from them. This is a common claim that for centuries meant nothing, only in our self righteous do no wrong times would such a claim even exist. Ask the American Indians.
Following the logic of 'the land was mine and you took it so give it back' where would you stop. The first location that comes to mind is Isreal. The Palestinians 'owned' the land in and around Isreal for centuries prior to WW II and the creation of Isreal. Shouldn't the Palestinians have the right to claim their land from Isreal and I don't mean just the land seized during wars? If the Huns or Mongols drove you from your native lands in Asia or Europe can you sue to get them back from the current residents?
The former lands of Yugoslavia had a lot of displacement recently, Russia has moved entire groups around, perhaps they should sue in a US Court since we seem to make it a habit of extending our laws beyond our borders regularly.
Why aren't the Hawaiians simply suing to have the Kingdom restored and the US presence removed? I seem to remember there being a couple of groups who want this and based on the claims in the lawsuit it seems only logical to support them - hello 49 states. Imagine the stimulus of everyone having to buy new flags.
Thursday, March 12, 2009
Term Asset Backed Loan Facility
The Term Asset Backed Loan Facility is another government program designed to get the economy rolling again. When reading the details I have to wonder if the politicians who created this program stopped to consider how the United States got into the mess it is in now.
The government will lend investors from 86 to 95% of the cost at low interest rates to purchase bonds backed by various types of consumer loans. Wasn't over leverage the initial problem that brought our economy to it's knees?
If the government is funding virtually all of the purchase price why don't they purchase the bonds themselves? Clearly such a plan must be profitable to the investors or they would not participate so once more the government is handing out tax dollars out to investment firms such as hedges funds, the crew who led us down this merry path of financial disaster.
We must also remember that this is designed to make more money available for the average consumer to borrow again. All this at a time when the average consumer is either over-leveraged and can't borrow or doesn't really want a loan.
The lenders who will benefit according to the article I read are mostly finance arms of automobile firms, didn't we already lend them billions of dollars? Isn't this a backdoor way of lending them more money without their having to succumb to the torture and micro-mismanagement of Congress being visited upon TARP recipients?
Supposedly this plan will also support the acquisition of Mortgage Backed Securities. This need leaves me a bit confused. The only mortgages being issued these days are to rock solid credit risks and a vast majority of these are for refinancing existing homes where the owners were prudent and didn't waste all their equity. Since the refinancing pays off the existing mortgage the holder of that mortgage should find themselves with excess cash needing to be invested which should naturally support the market for mortgage backed bonds. Why does the government need to provide a stimulus?
In case someone in Mr. Geithner's office reads this I want you to know that I have $100,000 sitting around to invest along with a wonderful credit score and very little debt. I would be more then happy to sign the legal paperwork and borrow $1,900,000 to invest in asset backed bonds with high ratings. If this figure is too small just let me know the minimum required and I will quickly put together a group that qualifies.
The government acting as a Prime Broker, I would have never predicted this.
The government will lend investors from 86 to 95% of the cost at low interest rates to purchase bonds backed by various types of consumer loans. Wasn't over leverage the initial problem that brought our economy to it's knees?
If the government is funding virtually all of the purchase price why don't they purchase the bonds themselves? Clearly such a plan must be profitable to the investors or they would not participate so once more the government is handing out tax dollars out to investment firms such as hedges funds, the crew who led us down this merry path of financial disaster.
We must also remember that this is designed to make more money available for the average consumer to borrow again. All this at a time when the average consumer is either over-leveraged and can't borrow or doesn't really want a loan.
The lenders who will benefit according to the article I read are mostly finance arms of automobile firms, didn't we already lend them billions of dollars? Isn't this a backdoor way of lending them more money without their having to succumb to the torture and micro-mismanagement of Congress being visited upon TARP recipients?
Supposedly this plan will also support the acquisition of Mortgage Backed Securities. This need leaves me a bit confused. The only mortgages being issued these days are to rock solid credit risks and a vast majority of these are for refinancing existing homes where the owners were prudent and didn't waste all their equity. Since the refinancing pays off the existing mortgage the holder of that mortgage should find themselves with excess cash needing to be invested which should naturally support the market for mortgage backed bonds. Why does the government need to provide a stimulus?
In case someone in Mr. Geithner's office reads this I want you to know that I have $100,000 sitting around to invest along with a wonderful credit score and very little debt. I would be more then happy to sign the legal paperwork and borrow $1,900,000 to invest in asset backed bonds with high ratings. If this figure is too small just let me know the minimum required and I will quickly put together a group that qualifies.
The government acting as a Prime Broker, I would have never predicted this.
Governments Home Relief Plan
Unless you live in a box you have heard about the Democrat's Plan to prevent the foreclosure and loss of 9 million homes in America while not assisting the speculators and those undeserving. This plan sounds just like one of those 'liar' loans that got us into this problem in the first place. Where is their documentation and evidence that they can assist 9 million homeowners?
Current homeowners either purchased homes that they can afford or didn't. If they could afford them then the most common reasons for this changing is the loss of a job or some financial difficulty usually brought on by an unexpected large expense such as health care. Neither situation can be corrected for by the Democrat's plan although these are the individuals most deserving of assistance.
If the homeowners really couldn't afford the home when they purchased it then they deserve to lose the home. Since these folks were speculators in their own way they are not supposed to be helped.
Since we have just ruled everyone who is having trouble holding on to their home as ineligible where do the politicians get off claiming they will save up to 9 million homes? Sounds like all a liar loan to me and more of the same from Washington - so much for Hope and Change.
If only I were competent with graphic software I would 'borrow' the Hope Poster and add another word stretching from the lower left corner up to the right, 'DASHED'. Of course I would give the AP photographer and the artist who created the poster credit.
Current homeowners either purchased homes that they can afford or didn't. If they could afford them then the most common reasons for this changing is the loss of a job or some financial difficulty usually brought on by an unexpected large expense such as health care. Neither situation can be corrected for by the Democrat's plan although these are the individuals most deserving of assistance.
If the homeowners really couldn't afford the home when they purchased it then they deserve to lose the home. Since these folks were speculators in their own way they are not supposed to be helped.
Since we have just ruled everyone who is having trouble holding on to their home as ineligible where do the politicians get off claiming they will save up to 9 million homes? Sounds like all a liar loan to me and more of the same from Washington - so much for Hope and Change.
If only I were competent with graphic software I would 'borrow' the Hope Poster and add another word stretching from the lower left corner up to the right, 'DASHED'. Of course I would give the AP photographer and the artist who created the poster credit.
Monday, February 23, 2009
Does Obama Know where Washington D.C. is located?
Has anyone else noticed that Pres. Obama seems to have forgotten where Washington D.C. is located? He has been everywhere but there. Funny thing about that is that when my company started having to tighten it's budgets the first thing to go was travel. Seems to me that the US is in much worse shape then my employer and yet Obama keeps on spending our money flying around the country.
Obama Foreclosure Plan
Donovan said 45 percent of home sales in December were "distressed," meaning either sellers were facing foreclosure or the homes were already seized by the bank, driving down home prices further in an already-battered market.
"We've got to make clear, here, that a foreclosure hurts every American," he told CNN.
Apparently Mr. Donovan does not consider those careful enough to avoid the housing bubble and wait for the collapse to make a reasonably priced purchase American.
I needed to move to make room for my first child in 2004. For various reasons we rented and a year later my wife started pressing to purchase. I resisted based upon the cost of houses in my area (southern California) and the obvious fact that we simply couldn't afford a home with a standard loan despite paying $2,200 a month in rent. Being from New England must make me old fashioned so an Option ARM just wasn't something I was going to use and was horrified that others would consider it for a $700,000 when they earned under $100K a year, frequently well under.
Prices in my area have finally fallen although I feel they are still high - I live in San Diego and not north in Riverside County where prices have collapsed and have no desire to live there, not sure why anyone does to be honest. If t he government is going to step in and artificially prop up values they better put something on the table for me. I am pretty sure the home buyer credit won't apply as I still own a condo that is rented, probably a disqualificaiton.
I am the middle class that everyone claims to want to help - and I feel screwed again. I can't buy a home and I have to pay for everyone else's.
Thank you Washington D.C.
While on the topic of the Housing Secretary - I happened to catch his interview on CBS News. The term News clearly did not apply to what I saw. It sure appeared that the Secretary was being lobbed questions that he and his team had prepared and presented to CBS to ask. Where is the hard hitting reporting and seriuos questions one expects from a true reporter and News show?
"We've got to make clear, here, that a foreclosure hurts every American," he told CNN.
Apparently Mr. Donovan does not consider those careful enough to avoid the housing bubble and wait for the collapse to make a reasonably priced purchase American.
I needed to move to make room for my first child in 2004. For various reasons we rented and a year later my wife started pressing to purchase. I resisted based upon the cost of houses in my area (southern California) and the obvious fact that we simply couldn't afford a home with a standard loan despite paying $2,200 a month in rent. Being from New England must make me old fashioned so an Option ARM just wasn't something I was going to use and was horrified that others would consider it for a $700,000 when they earned under $100K a year, frequently well under.
Prices in my area have finally fallen although I feel they are still high - I live in San Diego and not north in Riverside County where prices have collapsed and have no desire to live there, not sure why anyone does to be honest. If t he government is going to step in and artificially prop up values they better put something on the table for me. I am pretty sure the home buyer credit won't apply as I still own a condo that is rented, probably a disqualificaiton.
I am the middle class that everyone claims to want to help - and I feel screwed again. I can't buy a home and I have to pay for everyone else's.
Thank you Washington D.C.
While on the topic of the Housing Secretary - I happened to catch his interview on CBS News. The term News clearly did not apply to what I saw. It sure appeared that the Secretary was being lobbed questions that he and his team had prepared and presented to CBS to ask. Where is the hard hitting reporting and seriuos questions one expects from a true reporter and News show?
Wednesday, February 18, 2009
Public Employee Unions
Should unions who represent public employees be allowed to donate time, money and their support to politicians?
I don't think so. When is the last time a non-public employee got to pick and choose their boss on a regular basis? It is no wonder that our government agencies are all on the verge of bankruptcy.
I don't give much weight to the obvious argument by the unions that this tramples on their rights of free speech. The individual members are still free to do, say, contribute and vote as they desire. Since Unions can't vote I am not sure how they qualify for unlimited free speech. We have already banned priests from participating in politics or their churches could lose their tax-exempt status. Sounds pretty close to me.
Don't forget that the last time a union had the power that public employee unions wield we ended up with the Teamsters and the current U.S. Automotive Industry.
I don't think so. When is the last time a non-public employee got to pick and choose their boss on a regular basis? It is no wonder that our government agencies are all on the verge of bankruptcy.
I don't give much weight to the obvious argument by the unions that this tramples on their rights of free speech. The individual members are still free to do, say, contribute and vote as they desire. Since Unions can't vote I am not sure how they qualify for unlimited free speech. We have already banned priests from participating in politics or their churches could lose their tax-exempt status. Sounds pretty close to me.
Don't forget that the last time a union had the power that public employee unions wield we ended up with the Teamsters and the current U.S. Automotive Industry.
Wednesday, February 11, 2009
The Federal Bailout/Stimulus
What if in 1637 European governments had decided that Tulip Bulbs really weren't overpriced and supported the market?
I don't believe there is any simple, painless answer to our current turmoils. My heart goes out to the unemployed as I wonder if I will be joining them as business contracts and my employer is rumored to be working on a 3rd round of layoffs for March. It is this fear of a layoff that is gripping the country and insuring that the economic malaise will continue. I still have my income yet I have cut spending and am putting off several major purchases including a new computer and a home. Why should I deplete my savings for a down payment when I could lose my income and not have an adequate safety cushion to fall back on? The stimulus package will not address this fear.
Assuming the stimulus is approved and money starts flowing just how fast will jobs be created and saved? Assuming they send the money out for construction projects and the projects have the material required to start and the idle construction firms bring back all that they laid off do you think the workers will spend their new income? I don't. They will be shell shocked and use the money to pay off existing bills providing no stimulus. Once caught up they will save to avoid a similar fate. Where is the stimulus?
The governments plan is nothing more then a decision that Tulip Bulbs are not overpriced and they should be propped up by the government. Over the course of generations policies and procedures were put in place to handle companies that went bankrupt. Banks have their own unique rules to protect depositors. The federal government has thrown these rules out the window with a claim of protecting the financial system. Wouldn't it be better to seize failing banks no matter the size, remove the questionable assets, recapitalize the remainder and sell the now healthy institution? For small banks selling to existing banks is fine, for larger banks the government could have an IPO. They could spread the IPO work out amongst many Wall Street firms and help them while creating the new healthy bank.
The questionable assets could be held by the government for as long as it is deemed wise. This may be until maturity or when market liquidity returns and prices appear reasonable, fire sales should be avoided to maximize the return to taxpayers.
One last note - living in Southern California, that $15,000 home purchase stimulus is pretty weak and I believe that would be true in other truly hard hit real estate markets. Average homes still sell for 300 to 500K in my area so their values could easily, and I suspect will, drop by well over 15K in the next 6 to 12 months.
We had a nice ride up the economic spiral, the slide back down is proving catastrophic.
I don't believe there is any simple, painless answer to our current turmoils. My heart goes out to the unemployed as I wonder if I will be joining them as business contracts and my employer is rumored to be working on a 3rd round of layoffs for March. It is this fear of a layoff that is gripping the country and insuring that the economic malaise will continue. I still have my income yet I have cut spending and am putting off several major purchases including a new computer and a home. Why should I deplete my savings for a down payment when I could lose my income and not have an adequate safety cushion to fall back on? The stimulus package will not address this fear.
Assuming the stimulus is approved and money starts flowing just how fast will jobs be created and saved? Assuming they send the money out for construction projects and the projects have the material required to start and the idle construction firms bring back all that they laid off do you think the workers will spend their new income? I don't. They will be shell shocked and use the money to pay off existing bills providing no stimulus. Once caught up they will save to avoid a similar fate. Where is the stimulus?
The governments plan is nothing more then a decision that Tulip Bulbs are not overpriced and they should be propped up by the government. Over the course of generations policies and procedures were put in place to handle companies that went bankrupt. Banks have their own unique rules to protect depositors. The federal government has thrown these rules out the window with a claim of protecting the financial system. Wouldn't it be better to seize failing banks no matter the size, remove the questionable assets, recapitalize the remainder and sell the now healthy institution? For small banks selling to existing banks is fine, for larger banks the government could have an IPO. They could spread the IPO work out amongst many Wall Street firms and help them while creating the new healthy bank.
The questionable assets could be held by the government for as long as it is deemed wise. This may be until maturity or when market liquidity returns and prices appear reasonable, fire sales should be avoided to maximize the return to taxpayers.
One last note - living in Southern California, that $15,000 home purchase stimulus is pretty weak and I believe that would be true in other truly hard hit real estate markets. Average homes still sell for 300 to 500K in my area so their values could easily, and I suspect will, drop by well over 15K in the next 6 to 12 months.
We had a nice ride up the economic spiral, the slide back down is proving catastrophic.
Monday, January 12, 2009
Keynesian Recovery
A quote from George Bush in today's news:
"I inherited a recession, I'm ending on a recession. In the meantime, there were 52 months of uninterrupted job growth," he said.
"And I defended tax cuts when I campaigned, I helped implement tax cuts when I was president, and I will defend them after my presidency as the right course of action."
Over the last couple of days I have seen a plethora of articles about Keynes and how the plan to save the American Economy is a resurgance of Keynesian Economic Principals and Theories. I haven't read them too closely or at all in most cases but if memory serves Keynes believed that governments should deficit spend to get economies out of slowdowns.
I think Keynes is rolling over in his grave right now. Pundits who cite Keynes are looking at a very narrow picture and completely ignoring the incontrovertible facts that our government has been engaged in Keynesian spending for the past 8 years (and longer) to no long term avail. George Bush's comments assist in pointing out this fact and supporting thier failure.
The government has been deficit spending for years while driving down interest rates and implementing policies that promoted deficit spending amongst the consumers as well. This resulted in the largest financial bubble in history and the politician's solution? Blow harder into the bubble and keep it inflated, blame everyone else.
Keynes believed during Good Times the government should reduce it's spending and save for a rainy day and then increase spending during slowdowns to smooth out economic cycles. I can't remember the last time a government agency said, "Things are going good so lets save some money for when they aren't." All I have ever heard is, "Spend, Spend, Spend, we got more money? Spend IT!!!!".
The United States is actually in a Keynesian Bubble that is imploding. Failure to recognize this and accept (deal with) the consequences in order to allow our economic ship to right itself will simply lead to greater and more costly consequences down the road.
Barack Obama is not the Change we needed nor that we can Count On. He is simply perpetuating the error of Washington's ways and condemning himself to a level of historical respect equivalent to that deserved by George W. Bush.
"I inherited a recession, I'm ending on a recession. In the meantime, there were 52 months of uninterrupted job growth," he said.
"And I defended tax cuts when I campaigned, I helped implement tax cuts when I was president, and I will defend them after my presidency as the right course of action."
Over the last couple of days I have seen a plethora of articles about Keynes and how the plan to save the American Economy is a resurgance of Keynesian Economic Principals and Theories. I haven't read them too closely or at all in most cases but if memory serves Keynes believed that governments should deficit spend to get economies out of slowdowns.
I think Keynes is rolling over in his grave right now. Pundits who cite Keynes are looking at a very narrow picture and completely ignoring the incontrovertible facts that our government has been engaged in Keynesian spending for the past 8 years (and longer) to no long term avail. George Bush's comments assist in pointing out this fact and supporting thier failure.
The government has been deficit spending for years while driving down interest rates and implementing policies that promoted deficit spending amongst the consumers as well. This resulted in the largest financial bubble in history and the politician's solution? Blow harder into the bubble and keep it inflated, blame everyone else.
Keynes believed during Good Times the government should reduce it's spending and save for a rainy day and then increase spending during slowdowns to smooth out economic cycles. I can't remember the last time a government agency said, "Things are going good so lets save some money for when they aren't." All I have ever heard is, "Spend, Spend, Spend, we got more money? Spend IT!!!!".
The United States is actually in a Keynesian Bubble that is imploding. Failure to recognize this and accept (deal with) the consequences in order to allow our economic ship to right itself will simply lead to greater and more costly consequences down the road.
Barack Obama is not the Change we needed nor that we can Count On. He is simply perpetuating the error of Washington's ways and condemning himself to a level of historical respect equivalent to that deserved by George W. Bush.
Friday, January 02, 2009
Gaza Strip Bombing
When is the media going to wake up and stop pushing their left wing, soft is good agenda on the public. Listening to the media outlets be they ABC, CBS, NBC, CNN or FOX among others one is regularly being told that Innocent Civilians and Children are being killed - the world is calling upon Israel to stop it's bombing and show compassion.
What I rarely if ever hear and then in a watered down barely legible tone is that Israel civilians are being subject to missile attacks from Gaza repeatedly and have been prior to Israel's attack. These same missiles kill Innocent Civilians and Children, they just don't have as advanced guidance systems so frequently miss to the chagrin of Hamas and those launching them.
What the World needs to make clear is that terrorists of any kind by acting as they do are making themselves and EVERYONE around them subject to immediate attack and possible death. If the person living with you or next door is a terrorist then you should know that the person is a target and you are subject to death by association and proximity. If weapons are being stored next to your home/business then you should know that the site is a target and you are subject to death by association and proximity.
Terrorists can only survive if they have supporters and neighbors who fail to report on the activities going on are supporting the terrorists. Imagine if everyone knew their lives and the lives of their family were subject to imminent death based upon the actions of a neighbor. That neighbors actions would be curtailed in one form or another - either authorities would be called in when possible, neighbors would band together to drive out the problem or areas would be vacated making their uses obvious for targeting and removal.
The World is soft and terrorists know this. The government of Sudan knows that no one will interfere in Darfur so they sit in their luxury homes selling oil to willing foreign governments and companies who make a show of complaining about the slaughter going on in the countryside. If they knew that their lives and those of their families were subject to immediate termination things would change - things would have never gotten to the state they are in now.
You will never convince me that the missile strikes on Khaddafi's home in Libya several years ago didn't assist in changing his attitude towards the outside world. He suddenly understood that his actions could result in the immediate death of any and all of his family members, not to mention himself. Yet at the time of the strike all you heard in the media was how one of his young daughters died, although even that part of the story was questionable. The Terrorists sending out suicide bombers aren't doing the bombing themselves for a reason, they don't wish to die no matter what they tell the bombers.
Pirates in Somalia wouldn't be making headlines. The press runs stories how when a ship is taken hostage the local villages all open up their shops and have an economic boom. Imagine if those same villages knew the pirates were subject to immediate retaliation where ever they may be. Suddenly the pirate booty would not look so good when measured against their and their families immediate death and destruction by association.
The terrorists and criminals know that the World and authorities are soft having to appease the media and their liberal leanings. For this reason they base their activities in civilian areas just so when they get brought to justice they can scream about the death of women and children. It is time for the World to stand up and deal with terrorists appropriately and not be led to it's continued slow torture by the media. Let the news shows know that they should be reporting the NEWS and not trying to direct public opinion unless they appropriately label it an editorial in which case they can espouse anything they desire.
What I rarely if ever hear and then in a watered down barely legible tone is that Israel civilians are being subject to missile attacks from Gaza repeatedly and have been prior to Israel's attack. These same missiles kill Innocent Civilians and Children, they just don't have as advanced guidance systems so frequently miss to the chagrin of Hamas and those launching them.
What the World needs to make clear is that terrorists of any kind by acting as they do are making themselves and EVERYONE around them subject to immediate attack and possible death. If the person living with you or next door is a terrorist then you should know that the person is a target and you are subject to death by association and proximity. If weapons are being stored next to your home/business then you should know that the site is a target and you are subject to death by association and proximity.
Terrorists can only survive if they have supporters and neighbors who fail to report on the activities going on are supporting the terrorists. Imagine if everyone knew their lives and the lives of their family were subject to imminent death based upon the actions of a neighbor. That neighbors actions would be curtailed in one form or another - either authorities would be called in when possible, neighbors would band together to drive out the problem or areas would be vacated making their uses obvious for targeting and removal.
The World is soft and terrorists know this. The government of Sudan knows that no one will interfere in Darfur so they sit in their luxury homes selling oil to willing foreign governments and companies who make a show of complaining about the slaughter going on in the countryside. If they knew that their lives and those of their families were subject to immediate termination things would change - things would have never gotten to the state they are in now.
You will never convince me that the missile strikes on Khaddafi's home in Libya several years ago didn't assist in changing his attitude towards the outside world. He suddenly understood that his actions could result in the immediate death of any and all of his family members, not to mention himself. Yet at the time of the strike all you heard in the media was how one of his young daughters died, although even that part of the story was questionable. The Terrorists sending out suicide bombers aren't doing the bombing themselves for a reason, they don't wish to die no matter what they tell the bombers.
Pirates in Somalia wouldn't be making headlines. The press runs stories how when a ship is taken hostage the local villages all open up their shops and have an economic boom. Imagine if those same villages knew the pirates were subject to immediate retaliation where ever they may be. Suddenly the pirate booty would not look so good when measured against their and their families immediate death and destruction by association.
The terrorists and criminals know that the World and authorities are soft having to appease the media and their liberal leanings. For this reason they base their activities in civilian areas just so when they get brought to justice they can scream about the death of women and children. It is time for the World to stand up and deal with terrorists appropriately and not be led to it's continued slow torture by the media. Let the news shows know that they should be reporting the NEWS and not trying to direct public opinion unless they appropriately label it an editorial in which case they can espouse anything they desire.
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