Is anyone else starting to get nervous about our new President and his policies?
It is looking more and more like we are in for an era (for as long as the Obama Era lasts) that entails the following megatrends:
1. Extreme regulation of economic activity (click the following link for information on just one example of this, the CPSIA at http://www.learningresources.com/category/id/104512.do?code=CPSIA). We are looking at an environment in which the default approach to any problem is regulation (i.e. what we need to solve this problem is a new mandate for a federal agency and a new set of regulations). If you have been in the business world for any length of time, you know that many regulations, while well-intentioned, end up costing businesses more than the benefit to society they set out to create. Regulations create costs for businesses. And, that translates into less jobs being created. There is really no debate on this point.
Doesn't seem to be a great time for this, with 600,000 plus new jobless claims each week.
As a society, we should seek to balance the need for regulation against the economic cost-benefit analysis of the regulation. Usually, this analysis results in less regulation and more market forces being used to solve problems. I know this is anathema right now - to suggest that market forces can be used constructively - but we need to be careful not to over-react to circumstances in the financial sphere and over-compensate elsewhere in our economy with more regulation. That will cost us, big time, in the long run.
2. Class Warfare. It seems to me that President Obama, and his Congressional partners, are setting a tone in this country that pits one group against another. Just take a look at the pronouncements that accompanied his new economic proposals. The tone of what our President is saying is that the wealthy are dodging taxes (is that fair?) and that what we really need to do is to make sure they pay their taxes by limiting itemized deductions and increasing the tax rates. Meanwhile, the top 2% of taxpayers paid in 40% of the total taxes paid, while earning 22% of the taxable income in the most recent year for which the data is available.
And, by the way, does our President understand that charitable donations are itemized deductions? So, limiting itemized deductions will, as night follows day, result in a decrease in charitable donations. Is this a great idea right now? When there are more and more people turning to charitable organizations for economic asisstance. Also, mortgage interest is an itemized deduction. Do we need another reason created by the tax code to send real estate values down further? That can't be a good thing right now.
Overall, I am unimpressed by what President Obama is saying, and by what he is doing. Time will tell if this is political posturing (to payback supporters) or if he really means these things, but it is not a great start, in my view. And, that's what you get here at woldyworld . . . my view.
Later . . .
Thursday, February 26, 2009
Friday, February 20, 2009
Foot in the Mouth Award for today goes to Senator Chris Dodd, who famously, and it seems, unilaterally, decided to let the World know that the U.S. might be nationalizing a few banks for a little while (whatever that means).
I am not 100% sure, but it seems to me that that particular policy decision is not up to the good Senator from Connecticut. Nonetheless, Senator Dodd's reckless verbalization of this possible outcome caused quite a commotion in the stock market, which is just what we needed . . . thanks Chris.
The last award to be given out today is the coveted WTF? Award, which goes to Bernard Madoff. I know. I know. It is so unfair to be giving so many awards to Bernie, but really, he deserves this one. Bernie gets this particular award because it now seems that he had not bought any stocks (as in NONE) with the proceeds of his "investment funds" for more than 13 years. That is one heck of a long time to keep this thing going.
NO STOCKS. He was just taking the cash in and sending out checks. Banks saw the deposits and cleared the checks. Trading firms (his own) were supposed to have cleared his trades ($50 Billion is a lot of assets to pretend to be trading - no one at the trading firm noticed there was no activity?) Sophisticated fund managers were sending him hundreds of millions of dollars. Accountants came in and audited. Federal agencies visited from time to time.
HE BOUGHT NO STOCKS. That is truly amazing.
It will certainly be interesting in the months and years to come (for those of us who dodged this bullet) to find out how he did this. And, we will also learn more about who else was involved because no matter how much of a wizard he was with Excel and Word, there is no way Bernie did this on his own. No chance.
Headed back onto the Road tomorrow. Return midweek. In the meantime . . . take a deep breath and repeat, as necessary.
I am not 100% sure, but it seems to me that that particular policy decision is not up to the good Senator from Connecticut. Nonetheless, Senator Dodd's reckless verbalization of this possible outcome caused quite a commotion in the stock market, which is just what we needed . . . thanks Chris.
The last award to be given out today is the coveted WTF? Award, which goes to Bernard Madoff. I know. I know. It is so unfair to be giving so many awards to Bernie, but really, he deserves this one. Bernie gets this particular award because it now seems that he had not bought any stocks (as in NONE) with the proceeds of his "investment funds" for more than 13 years. That is one heck of a long time to keep this thing going.
NO STOCKS. He was just taking the cash in and sending out checks. Banks saw the deposits and cleared the checks. Trading firms (his own) were supposed to have cleared his trades ($50 Billion is a lot of assets to pretend to be trading - no one at the trading firm noticed there was no activity?) Sophisticated fund managers were sending him hundreds of millions of dollars. Accountants came in and audited. Federal agencies visited from time to time.
HE BOUGHT NO STOCKS. That is truly amazing.
It will certainly be interesting in the months and years to come (for those of us who dodged this bullet) to find out how he did this. And, we will also learn more about who else was involved because no matter how much of a wizard he was with Excel and Word, there is no way Bernie did this on his own. No chance.
Headed back onto the Road tomorrow. Return midweek. In the meantime . . . take a deep breath and repeat, as necessary.
Thursday, February 19, 2009
Boy does this suck . . .
The Dow is at a six year low. Down more than 46% from its 2007 high of 13, 930.
46%
That is a staggering number. Worse yet, there is no reason to believe that we are done yet. We could go down significantly from here. Why not? The chattering masses tell us that NOW is the time to buy stocks. If we are going to hold stocks for the "long run", we should be buying now. Because, they tell us, stocks go up over time. And, with enough time . . . they will go back up. Warren Buffet says so.
Just one thing wrong with that theory.
Ain't necessarily so.
Just ask the Japanese, who still, 18 years after the Nikkei Index topped out near 40,000, have a stock market that is down more than 75% from its high. I would say that 18 years is a resonably long time. So, if you put money into that stock market when it was off 50% from its high, you have lost an additional 60%. I would rate that as "not so good". And, a great reason not to be buying U.S. stocks right now.
Sorry . . . I wish I felt otherwise.
The Dow is at a six year low. Down more than 46% from its 2007 high of 13, 930.
46%
That is a staggering number. Worse yet, there is no reason to believe that we are done yet. We could go down significantly from here. Why not? The chattering masses tell us that NOW is the time to buy stocks. If we are going to hold stocks for the "long run", we should be buying now. Because, they tell us, stocks go up over time. And, with enough time . . . they will go back up. Warren Buffet says so.
Just one thing wrong with that theory.
Ain't necessarily so.
Just ask the Japanese, who still, 18 years after the Nikkei Index topped out near 40,000, have a stock market that is down more than 75% from its high. I would say that 18 years is a resonably long time. So, if you put money into that stock market when it was off 50% from its high, you have lost an additional 60%. I would rate that as "not so good". And, a great reason not to be buying U.S. stocks right now.
Sorry . . . I wish I felt otherwise.
Monday, February 16, 2009
JAPAN ECONOMY SHRINKS 12.7%.
This is not good news for us, folks. Japan has the second largest economy in the World, and is our third largest customer, in terms of Export dollars. Canada is our Number One Export customer and their economy shrank 0.5% in 2008, but is likely to be significantly worse in 2009, due to commodity price declines. Same with Mexico, our Number Two Export customer.
To me, this means that it is entirely possible (though not a certainty) that our economy is headed for a much worse recession than people are currently acknowledging. Stimulus package, or no stimulus package.
60 MINUTES.
Last night on 60 Minutes, there was a story about World Savings, a financial institution that was heavily involved in subprime lending. We have read so many stories about financial malfeasance over the last six months that it is hard to work up the outrage that this story rightly deserves. Selling mortages to people who could not afford to make the payments, refinancing folks repeatedly into mortages that put them further and further behind. Skimming fees from every shady transaction along the way. What an awful story. They had me. Then they interviewed a lady who is in danger of losing her home because of the World Savings sales reps who convinced her to refinance several times into mortgages that she could not afford. Awful. Terrible. Very sad story. But, what's this? She received $20,000 in cash each time she refinanced. And, now she can't afford to pay back what she owes.
But, I am left asking at what point is it the responsibility of the borrower to know what they can afford? Why does this lady, and others like her, get a "free pass" with respect to her receiving $20,000 in cash to refinance her home, but then not being able to afford the refinanced payments? Why is it now our responsibility, as taxpayers, to fix this mortgage? Because, make no mistake about it, the taxpayers are going to be picking up the tab for this. When President Obama says he has a plan to re-work mortgages, that means watch your wallet because we are going to be paying for it.
Where is personal responsibility in all this? Why do we accept the explanation that it is always someone else's fault?
GAZA WAR: UN School "Massacre" Update
Remember during the Gaza War, there was a news story about a UN School that was hit by Israeli artillary? At the time, news reports indicated that 42 civilians, including lots of children, were killed there. At the time, it was reported that the Israeli attack was unprovoked. International outrage at Israel's "disproportionate" response peaked after this story was reported.
Then, a few weeks after the incident, it turns out that there were witnesses in Gaza who came forward and testified that there was a Hamas mortar crew firing from right next to the school. And, questions were raised about the number of casualties at that time. Now, there is another story about this incident. Turns out that the latest estimate is that there were not 42, but 12 people killed at the school, and 9 of them were Hamas operatives. And, that the Israeli shells did not actually hit the school, but outside the school where the mortars were being fired from. Israel is providing the names and ages of the casualties in Gaza, to set the historical record straight. It is hard to dispute when you have the facts in hand.
But, you won't find this story on the front page of the New York Times, or the Guardian in London . . . nope. It would create too much egg on their faces to report this story. Just let the lie live, and save face.
All for now,
Woldy
P.S. I will be out of commission tomorrow, traveling for work. Back on Wednesday.
This is not good news for us, folks. Japan has the second largest economy in the World, and is our third largest customer, in terms of Export dollars. Canada is our Number One Export customer and their economy shrank 0.5% in 2008, but is likely to be significantly worse in 2009, due to commodity price declines. Same with Mexico, our Number Two Export customer.
To me, this means that it is entirely possible (though not a certainty) that our economy is headed for a much worse recession than people are currently acknowledging. Stimulus package, or no stimulus package.
60 MINUTES.
Last night on 60 Minutes, there was a story about World Savings, a financial institution that was heavily involved in subprime lending. We have read so many stories about financial malfeasance over the last six months that it is hard to work up the outrage that this story rightly deserves. Selling mortages to people who could not afford to make the payments, refinancing folks repeatedly into mortages that put them further and further behind. Skimming fees from every shady transaction along the way. What an awful story. They had me. Then they interviewed a lady who is in danger of losing her home because of the World Savings sales reps who convinced her to refinance several times into mortgages that she could not afford. Awful. Terrible. Very sad story. But, what's this? She received $20,000 in cash each time she refinanced. And, now she can't afford to pay back what she owes.
But, I am left asking at what point is it the responsibility of the borrower to know what they can afford? Why does this lady, and others like her, get a "free pass" with respect to her receiving $20,000 in cash to refinance her home, but then not being able to afford the refinanced payments? Why is it now our responsibility, as taxpayers, to fix this mortgage? Because, make no mistake about it, the taxpayers are going to be picking up the tab for this. When President Obama says he has a plan to re-work mortgages, that means watch your wallet because we are going to be paying for it.
Where is personal responsibility in all this? Why do we accept the explanation that it is always someone else's fault?
GAZA WAR: UN School "Massacre" Update
Remember during the Gaza War, there was a news story about a UN School that was hit by Israeli artillary? At the time, news reports indicated that 42 civilians, including lots of children, were killed there. At the time, it was reported that the Israeli attack was unprovoked. International outrage at Israel's "disproportionate" response peaked after this story was reported.
Then, a few weeks after the incident, it turns out that there were witnesses in Gaza who came forward and testified that there was a Hamas mortar crew firing from right next to the school. And, questions were raised about the number of casualties at that time. Now, there is another story about this incident. Turns out that the latest estimate is that there were not 42, but 12 people killed at the school, and 9 of them were Hamas operatives. And, that the Israeli shells did not actually hit the school, but outside the school where the mortars were being fired from. Israel is providing the names and ages of the casualties in Gaza, to set the historical record straight. It is hard to dispute when you have the facts in hand.
But, you won't find this story on the front page of the New York Times, or the Guardian in London . . . nope. It would create too much egg on their faces to report this story. Just let the lie live, and save face.
All for now,
Woldy
P.S. I will be out of commission tomorrow, traveling for work. Back on Wednesday.
Friday, February 13, 2009
Winner winner chicken dinner
DP wins the prize for first to register. But, as DP pointed out . . . now that he went to all the trouble to register . . . I best make it worth his while.
Well, here goes . . .
Does anyone else have the feeling that things are spinning out of control in Washington? That nobody really knows how to get us out of the hole we are in and that there is the distinct possibility that what we are doing now with our monetary policy and stimulus packages may make things a lot worse before too long? Our policymakers can not even adequately explain what is wrong, let alone identify how to fix it.
There was a lot of hand-waving about how important the stimulus bill is, and about how it was so urgently needed . . . (or else). But no one, including our esteemed President, can quite explain why and how this bill is going to "make things better", other than to assert broadly that it will create jobs. Did anyone else catch the CEO of Catepillar today contradicting what he was reported to have said two days ago (that CAT would start adding back jobs recently cut once the stimulus bill was passed)?
Those of us that operate in the "real world" economy, where we need to meet payrolls, pay our vendors, and get sales in the door, know that we are on our own to protect our people and our companies. We are all hoping Washington will eventually do something that will help, but increasingly it looks like that is misplaced hope. And, it looks like the natural rhythm of economic cycles will determine when we will emerge from this downturn.
But, one thing is certain . . . and that is what will happen when we do finally snap out of this economic morass. There will, no doubt, be a mad scramble to take credit for the billiant economic polices that led us out of the wilderness. Just like the rooster taking credit for the sun coming up.
All for now . . .
Well, here goes . . .
Does anyone else have the feeling that things are spinning out of control in Washington? That nobody really knows how to get us out of the hole we are in and that there is the distinct possibility that what we are doing now with our monetary policy and stimulus packages may make things a lot worse before too long? Our policymakers can not even adequately explain what is wrong, let alone identify how to fix it.
There was a lot of hand-waving about how important the stimulus bill is, and about how it was so urgently needed . . . (or else). But no one, including our esteemed President, can quite explain why and how this bill is going to "make things better", other than to assert broadly that it will create jobs. Did anyone else catch the CEO of Catepillar today contradicting what he was reported to have said two days ago (that CAT would start adding back jobs recently cut once the stimulus bill was passed)?
Those of us that operate in the "real world" economy, where we need to meet payrolls, pay our vendors, and get sales in the door, know that we are on our own to protect our people and our companies. We are all hoping Washington will eventually do something that will help, but increasingly it looks like that is misplaced hope. And, it looks like the natural rhythm of economic cycles will determine when we will emerge from this downturn.
But, one thing is certain . . . and that is what will happen when we do finally snap out of this economic morass. There will, no doubt, be a mad scramble to take credit for the billiant economic polices that led us out of the wilderness. Just like the rooster taking credit for the sun coming up.
All for now . . .
Intro to Blogging
Okay, so this is my first entry on my blog. I have no idea who, if anyone, will read this (maybe Nicki and the kids . . .) but I am officially out there now, in the blogosphere.
Today is a 6. Business is a little slow this month, although we had a decent January. We are holding our own with last year, but we all expected a little bump from the new catalog. It is early and these first few months of the year are not really good gauges on how the year will unfold because they are usually lower sales months. So, swings up or down in these months are not very telling.
We will start to see the fruits of our labor as the year progresses. . .
More later . . .
Today is a 6. Business is a little slow this month, although we had a decent January. We are holding our own with last year, but we all expected a little bump from the new catalog. It is early and these first few months of the year are not really good gauges on how the year will unfold because they are usually lower sales months. So, swings up or down in these months are not very telling.
We will start to see the fruits of our labor as the year progresses. . .
More later . . .
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