Saturday, March 28, 2009
Thursday, March 26, 2009
IBD reports that Barry O'B's budget would put every American family $48,000 deeper in debt.
In the next five years alone, Obama's budget adds $5.7 trillion to the U.S. debt. That's $48,000 per household. Put in perspective, servicing that debt each year will cost as much as the annual defense budget by the end of the decade.So we'll be spending as much on debt service as on defense? Ouch. (My prediction is that we'll be spending more bc. the Dems will cut defense as soon as they get the opportunity.)
It's beyond words. . . .
I swiped the picture from here.
Just goes to prove there are two sides to every story. I wish Mr. DeSantis well and hope the demagogues get what they deserve.
Monday, March 23, 2009
What happens if all the folks who got those bonuses at AIG just quit?
A small detail that hasn't been mentioned much--these were retention bonuses. In other words, in theory, they were offered to employees in order to keep them from fleeing the company. After all, these were folks who had been working for a big insurance company, not the government.
So what if they all decide not to come to work tomorrow? What would whoever's-in-charge do? Promote into executive positions junior AIG employees who didn't get bonuses? Hire people away from Travelers or State Farm? Hire people from government regulatory departments?
I mean, doesn't whoever's-in-charge there at AIG have an important job to do? Don't they need to pick up the pieces and put this thing back together--get rid of the the crap and make it a profitable company again?
Maybe they can tax bonuses 90% and still retain the best people who have stuck it out this long. Maybe.
My guess is not, tho. My guess is that they will hire (in a figurative sense) postal workers, DMV cashiers, OSHA inspectors, IRS & Social Security Administration help desk phone operators, and airport security wand-wavers. And if that's not who they hire to fill the vacancies, that's what the remaining employees will be turned into.
Wednesday, March 18, 2009
Gotta love Mother Goose. Timeless. Here's a modern day version to ponder:For want of a nail, the shoe was lost;
For want of the shoe, the horse was lost;
For want of the horse, the rider was lost;
For want of the rider, the battle was lost;
For want of the battle, the kingdom was lost,
And all for the want of a horseshoe nail.
Blabber Mouth Barney and Congressional Cohorts attack some TARP-receiving corporation for having a corporate retreat at a fancy resort.
The Acme Widget Company board fears bad publicity, stockholder backlash, and Congressional subpoenas.
Said board cancels its Gold Legion Sales Award program in Las Vegas.
Vegas hotel vacancy rates skyrocket.
Vegas hotels lay off workers.
Laid off Vegas workers quit making house payments.
Banks foreclose on laid off Vegas workers.
Banks now own lots of Vegas real estate.
Banks have to take TARP funds.
Blabber Mouth Barney gets to tell banks what to do.
The winner? Blabber Mouth Barney gets his mug on TV, gets more votes, and gets more power to tell banks what they can and cannot do, what they can and cannot pay their employees, and--just around the corner, it's coming--who they have to lend to.
The losers? The taxpayers. The taxpayers' grandchildren. Everyone else in the chain.
Thursday, March 12, 2009
Good news in the news in the last couple days.
First, home sales are way up in the Land of Arnold. Twice as many California homes sold in Jan. '09 as did in Jan. '08. Of course, the median home price dropped 40% year-over-year. But isn't that good for the buyers?
What's even better is that the inventory of homes plummeted from a 16.6 month supply to a 6.7 month supply. A shorter supply may lead to price increases. Time will tell. Read the article here at IBD.
Of course real estate is local and just because prices may be nearing a bottom in La La Land doesn't mean it's necessarily a bottom for the rest of us. BUT, if the Left Coast is bottoming out, the rest of the country will follow and will probably end up hitting a bottom that's no worse than California's. The most recent Case Shiller Report puts L.A. at 37.5% off it's Nov. '05 all-time peak. That's Dec. '08 data. If this does end up being the bottom in L.A., look for the rest of the country to follow in the next year or so. Of course a bottom is one thing and a rebound is another.
The other bit of good news is that the Baltic Dry Index seems to have bottomed. This index tracks the cost of transporting dry goods such as coal, cement, ore, and grain by ship. The higher the index, the greater the demand for shipping. A Baltic Dry Index on the rise means that credit must be flowing and countries are trading. A good thing. Read about it here.
Wednesday, March 11, 2009
Sunday, March 8, 2009
The Sunday morning chat shows were full of powerful Dems this morning raving about Barry O’B’s approval ratings--NY Sen. Schumer, VA Gov. and DNC Chairman Kaine, Meet the Press host David Gregory. It’s true: the President is very popular. But ya know what?
So are french fries.
Just because something's popular doesn't mean it's good for you.
Don't get me wrong, it's good, it's refreshing to have a popular figure in the White House once again. But being popular doesn't create one new job or save one single "victim" of "predatory" lending. So while I would still say that the President is a pretty good guy, the debt that he and the Congress are running up and the energy, health care, and tax policies that he bandies about are, in the long run, about as helpful for our economy as french fries are for our arteries.
Ahh, but it makes for good politics.
Friday, March 6, 2009
Fascinated by the similarities bet. the Dow crash of '29 and the Nasdaq crash of '00, I decided to look into it a little further. Here's the poop.
The Dow peaked in August, 1929. From there it fell 87%, bottoming in July 1932. "The entire gains of the Roaring Twenties boom and more were wiped out in just three years," writes Harry S. Dent, Jr (p. 274). Interestingly, by July 1933, just one year off the low, the Dow rallied 300%! From there it faded 50% to hit another low (tho not as low as 1932) in 1942. From this second low, it took 12 years to regain the 1929 high. So $10,000 invested in the Dow in August 1929 wouldn't be worth $10,000 again until November 1954, 25 years later.
The interesting thing, the thing that caught my eye, anyway, is that the Nasdaq fell by almost an identical amount, 84%, when that bubble popped in 2000. It peaked at 5132 on March 10, '00 and bottomed at 807 on March 3, '03. From that '03 low the Nasdaq rose 350% to 2810 in November 2007. Today it's trading around 1280, roughly 55% off the '07 high and 75% off the '00 high.
So the question is, if the Dow dropped 87% from it's '29 high and the Nasdaq dropped 84% from it's '00 high, will history repeat itself with this latest carnage? The Wilshire total market index hit it's high October 11, '07 at 15,819. If it drops 85% and takes three years to do it, as the markets did with these other two bubbles, it will bottom around 2375 sometime in the fall of 2010.
Today, the Wilshire sits at right around 6900. So if history repeats itself with an 85% drop off the '07 high, we are going to drop 65% more from where we are right now. In that case, $10,000 invested at the peak will be worth $1500 and $10,000 invested today will be worth $4500. Ouch. What's worse, the $10,000 invested in 2007 won't be worth $10,000 again until the year 2032.
So much for riding it out. So much for buy and hold.
A couple things. Heading into these bubbles, the Wilshire chart does not look as parabolic as the Dow (see chart above) and the Nasdaq charts do. So maybe the market will not crater as strongly as it did after '29 and '00.
Who knows? The major indexes are all off around 50% from their '07 highs. Maybe doubling the national debt, slashing interest rates to zero, nationalizing Freddy and Fannie and AIG, and legalizing mortgage cram-downs will do the trick. Maybe not.
On the one hand, those who don't read history are doomed to repeat it--whether as an investor or as a legislator or chief executive.
On the other hand, history repeats itself until it doesn't. Maybe this will be different.
Click on the chart above to enlarge. I found it here along with a very good article by Eric Parnell at Seeking Alpha.