Never Mind

Gilda Radner once played a character on “Saturday Night Live” called Emily Litella. This Emily Litella generally would sit with another news anchor on “Weekend Update,” and would read a seemingly serious editorial. She invariably misunderstood some word or issue in this editorial and would go off at length on this misunderstanding … bringing up irrelevant nonsense after irrelevant nonsense. Finally her co-anchor would tell Emily Litella that her original jumping off point was in error … at which point Emily Litella would shrug and say, "Never mind.”

Yesterday, I wrote a bit of a puff blog on Barack Obama, complementing him on his contribution to the convivial nature of the G20 economic summit in London (see: New World Order). Now, today we see Obama has given a speech in Strasbourg, France (see French Town Meeting) in which he went out of his way to disrespect the country over which he governs. He said that the United States:

- had often behaved arrogantly towards Europe, and had been “dismissive, even derisive",
- “shares the blame [for the world economic meltdown] ... we've just emerged from an era marked by [our] irresponsibility".
- “now embodies [in him] the new idealism and the new fight for progress … on climate change, on clearing up the financial and economic mess left by his predecessors, and all the other mega-problems.”
- has shown “a failure to appreciate Europe's leading role in the world."
- "made a mistake by allowing the Taliban to reemerge [in Afghanistan] during the height of the Iraq war."

So, Obama still can’t resist, on foreign soil no less, in berating the United States for its flaws and in believing that he will lead our country back on the path that Europeans will find more palatable.

Re: my new respect for Obama’s leadership, “Never mind.”

New World Order

It appears President and Michelle Obama have helped create a new conviviality among world leaders. See the G20 Results. Michelle Obama snookered up to Queen Elizabeth in a very forward but seemingly accepted manner. See Hug a Mug. And Barack Obama unexpectedly bowed to the king of Saudi Arabia. See Your Highness. But these gaffs aside, our President did help calm the waters between China and France over dealing with financial tax havens (see “G20 Results” reference). Even Dmitry Medvedev of Russia hailed Obama as “my new comrade” (at once, both a fraternal and frightening appellation.) But, giving Obama the benefit of the doubt, the G20 world economic summit seems to have been a winner for the good ole U.S.A.

Time will, of course, tell. But at least it appears that the world has endorsed our smiling savior as its new matinee idol. And I will acknowledge that this group embrace is a dollop of gravy on an otherwise dreary meal of economic gristle.

G20

The G20 economic summit is meeting tomorrow in London and there are considerable protestations … marching, breaking windows and invading buildings. Here is a sample of the kind of demonstrations that are taking place. But, there is one problem. It is Socialism and Communism that means not working. But, Capitalism means working your tuckus off. Somebody should really clue these radicals in. By the bye, I wonder how many of these extremists have real jobs?

Mr. Goodwrench

President Obama has unilaterally guaranteed the warranties on the autos sold by General Motors and Chrysler. See U.S. Auto Warranties. Now this is a pretty far-reaching commitment of taxpayer dollars for not having any public or Congressional input. To see how profound this might be consider the following: these two U.S. automakers sell roughly eight million cars a year (some years more, some years less) and I estimate the effective cost of a three-year warranty on a new car to be about $1,000 per car. So Obama has committed the U.S. taxpayer to $8 billion of cost per year in the first year and accumulating up to $24 billion per year in year three (after layering each new model year). Once these two car companies went under, this guarantee would theoretically last for at least three years after they disappeared under the waves. Now this is just problem one. There are two more serious issues:

1) What about Ford Motor? How can they compete with GM and Chrysler when these latter two companies have free access to the U.S. taxpayer’s wallet from which to extract even larger amounts of pelf.

2) What about foreign auto makers? Can they not now claim unfair trading practices for this U.S. warranty backstop? In fact, just the current Obama loan guarantees to GM and Chrysler could also be construed to be the start of an auto-industry world trade war. We know that the degeneration of world trade was a major contributing factor to the great depression. Have we just let this genie out of the bottle once again?

The Obama administration is moving so fast in its attempts to improve our economy that I am concerned that it has not spent enough time worrying about unintended consequences. Maybe they need to follow that oft-used phrase from the Clinton administration and "stop and take a deep breath".

Good Riddance

George W. Bush is comfortably ensconced back in Texas … making Laura’s morning coffee and licking his wounds. And I say, “Good riddance!” Clearly, our worst President can no longer run up huge budget deficits which our children and grandchildren will have no hope of repaying. He no longer can escalate military offenses in far away lands where American sons and daughters will go the die or lose their limbs. He can no longer gaff his way through unscripted press conferences and photo ops. He can no longer try to reward all this nation's illegal aliens with citizenship and Social Security benefits. He can no longer nominate people to his administration who are tainted with malfeasance or unethical pasts. He can no longer sully America’s standing with our foreign friends and enemies alike with his naïve diplomatic judgments. He can no longer reward his supporters with larded-up government spending. He can no longer ruin our economy with his constant doom and gloom predictions. He can no longer wage his petty “war on terror.” He can no longer endorse steps to alleviate global warming. He can no longer keep Guantanamo open so that peace-loving Islamists are constantly tortured and kept in subhuman conditions. And he can no longer fiddle-fart around while Rome burns.

Thank God for the wisdom of the American electorate.

The Piker

U.S. DEFICITS BY YEARS

Yes, George W. Bush took a budget surplus from the latter part of the Clinton administration and turned it into a deficit. This was the result of the bursting of the dot-com bubble, the 9/11 terror attack with its resultant financial meltdown, and then the wars in Afghanistan and Iraq. It was not the result of the Bush tax cuts as these did nothing but encourage economic growth and vigorous employment expansion up until the time of our current financial freeze-up (the reasons for which I will not argue here). But Bush was a piker when it comes to fiscal irresponsibility. As one can see from this chart, the Obama administration, under Rahm Emanuel’s leitmotif that “we should never waste a good crisis,” is pushing social spending and our federal deficits to undreamed-of levels … and this will occur despite a planned gutting of our defense budget. This chart shows the dramatically growth of deficits under the current Obama/Emanuel plan as projected by the White House and also the impartial Congressional Budget Office (CBO).

One picture is worth a thousand words.

The Face of American Politics

- Friend of Angelo (mortgage rate payola)

- Refusal to release mortgage paper trail
- Wife involved with AIG (on board of IPC)
- Flip-flopper on AIG bonus provision (fessed up) - Waitress "sandwich" maker w/Ted Kennedy

- Irish vacation home shady self-enrichment

- John Huang 1996-97 Chinagate scandal

- Cozy relationship with Fannie Mae

And to think, he might have been the Democrat nominee for President ...

Turd on the Table

A boss of mine once derided me for leaving him a “turd on the table.” In other words don’t bring him a problem without bringing him a solution. I guess I’ve done just that with “The Camel's Nose” blog entry. So, I will try to solution things. Unfortunately the riposte isn’t easy. The answer needs to rein in excessive executive compensation without the heavy hand of government which, if we have been awake these last twenty years, invariably brings with it more problems than it solves (witness the “Community Reinvestment Act” of 1992 which is the genesis of our current economic meltdown.)

Since the Board of Directors and the Executive Compensation Committees of corporations are where these problems start, this is where the solution must also begin. Therefore, I suggest the following remedies be enacted into law:

1) All senior executives and Board of Directors members must disclose annually in each company’s Annual Report and 10K what other corporate boards they sit on, what all their compensations, perks and considerations are from this company, and what conflict of interests they might have or have had to the financial well being of said company or to the benefit of some other entity. (For instance Edward Liddy, CEO of AIG would have to disclose that he previously sat on the Board of Goldman Sachs to which AIG funneled $12.9 billion of federal bailout monies.) These disclosures must be made fully, without obfuscation, and under the threat of severe penalties from the SEC and/or the civil justice system. I might even consider a special federal tribunal being set up that overarches state courts in these specific cases.

2) No Board member or corporate executive of a public company may also be involved, either directly or indirectly, in the political arena whatsoever.

3) All members of the Executive Compensation Committee must be outside Directors, must have had experience in constructing executive compensation packages, and the majority must come from entities which have meaningful investments in said company. They must state in writing in the 10K the specific reasons for each executive’s compensation package and disallow any variance from the terms of these packages. The SEC and general public would have the same redress options for failures under these terms as in #1) above.

4) No corporate executive or Board member can be an officer or in any way benefit from the operations of a subsidiary or non-public entity of said corporation. In fact, all off-balance sheet transactions must be fully disclosed and accounted for in the 10K of said corporation.

5) All offshore subsidiaries of said corporations need to comply with these laws as though they were operating in the United States.

6) Corporations should stop indemnifying directors from bad decisions AND paying them the big fees, stock options and perks -- possibly one but not both.

This, at least, is a start … and relies as little as humanly possible on the government actually running things.

The Camel’s Nose

The House of Representatives this past week overwhelmingly passed a 90% income tax on bonus compensation for executives earning over $250,000 per year and working for companies receiving over $5 billion in TARP or other bailout monies. This includes companies like AIG, Fannie Mae, Freddie Mac, and possibly Citigroup and Merrill Lynch (now part of Bank of America). And, in the process, Congress is ignoring the thousand fold bigger issue of how these TARP and other bailout monies are being distributed. See my blog Golden Goldman).

Although I think this was misguided legislation and may be mollified in the Senate, still executive pay packages have been soaring into the stratosphere in recent years primarily, I believe, because the checks on such largess have all but disappeared. Company shareholders are now mostly mutual funds, hedge funds, and other amalgams of monies whose investment time horizon are very short and whose managers themselves have been caught up in the frenzy of mega-salaries. (When I was an investment analyst on Wall Street in the 1970s, a top pay package for this profession was a few hundred thousand dollars … now, for essentially the same work, it is many millions.)

So, into center stage steps President Obama who is now proposing to limit the pay packages of all corporate America independent of whether any government monies have been given to them. (See Executive Pay Limits). Now while I don’t take issue with the need to reestablish some sanity into the executive pay process, I do question if the Federal Government in the form of Chris Dodd and Barney Frank have the expertise and disposition to be the arbiters of this process. In fact such a development downright frightens me. The AIG executive bonuses uproar has allowed the nose of the government camel into the tent of corporate governance which, if I read the Obama administration’s intentions correctly, will be just the first of a series of baby steps with the ultimate objective of dismantling capitalism.

The road to Socialism is paved with camel’s noses.

Breaking the China

Federal Reserve Chairman Bernanke announced yesterday that his organization will pump over one trillion dollars into the U.S. economy by buying up U.S. Treasury securities and mortgage-backed debt. (See Bernanke Buyback). This bold move has caused interest rates to plummet, the price of Treasury securities to rise, and the U.S. dollar to weaken around the world. It is now predicted that long-term mortgage rates will now decline to the 4% - 4.5% range. This buyback should include as much as $300 billion of long-term treasuries and cause the government printing presses to work overtime to print all the required dollars. Now, there may be an interesting wrinkle to this announcement. China has recently complained about its massive holdings of U.S. debt obligations (See China Complaint). It is estimated that they hold as much as one trillion dollars of U.S. debt and, if they were to decide to unload these holdings back to us, the price of such debt would plummet and U.S. interest rates would increase in step.

Now I have to wonder if these news stories are linked? Is Bernanke perhaps rubbing China’s belly by allowing it to sell a bunch of their U.S. debt holdings back to us under more favorable conditions? Isn’t it funny that effectively the same action (the Federal Reserve Bank buying back U.S. debt) can have totally opposite effects depending on who initiates the transaction? And, if my speculation turns out to be correct, then the U.S., under the wing of our International President, Hillary Clinton, clearly has blinked first.

Skin the Cat

Goldman Sachs is now making loans to its cash-strapped employees. See: Goldman Loans. This, most likely, is in response to the public outrage that has arisen over the bonuses that AIG recently gave to many of its managers. Like AIG, Goldman was also a recipient of taxpayer largess to the tune of $10 billion of TARP funds last fall PLUS a $12.9 billion pass-through of taxpayer funds from AIG (which I wrote about in my previous blog post). This loan program pretty much substitutes for what would be standard bonuses at Goldman. Instead, it is loaning its employees the money necessary to meet their internal capital calls.

Now the rub … I would be willing to bet a good steak dinner that many of these “loans” will be eventually forgiven by Goldman. Thus they effectively will turn out to be retroactive bonuses without the pejorative label. (And this legerdemain also allows recipients to defer income taxes on these payments.) So you see … there is more than one way to skin a taxpayer.

Golden Goldman

(Goldman Sachs Tower -- New Jersey)

American International Group (AIG) just released the ordered list of counterparty payments that it had made last fall from the taxpayers’ and the Federal Reserve Bank’s initial $115 billion in bailout money to this company. According to this morning’s NY Times, Goldman Sachs was second on this recipient list at $8.1 billion. However, since then, AIG has received an additional $58 billion from the U.S. Treasury and Goldman now tops the list at $12.9 billion in total bailout largess … presumably to make good on additional Credit Default Swaps or other financial derivatives that Goldman took out with AIG. (Other large benefactors from U.S. taxpayer’s and Fed’s money, via AIG, include Deutsche Bank @ $11.8 billion, Societe Generale @ $11.9 billion, Merrill Lynch @ $6.8 billion, Barclays Bank @$8.5 billion, and UBS @ $5 billion.)

Now, there are many questions surrounding such counterparty payments … such as:

- Did Goldman Sachs or any other counterparty buy these Credit Default Swaps at a discount and then turn around and sell them back to AIG at 100 cents on the dollar? (Question originally posed by Senator Shelby from Alabama in a recent Senate hearing.)

- Did AIG negotiate with any or all these counterparties to pay them something less than full par value for these CDSs as would be expected? (Question originally asked in a recent House hearing on AIG).

- Since Hank Paulson, the then Secretary of the Treasury under G.W. Bush, was a former Goldman Sachs Chairman and CEO … were such pass-through payments to Goldman Sachs from the U.S. Treasury and Federal Reserve Bank a possible conflict of interest? At the time, was Paulson made aware of this seeming breach of faith?

- The new Obama administration, under which an additional $58 billion has been funneled into AIG (and, as a consequence, an additional $4.8 billion into Goldman Sachs) also seems somewhat cozy with Goldman Sachs. Robert Rubin, a transition team economic advisor to Obama is an ex-Goldman co-Chairman and, according to Wikipedia, "Goldman was the second largest donor to the Barack Obama campaign." It is estimated that Goldman Sachs execs gave close to a million dollars to Obama (see Obama Donors) including James Johnson, a Goldman Sachs board member and former chairman and CEO of Fannie Mae, and Bruce Heyman, Managing Director, Private Wealth Mgt at Goldman. Also Larry Summers, Director of the President Obama’s National Economic Council; and Tim Geithner, the new Secretary of the Treasury and last fall’s head of the NY Federal Reserve Bank are both former protégés of Robert Rubin.

As far as I am concerned the current kerfuffle about the $165 million in bonuses paid out to AIG executives is a mere distraction from the much bigger mega-scandal of over $170 billion of make-good payments that AIG is funneling into the world’s financial counterparty community. This is the true AIG, Federal Reserve Bank, and U.S. Treasury misfeasance that Barney Frank and the rest of his masked bandits in Congress need to be investigating with their typical grandstanding vigor … instead of trying to grab headlines with this AIG bonus sidebar.

Obey

My wife and I recently visited the new Institute of Contemporary Art (ICA) museum, a spectacular cantilevered building overlooking Boston harbor. We spent at least 45 minutes waiting in a serpentine line of neo-hippies to pay an outrageous price (I think $12 @ plus expensive parking) to view, at best, a sparse and mediocre exhibit of “modern art” that rivaled the Rhode Island School of Design’s students’ exhibit in its schmaltzy glitz. (Note: the RISDI museum’s other standing exhibits, however, are well worth the entrance fee.)

The “highlight” of ICA’s current exhibits is the “Obey” section of graphic posters by “street artist,” Shepard Fairey, an iconoclast in the Andy Warhol genre from Los Angeles. See Shepard Fairey . Fairey is best known for his Andre the Giant posters and stickers (first created when he was at RISDI) and his recent “Hope” portrait of Barack Obama. This section is housed in 4 or 5 ICA exhibit halls and includes many posters filled with vitriol (greedy capitalism, George Bush as Satan) or adoration (Che Guevara, Angela Davis, Obama). These posters are so politically polarizing that it is difficult to judge their true artistic worth. However, grudgingly, they do show a modicum of creativity along with clever use of replicated computer-generated graphics.

But, I must also admit that I also foster an obsessive urge to return to the ICA with a few cans of spray paint hidden under my coat and tag many of Fairey’s more outrageous posters with my own political messages. I would continue this civil disobedience until I was hauled away in cuffs to spend the rest of my life in a Cambridge, MA gulag.

Closing observations:
- Of the many hundreds of attendees at this museum, we saw only one person of color (plenty of Asians though.) Strange?
- If you must visit ICA, spend some time sitting on the benches overlooking the serene Boston harbor (just before the “Obey” section). It will steel you for what is to come.

World’s Most Admired

FORTUNE Magazine has just published its list of the “World’s Most Admired Companies”. (Full disclosure: I was involved in the electronic publishing of this survey data for many years … when it was called “America’s Most Admired Companies”.) Even though this survey was done last Fall, it is quite revealing in which companies are leading in their industries and which companies are lagging:

Megabanks: Bank of America (#1, of all things! BAC stock now sells for $3.50))
Megabanks: Citigroup not even in the list of 7
Motor Vehicles: General Motors (#7, just ahead of Renault … stock sells for $1.60)
Computers: Xerox (#1, yes Xerox! When was the last time you saw a Xerox computer?)
Electronics: General Electric (#1, GE recently hit a 17 year low in the stock market)
Insurance: AIG, the world’s largest insurance company is no longer in the top 8
Infotech Services: IBM (#1, right ahead of Accenture)
Software: Microsoft (#5, behind Intuit, Adobe, Electronic Arts and Autodesk)

Now tell me that U.S. industries are not going through performance paroxysms.

Killing Capitalism

The stock market keeps going down hardly without a pause (see Market Plunge) … pretty much since it was clear that Obama was to be elected President. The nagging question is -- why? I have finally and reluctantly come up with my answer and it is not pretty – President Obama seems bent on killing capitalism. (Gasp!) What better way to slay the bourgeois notion of private ownership of the factors of production than to eliminate the shining symbol of this private ownership -- the stock market? Given what we learned about Obama’s friends and mentors during his campaign, I seriously doubt if this result would be inadvertent.

As a child in the 1940’s and 1950’s I remember that the Soviet Union would often use “Wall Street” as their bete noire representing the United States in their crusade to vilify and defeat us. So, someone who wants to “change” forever the fundamental character of this country might well first attack and eliminate this symbol. And Barack Obama seems to be performing creditably in his job one. For example, he has:

- continually talked down the economy and the stock market with his drum-beat doomsday pronouncements.

- systematically attacked U.S. industry groups with his plans for fundamental “change” – the pharmaceutical industry by planned drastic reductions in the government’s Medicare drug reimbursements; the coal industry by his threat to eliminate coal-powered electrical plants within ten years; the utility industry by his call for alternative energy sources without ever focusing on nuclear power and by his call for carbon “cap and trade” taxing; the health care industry by his thinly-disguised plans for the government eventually to be the sole health care insurer; the banking industry by his Treasury Secretary’s reluctance to spell out a workable rescue stratagem; the petroleum industry by backtracking on his party’s pre-election promise to begin more offshore drilling and by his eliminating tax incentives for new oil discoveries; the defense industry by his easy willingness to abandon our missile shield initiative and his implied coming draconian reductions in defense spending; the auto industry by making them effective wards of the state; and all industries in general by the crowding-out of future financing opportunities by the massive government borrowing that will be required to fund his stimulus bill (and other pork spending).

- shown little or no concern that trillions of dollars of wealth that has been destroyed by this stock market slide (reference Jim Cramer’s rants: Cramer Rants).

And apparently Jim Cramer and I are not the only people who think so. See also: Power Line and The Wall Street Journal

If this speculation of mine turns out to be true (and, believe me, we will know soon enough), it will be considerably ironic since it was many fat-cat Wall-Street capitalists who financed much of Obama’s campaign. (Sorry, no take-backs.)

Basket Case

The federal government (read the Pelosi/Reid lunatic ward) has just allocated $200 million to bail out the NBA. Are we f…ing crazy? We give this corrupt “Show Me the Money” organization our hard-earned tax money so that their million-dollar, gold-brick players can get more tattoos and wear more bling-bling? Perhaps we should just cede our government to Donald Trump or Bernard Madoff and get it over with?

Some More Pet Peeves

Conspicuous Consumption -- Take a few hours off one afternoon and watch some of the teen-directed cable channels (such as MTV) and gag your way through their presentations of the newly rich and famous (rap stars, professional athletes, etc.) giving us a tour of their McMansions ("This is my video game room." "Here are my paintings on black velvet." "This is my large collection of high-performance cars and motorcycles.") And see if you can find any redeeming social value in such lurid displays of conspicuous consumption.

Turkey Pastrami -- pastrami needs to be made from juicy beef brisket and marbled with copious fat … otherwise it is just spiced cardboard. Making pastrami out of turkey is like constructing Manhattan skyscrapers out of Tinker Toys.

Multi-colored Kids’ Plastic Outdoor Stuff -- I don't mind these toddler playground contraptions hidden away IN THE BACK YARD! But increasingly brain-dead parents are placing them in highly visible locations so that many houses are taking on the appearance of a McDonalds' playpen.

Child Car Seats -- I understand the need for infant car seats … but now we must place children up to their Sophomore years in college in contraptions that cost too much and do nothing but take up sitting space in our cars. Parents with more than two small children are therefore compelled to buy huge SUVs or vans just to hold these child cages proscribed by our nattering class.

"American people want …" -- Politicians who aver (usually on Cable TV) that "The American people want … blah blah blah". James Carville started this smarmy trend … now followed by such luminaries as Chuck Schumer and Chris Matthews. How these morons (usually liberal) know what the "American people want" is beyond me? I usually DON'T desire what is claimed of me and strongly resent such words being put in my mouth.

Hope and Change

The Dow Jones Industrial Average (DJIA) is down over two thousand points since Barack Obama was elected (from 9,617 to 7.553). I don’t know if this is a contra-indication to “hope and change” or possibly a reaction to the doom and gloom forecasts of Obama and the Democrat party. But it clearly is in spite of the fire-hose of money that is being spewed around ($700 billion of TARP funds, $20 billion to the auto industry, $787 billion in the recent Stimulus Bill to be signed into law today, AND over a trillion dollars of federal guarantees to Fannie Mae, Freddie Mac, AIG, Citicorp, Bank of America and other distressed financial companies.)

Why has this seeming disconnect occurred? Perhaps, because of the constant drumbeat of pessimistic pronouncements coming from the incoming administration. This morning, one talking head on “Morning Joe” suggested that maybe Obama had overdone this negative sell as a way of pushing through his stimulus bill. If this was the cynical case, then maybe our President, now that he has gotten what he wanted and with his marvelous rhetorical talent, could please talk us back out of this hole?

A Fast One

The fast talking team of Obama/Reid/Pelosi scammed the American people on Friday last when they pushed through Congress (not misnamed considering what “congress” is also a synonym for) the reconciled $787 billion Stimulus Bill with just three shaky Republican votes in the Senate (as opposed to eight dissenting Democrat votes in the House). This was done on the basis that we are in an economic crisis and could not spare one extra day for our legislators to actually read this 1,073 page tome which, I’m sure, contains item after item of special interest largess. (This reconciled bill was actually published just hours before it was voted on.) However, why then is Barack Obama waiting four extra days to sign this bill into law in Denver on this following Tuesday? Could not this time have been better spent uncovering all the Democrat agenda goodies hidden amongst the reams of camouflage? Perhaps these traipsing triplets could not wait for the voters to find the pea (pee?) under their rapidly moving walnut shells?

In the next six months the Obama presidency, I hope, suffers the drip, drip, drip in the media’s uncovering these honey dollops ... until such time as it becomes necessary for the next stimulus hog fest.

Elections Have Consequences

Show this to your grandkids. And then have them save it for their grandkids. (The last bar is 2009.)

Bambi

I should be supportive of Tim Geithner because he is from my alma mater. But his performance today, explaining our country’s financial itinerary out of our current economic crisis, was sub par at best. We were told last night by the Chosen One in his prime-time address to expect great things from his new Secretary of the Treasury, the Artful (tax) Dodger. Instead of getting St. Peter, we got a peter-out. His performance was devoid of promised specifics (“were not going to give the details of this plan until we get it right”) and was long on blame for his predecessors (of which he seems to forget that he was one). And, as a result the stock market is down 382 points and Obama has had to improvise in his Ft. Myers speech and pledge to redo things early next week.

Throughout his performance Geithner had that deer in the headlights look that George Bush was often criticized for having … thus Geithner’s new nickname, Bambi.

Caribou Barbie

Last night I heard some info babe on MSNBC refer to Sarah Palin as “Caribou Barbie” … bragging that she was the one who coined this appellation (she didn’t use the word “appellation” as I think it was above her pay grade.) I just Googled these words and find that Stephanie Miller, a progressive radio talk show host, is credited with this snot-nose term. And apparently this insult has been around from before Sarah Palin made her appearance on Saturday Night Live. (Surprisingly, Stephanie’s late father, William E. Miller, was Barry Goldwater’s running mate for his failed 1964 bid for the presidency.) Ms. Miller’s talk show, “The Stephanie Miller Show”, is L.A. based (surprise, surprise) and apparently is also in modest syndication (including Sirius Satellite Radio) … although I’ve never heard of it before.

So, I’ve been asking myself why am I bothered by this elitist comment? … particularly, when I am not upset by Rush Limbaugh’s insulting term, “femiNazi” or his aphorism,“feminism was established so as to allow unattractive women access to the mainstream of society.” I think what puzzles me most is why liberals seem to hate Sarah Palin with such a crazed zeal. It feels that liberals despise her mainly for her old-fashioned values (self-starting, family-first orientation, corruption fighting, rugged individualism, etc) combined with her good looks. To pose an analogy -- if Barry Goldwater (ironically) were to have a child with Annie Oakley, the result would be something like Sarah Palin. Perhaps (to play psychoanalyst), Stephanie Miller may be exhibiting a latent hatred of her father and consequently his politics? Or maybe she just wants to get more ink (like this blog entry).

I Was Wrong …

When I predicted that, after the election was won by Obama, the Democrats and the main stream media would stop talking down the economy. In fact the drumbeat of doom and gloom has intensified to the point of near hysteria. But, I now predict (with much more confidence) that, after the Democrats’ spending (er, stimulative) bill gets passed, that suddenly, within weeks if not days, the sun will rise, the birds will be singing, and the wind of Obamania will blow away the specter of economic catastrophe. This will occur despite the fact that the true impact of these spending (er, stimulative) provisions will not kick in for months or even years (and in most cases, never).

Tina Katriina

Nearly one million people are without power in our Nation’s midsection going on the sixth day. At least forty-two people have died as a direct result of devastating ice storms that have left the center of the country (mostly rural Ohio, Kentucky, Texas, Missouri, West Virginia, Oklahoma, Indiana, and Virginia) gripped in continuous sub-freezing temperatures. No heat, little water, and in many cases sparse communications are the plight of over 500,000 homes -- a huge swath of U.S. citizenry have been forced from their houses. This devastation is not as large as was experienced with Hurricane Katrina (with over one thousand deaths directly and indirectly attributed to the hurricane) … but this one is spread over a much large area and has about the same number of people having been dislocated as was the case in New Orleans … but, hopefully, for a much shorter time.

Local officials are upset at the poor response from the states and the Federal Emergency Management Agency. What has President Obama been doing? He did declare a federal emergency for Missouri – five days after the fact. But he hasn’t even flown over the region in Air Force One to inspect the plight of this mostly white area of the country. Instead, he is throwing a Super Bowl party in the White House where the steaks served cost $100 per pound. Many have been speculating as to whether President Obama indeed has much empathy for the citizenry of these mostly “red” states.

[I do realize that this, although accurate, is grossly biased reporting, but I am just trying to mimic how the drive-by media excoriated Bush after Hurricane Katrina.}

Taxing Issues

Tom Daschle has hit a snag in his appointment to head HHS. Apparently he has had to correct his tax filings for the last three years and is paying around $130,000 in back taxes and interest (no penalties). He somehow forgot to account for his use of a free limo and driver for this period of time. (I think he has also had tax problems in the past associated with a vacation home he owns in North Carolina.)

Tim Geithner, just shamelessly confirmed to head our Treasury Department, has also had to pay self-employment taxes for 2001-2004 when he worked for the IMF. After these oversights were found, he had to pay back taxes and interest (no penalties) of $43,200. (Even though Geithner was re-imbursed by the IMF for the taxes he hadn’t paid, President Obama labeled this an “innocent mistake”.)

Representative Charlie Rangel also failed to report some $75,000 in rental income from vacation properties he owns in the Dominican Republic. He will (someday) be filing amended returns. It is expected he will owe the IRS thousands of dollars. Strangely he also has paid no interest on the mortgage he used to buy this property … weird? (He heads the House committee that writes our tax code.)

There are many, many more politicians who face IRS scrutiny, Ted Stevens from Alaska and William Jefferson from Louisiana to name but two … maybe even Christopher Dodd if he ever gets around to disclosing the terms of his sweetheart mortgage from Countrywide Finance.

Therefore, my solution to our rapidly growing national deficit is for the Internal Revenue Service to give all politicians of any stripe a colonoscopic audit of their tax filings for the last five years. The money that they would recover should be monstrous. But wait, since Geithner is now head of the Treasury Dept. under which sits the IRS, this seems somewhat unlikely to happen.

Politicians vs. Statesmen

My memory is becoming more and more unreliable, but I seem to recall that we once had such things as “statesmen”. These were people who placed what would be best for our country ahead of their and/or their party’s political ambitions. I recall such people as Daniel Patrick Moynihan, John Danforth, John F. Kennedy, Everett Dirkson, Barbara Jordan, Alan Simpson, and Sam Nunn often exhibiting such patriotic selflessness. Now, we have a new administration that, together with Congress, has placed before the American public an $800 billion package of government programs that is meant to stimulate job creation and insure economic recovery. It is called the “Economic Stimulus” package. It is, in fact, a wish list of liberal power grabs, special interest spending programs, and constituent payoffs that have only a passing semblance to job creation. What we need instead is a set of tax and regulatory incentives that lead to a re-awaking of the economic giant that is the United States.

What we also need are statesmen. What we have instead are Nancy Pelosi and Harry Reid … unbridled by our new President who has promised change and is now trying to take advantage of our current economic problems to lock in four years of his leftist programs in one fell swoop. If this Economic Stimulus package gets implemented as it currently stands not only will it not bring us out of our current economic malaise, but it will surely sink us further … only to create the need for more shined-up Socialism within the following year.

Na Na Na Na-Na!

You think you could run up deficits!

Family Shopping

(a rhyming poem)

With the hours spent waiting for my wife,
I could've added two more years to my life.

Politics Ain’t Beanbag

Caroline Kennedy’s on-again, off-again, on-again, off-again quest for Hillary Clinton’s Senate seat ended with a whimper as she finally gave up, you know, and reacquired her married name, you know, Schlossberg. There is lots of speculation as to why Governor Paterson left the daughter of Camelot slowly swing in the wind for so long and then, assumedly, told Caroline that she wasn’t going to be the anointed. Now, the obvious question is, why?

May I suggest that Caroline’s early endorsement of Barack Obama (along with her uncle, Ted) and her serving as co-chairman of the Obama’s Vice President selection committee … both together made her mega-toxic to Hillary and Bill Clinton. And this Pleasantville daring-duo are not used to losing their political skirmishes. Therefore, I can easily imagine that the Clinton’s famed opposition research team finally found some real dirt on Caroline and consequently flushed her into political purgatory.

Now, despite what the Clintons may have found out, I don’t believe that she was as scummy as most politicians we are exposed to these days (Ted Stevens, William Jefferson, Charlie Rangel). So, in a strange way, I’m sorry to see her savaged by her political enemies the way she is … kind of like that doey-eyed baby impala having its throat ripped out by a cheetah.

Chicken Little

Jim Hansen, a leading NASA scientist has been crying wolf about Global Warming since 1988. His latest warning (see The Sky Is Falling) is particularly shrill and doomsday predicting. Now Herr Hensen might be right in his dire warnings but, then again, the tone of his rhetoric suggests to me a bit of panic in that there has been a decided public opinion shift toward the doubters … perhaps due to the spate of very cold weather we have had lately. (Also, perhaps because global temperatures have not increased since 1999 and, many scientists say, are falling back to levels more normal to the last century.) I chose to believe that it is cognitive dissonance that is driving the Chicken Littles of the Global Warming Cult to up the heat-level of their public pronouncements … from the sanctity of their Gore-created-and-protected Mount Olympus.

If we could only package all this bluster and shoot it off into space, we surely could delay the possibility of real global warming for another century.

More Compound Interest

In the previous piece on Interest Rate Swaps (IRSs) it is stated that these derivatives now total some $400 trillion. This is a huge number, yes, but there is some amelioration to this figure. First, this number represents the principle debt that is being hedged and not the interest on this principle. Therefore, the amount of interest that is being hedged must be something like 5 or 6% of this figure, or about $20-$24 trillion -- still a very big number, but not as large as all credit default swaps (including the Collateralized Debt Obligations, CDOs, arising from the sub-prime mortgage industry) that may total $60 trillion.

Also, in most cases (except for runaway inflation … a very important exception) the amount of exposure to the guarantor or guarantee against interest rate swings would be smaller than this number, say just one or two percentage points (100 to 200 basis points). This suggests that the total risk exposure from IRSs is smaller still, say around $4-$8 trillion, far from a trivial number. But this may have also effectively doubled (to roughly $10 trillion) the total counter-party risks that financial institutions found themselves burdened with last summer when the LIBOR swung up one and one-half basis points at the same time as Credit Default Swaps on sub-prime mortgages were being called in … if (and a big “if”) we assume just the first level of CDS exposure. One more salient point, unlike CDSs, the IRSs are zero-sum. In other words for each financial loser, there should be, without defaults, a financial winner. Who they are and were I haven’t a clue.

But still the $400 trillion of IRS’s principal does show the degree to which the world financial markets had been over-leveraged … perhaps encouraged to do so by the false sense of security that IRS derivatives seemed to provide them. This is a good reason why this whole notion of interest rate swing hedging should be rethought in the future. It might be OK if just a few do it, but not OK if everyone is doing it.

Compound Interest

I have written in the past about Credit Default Swaps (CDSs), a form of financial derivatives that appear to be a major reason for our recent banking and insurance industry crises (see here). Basically CDSs are unregulated insurance policies naively written by many companies without sufficient reserves to cover any subsequent claims. When, due to the sub-prime mortgage crisis, many of these “policies” came due and there was not enough money at the guarantors to pay the guarantees off. A rough estimate is that there are now almost $4 trillion of defaulting sub-prime mortgages but something over $50 trillion of CDSs written against them. In other words, CDSs had become a huge financial industry Lotto game.

Now I am learning about another financial derivative that may be even more onerous – Interest Rate Swaps (IRSs) … again, unregulated and seemingly out of control. IRSs are a form of financial barter that allows institutions to hedge their monetary return from variable-rate interest-bearing securities by exchanging this interest for a “less-risky” fixed-rate cash-flow stream. The unsettling statistic is that these derivatives now total some $400 trillion … yes, $400 trillion. This pile of monetary obligations far exceeds the Gross National Product of the world … and probably also is approaching total world assets ... estimated to total around one quadrillion dollars. To better understand this mare’s nest of financial legerdemain see Interest Rate Swaps and also PIMCO Explanation. And, if you do understand IRSs, please explain them to me (and to many of the Risk Assessment Officers at the companies that are now receiving TARP funds.)

When you read these explanations of IRSs you will see that the key variable interest rate that is the touchstone of many of the various IRS options is the LIBOR (London InterBank Offering Rate). This is the rate at which banks around the world are willing to lend to one another … a little like the U.S.’s Federal Reserve Discount Rate. Now, if hundreds of trillions of dollars of interest rate bets are keying off this one number, then small perturbations in this number can whipsaw IRS guarantors and guarantees dramatically. And if, as it happened, the LIBOR rose dramatically when the world-wide financial crisis hit last summer (see LIBOR Rate Chart) , then the shock to the IRS markets must have been mind-numbing. Yes, the LIBOR rate swung dramatically back at the time of Clinton’s last year in office. But, the amount of IRSs in force then were lower by at least 80%.

Now, to let my paranoia surface a little, why wouldn’t someone or some country that wanted to damage our world’s financial markets do their best to perturb the LIBOR rate? This seems to me to be an Achilles’ heel of the financial derivative markets and may be a reason to reformulate IRSs entirely.

The More Things Change …

Obama’s Clintonista pre-election advisors – Franklin Raines, Jim Johnson

Obama’s Clintonista transition team members -- John Podesta, Sandy Burgler, William Perry, Madeleine Albright, Robert Rubin, Betty Currie

New Clintonista Obama administration members -- Rahm Emanuel, Eric Holder, Greg Craig, Tim Geithner, Bill Richardson (oops), Larry Summers, Hillary Clinton, Susan Rice, Carol Browner, Shaun Donovan, Leon Pinetta, Elena Kagan, David W. Ogden, Thomas J. Perrelli, Dawn E. Johnsen, Nancy Killefer, Julius Genachowski

Can we (you) get (y)our money back?

Are We Mad?

Here are a translation of some of the cell phone conversations between the Mumbai terrorists and their Pakistani handlers: Praise Allah. I don’t know where they came from (NSA?) but surely, were they intercepted inside the United States, they would be deemed by many as an invasion of the Constitutional rights of the callers. This by itself would cause paroxysms of consternation at the ACLU to the point where what actually went on there would be drowned in the din of protest. Sigh …

Thumper Stumper

Barack Obambi proposed today an economic stimulus program which will cost taxpayers (our children and grandchildren mainly) at least $800 billion and create (or save) 3 million jobs. This works out to $267,000 per job created (or saved). Now I don’t currently have a full-time job and, considering what is happening to our economy, I think that I need to get one. But musing further on this issue, I think I would rather have the cash.

Skin Flint

Times are really tough … and I mean tough. It seems that the pornography industry is suffering because of the softening in our economy. Because the porn industry is barely making it, Larry Flint, publisher of a series of skin magazines (“Hustler”, “Barely Legal”) is traveling to Washington along with Joe Francis (“Girls Gone Wild”) to beseech Congress to pony up $5 billion of aid to revitalize their industry. Flynt is quoted as saying, "It's time for Congress to rejuvenate the sexual appetite of America." Why not? Banks are screwing us. Wall Street is screwing us. The auto industry is screwing us. Barney Frank and Chris Dodd are screwing us. Why not Larry Flint and Joe Francis? We could call it the "Public Money for Private Parts" bill.

Thought for the New Year

And see here.

And here.

And here.

And especially here.

Dark Ages

Rush Limbaugh offered something like the following perceptive observation on Friday last:

Scientists have become alarmed at the accelerating decrease in sunlight available each day in the Northern Hemisphere. Since the end of this past June, the minutes of daylight have steadily shrunk to the point of near panic. All U.N. scientists now agree that, if this decrease continues apace, our 24-hour day will be totally dark by the end of this coming June … not one glimmer of luminescence. And what is worse – it seems that this lost light has been leaking down below the equator. While we here would be forced to live without natural illumination, those in Africa, South America, and Australia would enjoy twenty-four hours of sunlight … obviously Nature’s reward for these peoples’ limited use of the world’s natural resources.

So everyone in the Northern Hemisphere is besought to stop driving their cars, heating their homes, and using electricity for any purpose. And moreover, everyone is also asked to purchase daylight offsets from the George Hamilton Daylight Offset Foundation. Each $1,000 donated will allow us to regain one more second of daylight over the next six months. Please, please, please don’t let George Hamilton fade to pastiness. Thank you all!

Bush Derangement Syndrome

President Bush was interviewed on television today … of which snippets were replayed on MSNBC tonight. I happened to catch this exchange:
Questioner: “What are you going to do about the auto industry bailout?”
Pres. Bush: “You’re assuming I’ve made up my mind.”
Switch to Keith [D]Oberman back in the MSNBC studio: “No, that’s assuming Bush has a mind!”

Also today I received the following link from my wife’s cousin in France: http://www.sockandawe.com/
At this site you get to throw shoes at President Bush. Over 44 million shoe hits have occurred (from around the world). Now, isn’t that special?

Both these instances above indicate a galloping lack of civility toward the United States and our current leadership. They display a degree of rabid disrespect and even hatred that I have seldom seen exhibited … except perhaps for our mortal enemies in time of war. This “Bush Derangement Syndrome” is freely displayed by TV commentators/talking heads, in many published venues, by most reporters, and very often in “polite” conversation. It seems that everyone is now vying with John Stewart of the “Daily Report” to out-snide him. As bad as Jimmy Carter was, I don’t recall him ever being excoriated like President Bush. We have now a wood-chipper main stream media which likes to pulverize public figures just for the sport of it. And, if Barack Obama thinks he will be forever immune from their blood lust, then he is more naïve than perspicacious.

I Believe …

- Many powerful liberal politicians believed that everyone in America should own a home regardless of their means or morals. (Some now believe that they were wrong ... how quaint.)
- They coerced, with regulatory and oversight threats, banks and other institutions into offering such “sub-prime” mortgages.
- Banks and these other institutions discovered that they could package these mortgages (collateralized debt obligations -- CDOs) and sell them to, among others, Fannie Mae and Freddie Mac.
- Since the origination fees from this pass-through sub-prime mortgage process was very profitable to these banks and other institutions, they became willing co-conspirators.
- Because of the implicit government guarantees of these packaged mortgages, credit rating agencies placed unrealistic high ratings on them and on the institutions that held them.
- Fannie and Freddie were overly-populated with liberal ex-pols who were more than willing to participate in this fraud since their annual compensation was based on the volume of said transactions. The growth in the portfolios of sub-prime mortgage packages at Freddie and Fannie was exponential.
- All efforts to monitor and/or regulate this sub-prime process at Fannie and Freddie were squelched by accusations of racism from liberals in Congress
- At the start, the ease with which these sub-prime mortgages were off-loaded caused banks and others (such as Countrywide) to drop any semblance of checking the credit-worthiness of their mortgage borrowers. The writing of mortgages without suitable documentation became rife. Home-buyers couldn’t believe their luck and many went hog wild.
- The volume of these sub-prime mortgages grew to such an extent that many remained at their originators because, for no other reason, the origination fees were so profitable.
- Concurrent with this, because of accounting frauds at Enron and others, accounting rules were changed by the SEC to force companies to “mark to market” all balance sheet assets
- Also concurrent with this, a financial instrument appeared called a Credit Default Swap (CDS) which allowed institutions to insure most any financial asset against credit default
- Banks and other institutions sold CDS’s to protect themselves against losses that would occur if the collateralized mortgages on their books went into default. But they went much further; they (including many insurance companies and foreign institutions) bought and sold CDS’s far beyond the face value of the underlying assets (as much as ten times their value). CDS’s became, effectively, a gigantic, unregulated casino.
- When sub-prime mortgages began to default in droves, asset packages including these mortgages became difficult to value (or mark to market). Many of these asset packages (even though producing a steady, albeit somewhat reduced, income flow) were forced to be drastically devalued on balance sheets.
- Because of the sheer size of the CDS market ($60 trillion?) and its lack of regulation, many of the insurance policies on these defaulting sub-prime mortgage packages could not be honored which put the buyers and sellers of these CDS’s in great financial jeopardy (eg. AIG). This then began the world-wide freezing up of capital markets.
- Because of the capital-ratio requirements at banks, many of such institutions were forced to raise more capital in a capital market that was rapidly freezing up. It was then either insolvency or a government bailout.
- Enter Henry Paulson and the U.S. taxpayer.

Car Czar

My wife made a beautiful suggestion this AM regarding the automaker's bailout. Make Mitt Romney the "Car Czar" ... the one who oversees the bailout money and the reorganization plans of the automakers (since it now seems inevitable that they will get a ton of taxpayer money). He has all the qualifications and then some ... and seems to have the time. Nah!!! He would probably insist on the unions biting the bullet and it would also set him up as a political rival to the Democratic juggernaut. We can't have that!! It will probably be some doofus like Robert Kennedy Jr. Sigh ...

It’s not what you say …

it’s the way that you say it. A comparison was drawn recently between Barack Obama’s interview on 60 Minutes … his talking in dulcet tones and in complete sentences … and George Bush’s grating, fractured English. However, it seems to me that we all need to pay more attention to what people say and not to the melodious nature of their rhetoric. For instance, shortly after his election to the most powerful political position in the world, I would still like to know if Obama:
- Is going to raise taxes on the wealthy and lower taxes on 95% of Americans?
- Is going to withdraw American troops from Iraq before the most recent Iraq-set target date of the end of 2011?
- Is going to zero-out unproductive and non-effective government agencies?
- Is going to reach across the aisle to Republicans or have Rahm Emanuel take out his Uzi?
- Is going to bail out unconditionally the big three auto makers or make the United Auto Workers first bite the bullet?
- Is going to install almost a trillion dollar stimulus package or pull in the U.S.’s fiscal horns?
- Is going to create a civilian defense force bigger than our military?
- Is going to renegotiate NAFTA and back away from other free-trade agreements?
- Is going to eliminate workers’s secret union ballot?
- And many more.
Somehow, after cringing through one of GWB’s leaden presentations, still I always knew where he stood. Not so the case with our current President elect.

Speak Up Joe Biden

Golly gee, I sure hope that the Indian government didn't torture those terrorists that they captured last night in Mumbai. That would surely be wrong.

The Fox in the Henhouse

Let's see:
Barney Frank is set to fix the sub-prime mortgage mess.
Robert Rubin is pulling the strings to unravel the credit default swap debacle.

What's next?
Osama Bin Laden will be asked to remedy Islamic terrorism?

The Experts

They said that saccharin was needed to stop the plague of diabetes. Then they said, “Oh no, stop. It causes cancer!”
Six months ago, they said gasoline was going to $6.00 or more a gallon. I just filled up at $2.03.
They told me butter was bad for me. Eat margarine instead (the original transfat). They were dead wrong. (Julia Child knew.)
They told me I couldn’t use DDT. It made the egg shells of peregrine falcons thin. The result was that millions of people died of diseases carried by mosquitoes that DDT would have eliminated.
They told me I couldn’t eat French fries cooked in lard (that tasted sooo good!) Now I eat them cooked in tasteless safflower oil while the French laugh at us.
During the Carter administration when interest rates were 16%+, they said they would never again sink into single digits. They are now 1%.
They told me that the thimerosal in vaccines causes autism. It now appears that they were wrong See this NY Times Article.
They told me that to eat only organic foods while they stuffed their noses, stomachs, and veins full of non-organic, illicit designer drugs.
Now, they say that carbon dioxide is the bane of mankind.

Not So Merry-Go-Round

From the Dartblog: “According to data from Markit printed by WSJ, on August 1, it cost $15,000 to insure $10 million of US Treasuries against default but only $7,000 for German sovereign debt. That number has more than doubled to $32,000 for US debt but Germany’s has spiked to $33,000. The UK trails in at $58,000 and Italy at $109,000.”

From the above it is clear that the credit default swap (CDS) market is indeed existential. If one has to insure one’s purchase of an U.S. Treasury obligation against default, then what happens if such an event does occur. Clearly, since for each billion dollars of Treasury obligation, there is probably $10 billion of CDSs written against it, such writers of these CDSs will likely again be flocking to the U.S. Treasury for a bailout since most such insurers would be far too undercapitalized to make good on the bets they had made (like AIG). However, since it would have been the government itself that had defaulted, where are they (we) going to get the moolah then to perform such bailouts? And, if we stupidly print this money, wouldn’t this just snowball into more U.S. Treasury defaulting?

Twice Shy

I know that the Kool-Ade drinkers don’t believe that Obama flipped off Hillary earlier this year (middle finger scratching his cheek whilst he referred to her.) Now, he’s at it again while congratulating McCain. See: Congrats John Please, you Obama supporters with those bright orange stains around your mouths, rationalize how this happens twice. Or perhaps you think that it is cute to be so thuggish?

Redistribution

I guess I am not surprised that Obama has been revealed as favoring a redistribution of wealth. But what fazes me is that my leftie friends believe that this just means “marginal redistribution” … that is, upping the tax rate on people earning over $250,000 per year (Obama’s original target) … er, $200,000 per year (ala Obama, more recently) … er, $150,000 per year (ala Biden, yesterday). But, true redistribution of wealth would go much further … into redistribution of our citizen’s assets (remember what happened in China, Cuba, etc.?) Don’t snigger, the radical left is perfectly capable of applying this precept, particularly if they have a super majority in the Senate. Don’t forget that Obama’s church, the Trinity United Church, has required all its members (and this includes Obama) sign its manifesto which eschews “middleclasscedness.” I know that this sounds like scaremongering (as per Dennis Kucinich Noonan) but are you confident enough in Obama to say that this is not part of our future as he sees it?

What Went Wrong

Why things currently seem so bleak:
- Overleveraging (subprime mortgages, credit-default swaps, hedge funds, low interest rates)
- Lack of oversight in credit markets
- Commodity bubbles (oil, corn, natural gas, gold)
- Interlocking world credit markets
- Slowdown in Chinese infrastructure spending after the olympics
- Lack of fiscal discipline in government spending
- Competition for hegemony (Russia, Venezuela, Iran, North Korea, Syria, China)
- Decline in statesmanship among U.S. politicians
- U.S. Election (Democrats seeking advantage by talking down the economy)
- U.S. Elections (growing fear about the consequences of an Democrat sweep)
- Decline of objective media reporting

Thought for the Day

When times get tough the electorate blames everyone except themselves.

Yes, We Can’t

Yes, I am old and crotchety. But I still remember the can-do attitude that prevailed through most of the twentieth century. Then, the United States could do anything we put our minds to – build the Empire State building in one year; the Hoover dam in five years, the Golden Gate bridge in two years; win two World Wars; tame nuclear fission and fusion; make viewable movies; build the most massive engineering undertaking by man – our interstate highway system; put a man on the moon; and invent most of the technologies that are now manufactured in foreign lands. But this national spark seems to have faded as we limped into a new millennium. Today we are, unfortunately, a nation of can’t-dos:

- We can’t exploit our natural resources such as oil, coal and timber
- We can’t build a strategic missile-defense shield
- We can’t smoke tobacco (other herbs are OK)
- We can’t win any war into which we are drawn
- We can’t build nuclear power plants
- We can’t wear fur or perfume
- We can’t control government spending
- We can’t exercise our national hegemony
- We can’t keep unqualified people from having mortgages
- We can’t control who immigrates into our country
- We can’t execute serial or cop killers
- We can’t discipline our children
- We can’t preserve our time-honored traditions … such as marriage or Christmas
- We can’t stop killing full-term fetuses
- We can’t eat meat or animal fats
- We can’t keep uneducated students from graduating
- We can’t encourage our residents to learn English

And the sad irony is that those who mostly espouse the above taboos are the ones who are noisily chanting the mantra, “Yes, we can!”

Same Sex Marriage

Marriage is a social contract between two people of opposite genders who promise to procreate and raise the resultant children to the benefit of our future civilization. This contract is consequently rewarded by our society with certain social and financial benefits (including an ephemeral caste elevation). Now same-sex partners seek (and, in some states, have already received) these same benefits. May I suggest that same sex marriage brings with it the following problems:

- Male-male marriages cannot, by definition, procreate. Yes, they can raise adopted children but do not seem to be overly enthusiastic to do so. And those that do suffer the problem of imprinting a stigma on children of either sex that females are somehow flawed.

- Female-female marriages can, due to modern science, procreate. And they can also adopt children (those who make it past Planned Parenthood’s vacuum cleaner). However, I think that their issue (or adoptees) also suffer from the potential of making any male rug-crunchers feel that they are substandard and not deserving of intimacy.

- There is a bookshelf full of laws that have been written using the base-line assumption of male-female marriage. Changing this definition will throw many of these laws into a cocked hat ... which should take a generation to unwind. This will guarantee full-employment for lawyers for ages. (One reason why we might think about excluding lawyers from our governing bodies.)

Nose Thumbing

When George Bush put restrictions on under what circumstances the federal government would fund stem-cell research, at least two states, California and Massachusetts, stepped up to announce that they would fund such research themselves, California put aside $3 billion and Massachusetts, $1.25 billion. Effectively, they thumbed their noses at Bush and played Mother Teresa to Bush’s Ebenezer Scrooge
.
Now California is running short of funds and has floated a trial balloon that it might have to ask the U.S. Treasury for a loan of $7 billion. See California Loan I predict that Massachusetts will probably be soon in the same predicament as its reputation for fiscal restraint under Deval Patrick is not stellar. See Budget Problems

May I posit that our Treasury Secretary, Hank Paulson, should respond to these hat-in-hand requests with the suggestion that these states first find the money in their stem-cell research kitties?

Corrosive Practices

The following are, in my opinion, popular or looming practices that are corrosive of our society and would be better left on the cutting-room floor:
- Sub-prime mortgages
- World government
- Government sponsored enterprises (GSEs)
- Motor-voter registrations
- Same-sex marriage
- Black reparations
- Credit default swaps (CDSs)
- Goth culture
- Mark-to-market accounting
- Late-term abortions
- Too-easy credit
- Dark-pool securities trading
- Government bail-outs
- Hedge funds
- Global warming hysteria
- Single-payer healthcare
- Off-balance-sheet accounting
- Onerous gun registration laws
- Islamic fundamentalism
- Grunge, rap and heavy-metal music
- Disproportionate executive pay
- Same-day voter registration
- Naked short selling

What They’re Not Telling Us

$700 billion is a boatload of bailout money (if it is eventually allocated by Congress). But, to fully understand our current economic paroxysm, one must add to this money the $200 billion bailout of Fannie Mae/Freddie Mac AND last week’s $300 billion Congressional bailout of Main-Street mortgage holders. This would total $1.2 trillion of taxpayer relief to ameliorate this financial predicament (tagged “The Sub-prime Mortgage Crisis”). Add to this the approximate $400 billion of write-downs that U.S. corporations have already taken against these bad assets brings this total to around $1.6 trillion. If the average mortgage in default is for $200,000 (probably high) that suggests that there are around 8 million houses that are foreclosed or in arrears. This seems to me like a very high number since the total number of U.S. homeowners’ mortgages is only about 44 million. To view it another way, as of this summer there were in the U.S. $3.6 trillion in real estate loans and the latest statistic is that 9% of them are foreclosed or in default. This totals $324 billion of problem mortgages or about ¼ of the government money that Frank/Pelosi/Paulson have or want to be thrown at this problem. And this is less than the toxic amount that has already been financially evaporated off corporate balance sheets!

So, it seems to me that there is a lot more to this economic crisis than they are telling us. I suspect I know what it is … and it is something called “credit-default-swaps” (CDSs). Basically these are unregulated (and therefore opaque) ad hoc insurance policies that have been created to offload risk from debt holders (such as banks) in case these debts (such as mortgages) are not paid back. These CDSs carry an insurance premium and have been traded worldwide back and forth like stocks and bonds … that is, they did until the credit markets recently froze up. (The worldwide nature of CDS trading, it seems to me, is why what should be an U.S.-only problem has spread around the globe.) Now, if the final holder of some of these CDSs goes belly-up (such as AIG), then this insurance also disappears and the backstop to mortgage holders becomes will-o-the-wisp. The most recent estimate of the total amount of CDSs circulating world-wide is $62 trillion … a staggering number … which effectively multiplies the size of the mortgage crisis by almost 39! Now note that, when AIG went south, the Federal Reserve also stepped in and fronted AIG with an $85 billion bailout. So, I conclude, that, no matter how this financial crisis is being painted as the failure of U.S. sub-prime mortgages, it is now really a collapse of the worldwide CDS market precipitated by the U.S. sub-prime mortgage crisis (which, as has been shown, should have more than enough committed funds to fix it).

Obvious Conclusion: The $700 billion bailout package REALLY IS A BAILOUT OF WALL STREET AND ALL THOSE INSTITUTIONS THAT HAVE CREATED CDSs. IT ONLY HAS A TANGENTIAL RELATIONSHIP TO MAIN STREET. IT SHOULD NOT, I REPEAT NOT, BE ENACTED UNLESS AND UNTIL IT CONTAINS RULES AND OVERSIGHT FOR THE CDS MARKETPLACE. (IMHO)

Word Smart

As used by Joe Malchow in the blog, Dartblog (definition from Websters)

semiotics
def: a general philosophical theory of signs and symbols that deals especially with their function in both artificially constructed and natural languages and comprises syntactics, semantics, and pragmatics

Party Animal

Republican or Democrat? The way to determine what political party you effectively are is to see which one you are willing to give the benefit of the doubt to.

Voting Requisites

As we approach our next national election, my misgivings about our election process are growing. No, I do not mean “hanging chads” or “paper trail” concerns; I mean I am worried about who gets to vote. When I am allowed to add my bit to the Constitution (why not, everyone else seems to want to), I would advance the following new requirements for voter eligibility:

- Must be able to read and laugh at a Dave Barry column
- No more than one (inconspicuous) tattoo
- No body piercings with rusty protuberances
- No weirdly spelled first names, such as Jessye, Eriq, and Alisyn
- Must be a taxpayer – “No representation without taxation” … this would eliminate most students in situ (unless they went home)
- No members of PETA, NAMBLA, or the ACLU
- Cannot be a regular MTV or “The Daily Show” viewer
- No droolers
- No TV talking heads or news anchors
- No professional athletes or, for that matter, anyone earning over $1 million per

That should do it.

Mark to Market

There are plenty of charlatans who are to blame for our current financial crisis – such as Barney Frank, Franklin Raines, Chris Dodd, Jamie Gorelick, and Jim Johnson. But there is one overweening reason that, combined with the loopy notion that the U.S. taxpayer should buy everyone (of whatever means and morality) a house. This naive idea has brought this country, like Monica Lewinsky, to its knees. This reason is poorly understood by most and, thus, needs to be explained further. This precipitating event was the FASB’s (Financial Accounting Standards Board) change of accounting rules a year ago (FASB 157) that decreed that companies must daily “mark to market” any balance-sheet assets. Mark to market means that any asset, such as a mortgage must be valued at what a willing buyer and a willing seller would agree to in order to affect a transfer.

Now, when financial panics occur, such transactions become very sticky and thus marking to market becomes degenerative. For instance, if a bank’s asset’s value (such as a mortgage) sinks by $50,000, this means that required capital rations cause a bank to reduce it’s lending by $500,000. This puts the pressure on the bank to raise additional capital to justify its current lending portfolio … and, if unsuccessful, further reduces the pool of willing buyers and the mark-to-market price of its mortgages. A vicious cycle is initiated which, as we have seen, can wipe out a financial institution in a matter of days.

Secretary of the Treasury, Henry Paulson, started his testimony to the Senate on Monday with an explanation of this toxic process. He suggested that we might consider changing this rule to permit a less onerous way of valuing such assets, basically a discounted stream of future income. Thus, if a mortgage is to return so much per month for the next 25 years, one could apply a discount cash flow rate of say 5%. If such a mortgage is in default, then the discount rate would be higher, say 10% and the resultant discounted value substantially lower. But, this is a lot less punishing than what is currently required by FASB 157 … yet far better than what Japan did years ago when banks kept mortgages on their books at full value and it took over a decade for Japan’s financial stability to return.

An interesting twist to this dilemma is that Chris Cox, the head of the SEC, could, with the stroke of a pen, change this “mark to market” accounting requirement … to a discounted cash flow calculation and, thus, possibly eliminate the need for the $700 billion bailout now being debated in Congress. Perhaps, McCain’s calling for Cox’s dismissal had some legs after all.

Uh Uh Uh

"WASHINGTON (AP) - Democrat Barack Obama studied and practiced privately with aides in a Florida hotel Tuesday in the first of three days of intense preparations for his upcoming foreign policy debate with GOP rival John McCain."

They're giving him an uh-uh-uh-dectomy.

Robin’ Robin Hood

Barak Obama, if he is elected, has a Robin-Hood economic plan – tax the “rich” and reward the “poor.” Unfortunately for his election prospects, such wealth redistribution is now taking place in clubs (I can’t say that other word). Hedge funds, the piggy banks of the plutocrats, have, over the last few months, taken multiple financial hits:

- First, the bursting of the oil and other commodities bubbles

- Second, the freeze-up of financial liquidity brought about by the sub-prime mortgage fiasco

- Thirdly, the blood bath on Wall Street due to the failures of Bear Sterns and Lehman Brothers (and, to a lesser extent, Merrill Lynch) and the bailouts of Fannie Mae, AIG, and Freddie Mac

- Fourthly, the world-wide dramatic deflation of emerging-economy equity markets – particularly China and Russia

- Fifthly, the current run on the money market funds to the extent that they needed to be backstopped by the U.S. Treasury

- And possibly others to come

It is the lucky nabob who has navigated these treacherous times with his/her fortune intact. Therefore, Barak’s social-engineering economic promises have become somewhat moot. Come his prospective January inauguration, it is unlikely that there will be an extra penny in the U.S. Treasury for Obama to buy a populist’s vote for his second-term run. He will be lucky if we can pay for Michelle’s redecorating of the White House (as all First Ladies seem prone to do.)

Queasy about Quasi

You’d think we’d learn.

Politicians (and unfortunately, voters) frequently set up quasi-governmental organizations to remove them from the corruption of political patronage and malfeasance. Massachusetts set up the Massachusetts Turnpike Authority (MTA) in 1952 for these very reasons and Congress created Fannie Mae and Freddie Mac in 1968 for many identical rationales. Big mistakes! The MTA sired the “Big Dig” that has cost the taxpayers upwards of $17 billion dollars (about ten times the original estimate) for a series of leaky tunnels and contractor corruption that rival a third-world country.

And Fannie Mae and Freddie Mac were created to buy mortgage securities with the “implicit” backing of the U.S. government. And these two have been, as described by Mort Zuckerman, “the honey pot of the Democratic Party for a number of years.” Now the Federal Reserve Bank has had to step in to save these venerable mortgage-backing institutions from themselves by changing “implicit” to “explicit”. This all done at an ultimate taxpayer cost of probably hundreds of billions of dollars!

What happens with these quasi-governmental organizations is that they are effectively removed from voter oversight but not from the greedy designs of politicians. Interested readers can, within a few minutes of Googling, find enough political patronage abuses in these “companies” to nauseate even the most iron-stomached. Now, the ovine taxpayer has again been fleeced by trusting the public-relations lie of “quasi” being akin to “safe”.

Bull-hockey! Let us, the public, never again believe that fronting the description of a governmental entity with “quasi” is a recipe for keeping our solons’ greasy paws out of the cookie jar.

The Rise and Fall of Nations

Richard Lamm, the former Governor of Colorado, has warned that multiculturalism in our nation is very likely to bring about the failure of our future. See here. A friend, Axel Grabowsky, argues that the Roman Empire did not fall (as per Gibbon) solely because of the dilution of the Roman populus by the huge and continued influx of mongrel citizens from the Roman provinces and, therefore, Lamm’s argument is suspect. In fact, Grabowsky claims that there were as many as fifty reasons for the demise of this and other great empires. He adds, “I do not entirely agree with Toynbee. The empires of the world, ‘all the great civilizations,’ as Toynbee puts it, did have a hand in both their rise and fall, of course. But the outside reasons for both the rise and fall were at least as important as the internal ones.”

This avowal has gotten me to thinking about what does contribute to the rise and fall of empires? I have compiled below the following thoughts (roughly in order of importance):

- Geography – country’s absolute size, number/size of abutting nations, degree of geographic isolation, country’s shape (area relative to border length), number, size and dispersion of satellite territories, mean height above sea level

- Natural Resources – energy sources, mineral resources, amount and fecundity of arable land, timber resources, harvestable animal/fish populations, water resources, pestilence frequency

- Weather – rainfall/snowfall amounts, temperature/seasonal variants, predilection to natural disasters, sunshine amounts

- Demographics – proportion of young vs. older people, gender balance, life expectancy rates, infant mortality rates, immigration/emigration rates

- Infrastructure – quality and number of roads, rails, airports, ports and other public and private buildings; communication systems; other public transportation systems; infrastructure maintenance rates, sanitation facilities; gas/electric utility build-outs

- Cultural Ethos – clear and reinforced national goals, work ethic, morality baseline, stability of institutions, family values, religious faith, innovativeness, a sense of history/traditions, a commitment to the arts, the degree of a population’s hybrid vigor, the degree of cultural integration (salad bowl vs. melting pot, ala Lamm)

- Civil Freedom/Democracy – government guarantees of life, liberty and the pursuit of happiness; a swift and effective justice system; freedom of movement, assembly, expression, and privacy, a non-confiscatory taxing system

- Common Cause/Hegemony – a national identity, a common language, a forward purpose/resolve, a sense of history, a general dearth of prejudice, quality of leadership

- Economic strength – stability of monetary system, size of middle class, trustworthiness in commercial transactions, strength of financial institutions, world-trade effectiveness, health-care quantity and quality, degree of entrepreneurship

- Educational System – breadth, depth and general affordability of educational opportunities, openness to new ideas, a quest for natural truths, scientific/logical rigor, innovativeness encouragement

- Terrain –ease of movement of citizens/merchandise, number of alternative commerce routes, barriers (mountains, lakes, rivers, oceans, etc.) to potential enemies (These factors were much more important a century ago, before the age of airplanes, steamships, and motorized surface travel).

Each of these bullet points could engender a whole paragraph of exposition (or perhaps even a book.) But note, that in my opinion (and I assume Axel’s), such mongrelization as Lamm describes is not at the top of the list. But … it is not insignificant either, particularly when it can (and often does) impact so many other of the above bullet points.

It is an interesting and enlightening exercise to grade our country on these metrics relative to other world powers … to judge for yourself how much longer we may be around.

Small Things

As seen in a photo on the front page of the “Boston Globe” today, at the 9/11 memorial service at Ground Zero yesterday, Barak Obama tossed his rose on the existing pile of commemorative flowers while John McCain bent over and carefully placed his rose. I know it is a very small thing, but one’s temperament is made up of lots of tiny actions … and Mr. Obama has had his share of revealing slips.

You Saw It Here First

I’ve coined a nickname for Sarah Palin – “The Smiling Cobra.” I’ve e-mailed this suggestion to Rush Limbaugh, Michael Graham, Howie Carr, and David Brooks. Soooo, if this is picked up on, you saw it here first!

Palin Peccadillos

In case you didn’t know, Sarah Palin has committed the following serious political peccadillos:

- She coerced he fellow office workers into buying Girl Scout cookies for her daughter
- She has shot and dressed (with a dull knife) three caribou (and her family ate them!!)
- She had her staff work overtime 27 times in the last 2 years
- When she played basketball for Wasilla, she fouled out nine times (once in a tournament!)
- Her cousin, Wilber, twice watched the Playboy Channel
- She had a Brazil waxing back when she ran for Miss Alaska
- When she worked in her husband’s fishing business, she claimed she didn’t like halibut
- While in college in Idaho, she never joined a sorority
- As a sports reporter for KTUU-TV, she often entered the men’s locker room without knocking
- Over her life, she has removed twelve “Do Not Remove” tags from pillows and mattresses

How can we possibly vote for such a monster?