My last post raised the issue that it wasn’t just that the economy could be worse, it should be worse. It was appropriate to give a break until after the election so now it is time to recap some of what has happened and look at where we go from here.

What I didn’t see happening was Paulson and Bernanke going in front of Congress and convince them the sky was falling. The economy, was, and is, in pretty grim shape. But did the way that DC handled the whole issue make it better or worse? No one wanted to look at that while there was an election coming up. For whatever reason, Congress and the administration did what they did. Passed a “stimulus” package and opened up the taxpayers checkbook, and in this case, signed the taxpayer to trillions in promissory notes. And that is just the beginning.

As of Nov. 5, this has been the Obama administration. Even if Bush didn’t have approval ratings that only are made better by looking at Congress’, his ability to function as anything other than the guy who will try to get his cleaning deposit back on the WH is over. And if you don’t want to believe that, just look at what GM, Ford, Chrysler, and the UAW did to get in line for their checks. They didn’t even make a courtesy call on the administration. They went directly to Pelosi who has the advantage of already having a position while Obama has to wait a while. This is an interesting turn of events as shortly before the election, Treasury basically turned down the auto makers requests and said that they will have to go for their share of the $25B retooling package, which doesn’t even have guidelines set up yet, and then go after the current Obama administration for a bigger handout. Now Pelosi under Obama’s direction could have brought back Congress for a lame duck session and force feed an auto bailout for those loyal Michigan and Ohio voters. That’s what those people sold their votes for after all. But instead, Pelosi reads that there is some feeling among the electorate that these bailouts may not be popular. So Pelosi thought it would be a good idea to have Bush take the heat for a quick check to the auto companies. And how did the Obama/Democratic administration negotiate this deal? They sent a letter to the WH and released it to the press last Saturday.

The letter asks for Bush to, on his own authority, add the auto cos. to the stimulus package so Congress doesn’t have to approve giving $15B to GM to make the payment due in Dec. to the UAW to fund the auto worker golden parachutes. If GM makes that payment, they will probably be in technical bankruptcy in the first quarter of 09. So they would really like the tax payer to make that payment. And the UAW is in total agreement. After all, if GM defaults on the package they negotiated in 07 to turn the pension liability over to the UAW (along with a total of $61B that they don’t have) the retirees will be looking at GM bankruptcy or having to go to PBGC. Either way, they get pennies on the dollar just like anyone else that depends on an insolvent pension fund. But that isn’t what the UAW wants or GM really. UAW workers tend to get somewhat vindictive and have the wisdom to take it out on the product they build. Something that GM can’t survive. The short term plan would have been for GM to make a deal with the Wall Street Cerberus fund to get the $11B in cash that ChryCo has. But Cerberus, with Larry Summers as its head and with such notables as spokesperson Dan Quayle, might not get this year’s bonus if the taxpayer didn’t also throw another, say, $10B at them on Wall Street. So GM has pretty much dropped the ChryCo deal and went straight to the deepest pockets they could find with the easiest to push negotiators in charge, the US taxpayer. Why exactly Bush would want to give the Obama administration and the Democratic Congress cover is not very clear. Not saying they can’t make a deal with him. But you don’t do it with releasing a letter to the press. And as of right now, it doesn’t seem like Bush has decided to rush the checks to Detroit.

But what is it that makes this all work? We are now in the post election period and there is business as usual and there is the hope of change. Business as usual would mean that the US taxpayer would now go into a coma after the election. We spent our energy picking experienced people who had all the right makeup to be president on a moment’s notice. Whether it is answering the red phone at 2AM or handling an economic problem. And we (with the medias’ help) poured over the plans that the experienced candidates would implement on day one to rejuvenate this economy. And now, historically, these competent, experienced people, with the right plan in hand, need time to figure out what to do and how to do it. Doing things the way we have for hundreds of years already means that the taxpayer needs to go into a come for three and a half years. At which time they can be reawakened when their vote is once again needed and told how well everything has worked out since they put the current administration in office. That’s the way things have always worked and exactly the way the Obama administration wants them to work now. And it wouldn’t make any difference if it were a McCain administration. They would be the same. But Obama got 62M votes for himself. It is time to ignore the 58M that voted for McCain.

So what would change look like? It would be an electorate that actually wants to see how competent these people are on day one. They convinced us they were ready to launch nuclear missiles at 2AM. They need to get to work right now. Not three months from now and surely not three years from now. And the electorate needs to watch everything they do with the same interest a month after the election as they had a month before the election. Trillions in bailouts to get the party going again on Wall Street but plans for credit card reform or mortgage assistant need to work their way through the system. Just as they have for the past several years. This is Obama/Democrat administration right now. No one needed to be reminded that the inauguration isn’t until January other than those who are now trying to buy as much time as possible instead of having to get to work immediately. California is already seeing the effects of “Just don’t say no” fiscal policy. Except they don’t have printing presses. But my guess is that with a Democratic friendly administration, the taxpayer in all those other states will get to pay many of California’s bills. And if the electorate does what the politicians want, and goes into snooze mode for three and a half years, they won’t even know it’s happening.

So, there’s the choice, US politics as usual for the past two hundred years or change. And change will involve having to dig for information and making your voice heard. Otherwise, don’t expect much to change. I wonder if we have the interest to hold politicians responsible every day or just sleep? As usual.


So how good is this economy?

So how good is this economy? Really?

No one doubts that there are issues with the economy. Home equity has disappeared before people’s eyes. Credit availability has really only begun to dry up. Unemployment is trying to persistently increase. Company’s are reducing revenue forecasts going forward and most everyone is stretching out estimates of when recovery will occur. But in light of the bad news it isn’t just a case that the economy could be worse. It really should be worse. But it isn’t.

Unemployment is by no means anywhere near historic highs. Most people would like to see a new trend of jobs coming back to the US and it is sporadically happening. But the global economy is with us because it is possible to fabricate goods in country’s that will subsidize manufacturing or have much lower labor rates and then economically ship them to consuming countries, such as the United States. As country’s evolve, the subsidies become unsustainable and slowly but surely, labor rates increase, and energy costs are causing the economics of bringing goods manufactured in far away places to market to become less attractive. Unemployment is a definite concern and one that the Federal Reserve is watching closely. But the strengthening of the dollar, not due to anything the US did, is really due to the weakening of other currencies will put the brakes on fears of inflation. The effect is just as real as if the US did strengthen the dollar instead of just talking about it. And that effect is no where more visible than in energy prices. As energy has fallen, so has inflationary pressures. It might not last but the odds are that the Fed will most likely do precisely nothing for some time. Benny and the Feds are probably very happy at that turn of events. Unless unemployment and inflation make some significant move, very unlikely, or the economy gets either much stronger or much weaker, also not very likely, the Fed can just sit back with their interest rate popgun firmly in its holster.

Are there trouble signs? Of course. While the economy is doing surprisingly well, it is also more on the fragile side than would be desirable. Increases in federal spending and tax increases are ill advised. But that soon depends on an election and will simply play out as the voters wish. Energy prices may be in for further declines and settle at a sustainable lower level. Or not. The most oil revenue needy countries will scream the loudest for a production cuts, think Iran and Venezuela, but the cooler heads in OPEC (relatively speaking) will probably let it just go at getting back to the quotas that are technically in place. Chavez and the ayatollahs who quickly got used to those revenues at $145/barrel aren’t going to see them return. And they are going to whine long and loud. But having said that, OPEC would probably be very comfortable with a $100/barrel floor and will try to see if the world will support that without either more exploration, alternative development, or demand destruction. None of those results are in OPECs interests but the genie may be out of the bottle and energy price stability may be valued more than seeking a path of least resistance. It might take another 50% energy price increase cycle or two for the world to get serious or it may have already happened.

As we all found out, energy prices work their way through the entire economy but this year’s crunch came on top of the sub prime mess, housing price collapse, and credit tightening. And yet, the economy is not only not in recession, it continues to grow at a difficult to ignore pace. As I said, by all rights, it should be doing worse than it is. Housing will inevitably sort itself out. The market is taking care of that more than the government. It is difficult to see a return to the market of just a few years ago but with housing prices first leveling off and then slowly appreciating, the impact of energy and inflation will be far less than they were this year.

Recent history has taught us little other than when bubbles collapse, most people involved really want the bubble to reinflate. For the US it would mean the return of the unfettered American Consumer, savior of the worlds economies. Many countries exporting to the US are counting on it. But the US would be better served to learn its lesson and have the American Consumer take a more sober look at reality and learn lessons about credit and its uses. There are few more painful adjustments than realizing that one has been living beyond their means and realizing what their incomes can support. Of course politicians will point to increasing poverty levels and the need to redistribute wealth but with the US quickly getting to the point where over 50% of taxpayers will pay no taxes at all, taxing to redistribute wealth rapidly achieves diminishing returns and incentivizes tax avoidance. Increasing spending on education should create a more educated work force that will be able to move into better paying jobs but without the jobs here, the education is creating a more educated class of un- and underemployed. Reinflating the credit bubble more than likely won’t, and shouldn’t happen. That would mean more pain than Americans have been exposed to for quite a while.

I don’t mean to minimize the pain right now in the United States. Those auto workers and suppliers to the auto industry that are losing their jobs in the Midwest are feeling real pain right now. But decades of mismanagement and union pandering aren’t going to be undone overnight without real pain. It’s not like the US auto industry was on the brink of a spectacular recovery. For years they played games with product and incentives to keep the American Consumer in gas guzzling, barely competitive product. A real energy shock and the industry found itself producing product that nobody wanted at any price. The steps being taken now will not create or save jobs in the short run and it is even questionable how successful they will be in the longer run. Of course if you believed your path to fame and fortune, well at least fortune, was to be made by leaving your job at McDonald’s flipping burgers and then flipping houses on weekends, you’ve found out that the people putting those late night infomercials out didn’t have any insight. They just made their money 19.95 at a time on a CD or seminar to “share their secrets”. Here’s a clue, people who can make millions in anything don’t share their secrets 19.95 at a time doing infomercials. They don’t have to. And as people made deals that were to bring them quick wealth and got caught, what did they do? Why they ignored their contractual obligations, walked away from bad deals, and hope their fellow citizens will bail them out. Some were defrauded, the majority weren’t and were actually the ones perpetrating the fraud. Coming to grips with your true financial situation should match your assessment of your abilities to manage money in investments. If you don’t understand the deal you are getting into, you have no business getting into it. Contrary to popular belief, successful business people are not glib talkers who have “people” take care of everything and they are just the “idea” person with contacts and profit taker. Those who don’t honor commitments, contractual or otherwise, don’t find themselves in business very long. Regardless of what popular wisdoms are about self worth, knowing your own limitations is a good start for life. The hit being taken from getting into deals that were too good to be true is painful and it isn’t over. But it shouldn’t be swept under the rug, denied, and minimized. It should be a learning experience.

So there really are a lot of negatives in American society that brought about a tough economic situation. But the economy is still doing quite well, much better than it should. We waste billions in federal spending. We have exported more high paying jobs than we appreciate. We are at the wrong end of the stick on energy from the producers to the speculators. Federal government spending has infected state and local governments who no longer have tax bases to support spending plans and bankruptcies for those who can’t print money are real possibilities. Retirement plans have turned into fantasies including Social Security which remains the crazy aunt in the closet that everyone wants to ignore. And yet, the economy is not only not in recession but has positive growth. It is fragile and could easily get to a really bad state. But it hasn’t. And every month that goes by gets us closer to the end of many of the negative factors that are floating around out there. So, how good is this economy? Better than most people want to take the time to think about and admit.

Once we get past the staged convention nonsense, the campaigns will turn back to issues, running ads pointing out the oppositions’ flaws, and then run ads saying how the opposition is lying. For many voters, the economy is the biggest issue in this election. But most of them haven’t got a clue as to what a president should, or can, do to help the economy. Tax policy will get a lot of play in the debates and those useless campaign ads but they don’t mean a thing.

Presidents can propose legislation and they can veto legislation but it is Congress where the action takes place. I don’t have numbers on how many campaign “promises” ever mean anything but my guess is that presidential campaign statements about tax policies have little, if any, connection to what really happens. So Obama and McCain can quote chapter and verse on the percentages of marginal tax rates applying to what income level and it will all mean absolutely nothing. The Democrats will surely control Congress and if you want to see what is in store, look at what someone like Charley Rangel has been talking about recently.

Do I believe Barack Obama will raise taxes? Yep, I sure do. Do I believe John McCain will raise taxes? Ditto. Do I believe that Barack Obama will raise taxes more than John McCain? Duh. But should McCain pull off maybe the upset of the decade, he is going to have to be very adept to keep the Dems under control. The more important question needs to be on the spending side but that just doesn’t appeal to the typical American voter. Do I believe Barack Obama will increase federal government spending? Once again, the answer is yes. Do I believe John McCain will increase federal government spending? Unfortunately, once again the answer is in the affirmative. Do I believe Barack Obama will increase federal government spending more than John McCain? I wish I could say yes but the Republicans have lost their way and McCain will have to be very adroit and get some help from the economy and world situation to rein in spending. So I guess the best I can answer is that I am hopeful that McCain might be able to hold back spending more than Obama, who won’t have any interest in keeping spending under control.  But, for just one example, whatever peace dividend there is from reduction in effort and spending in Iraq will be minimal as everything from Afghanistan to health care compete for increased spending. And that doesn’t even include Russia and whatever game they have decided to start playing.

The original projections on Rangels plans were for around a half a trillion dollars of increases. Currently, the numbers have escalated to around $1.3T. These numbers were based on what Charlie was talking about last fall and may not have any relevance as even they will change significantly once they get down to it in 09. But with Obama in the White House, there will be no reason for the Dems to restrain anything on what could be the largest tax increase in history. Whether they couch it in terms of tax reform or tax fairness the result will be a massive tax increase. Rhetoric that is going on in the campaigns as to limitations to increases only to those taxpayers making over 150 or 250 thousand dollars a year will be meaningless once they start to really push the numbers around. Just one example, Rangel wants a surcharge on those wealthy tax payers. Oh, don’t call it a tax increase as the brackets will “only” go up by a few percent but the numbers I have seen for the surcharge he wants is on the order of 4% on AGI over $200K and 4.6% for higher income tax payers. And please note that our Democratic friends are not even letting you have some deductions and using taxable income but AGI so it will potentially wipe out your mortgage deductions, charitable contributions, state and local tax deductions, etc.

Obama and McCain tax proposals? If you base your vote on how well a candidate will lie to you then you can pay attention. For me, their proposals mean nothing. The reality of what will happen once either of them takes office and works with a Democratic controlled Congress will be very different than any of the lies they are telling on the campaign trail. And for those of you who feel that it is about time that all the fat cats get their comeuppance and pay their “fair share” of tax bills, be careful what you wish for. You are going to find yourself paying more in taxes and you may also find that businesses, even with reduced corporate taxes as Rangel wants to put in for a red herring, will be far less able to make or keep jobs in the US. So when either candidate runs ads on their tax plan benefits, their opponents tax plan disasters, and then the ads pointing out how the other side is lying, just save your sanity and ignore them. Unless, of course, you want to vote for the guy who’s the better liar.

Obama / Biden

I heard this on CNN this morning and man did I laugh hard.

Biden really!? Its funny that a person that has 0 experience on anything in foreign politics or anything nationally really picks someone with Washington credentials and foreign policy experience. Which in the words of Obama “if I should not be able to lead this country can take my place”. So he picks Biden.

So to skip the whole “possibility” of Obama not being able to serve why not just choose McCain with the experience and is the Presidential nominee already?

I figured I’d hit the photoshop cave and pop this out before anyone else does, because the coincidence is way to to easy to pass up.

Osama Bin Laden

Osama Bin Laden

News Link

Riot police used tear gas Wednesday to block hundreds of Venezuelans protesting the latest moves by President Hugo Chavez to concentrate his power. The demonstrators said a blacklist of opposition candidates and a series of socialist decrees are destroying what’s left of their democracy.

Though the protest of about 1,000 people chanting “freedom!” was small compared to past marches, there is a growing public outcry over the sidelining of key government opponents ahead of state and local elections in November.

Chavez opponents also are outraged by 26 laws the president just decreed, some of them mirroring the socialist measures voters rejected in a December referendum.

“We said in the referendum that we didn’t want that, and now he’s put it in the decrees,” said protester Josefina Bravo, a 59-year-old who wore a sticker reading “No means no” on her baseball cap. “That’s the problem we have: All the powers are concentrated in the president.”

Chavez seems like he wants attention again.
Looks like after his stinging defeat last year he is coming back for more, only this time he doesn’t have to worry about defeat. He makes the rules.

This is the problem people fail to grasp with Socialist parties and their agendas. Its not what YOU the people think is right, its what the GOVT thinks is right for YOU. Its the same idealistic, mommy govt that is being pushed in this country only lots more subtle.

The movements in NYC to remove trans fat, because well, you don’t know any better.
The movements in LA to stop any fast food restaurants from operating, because you don’t know better. The proposals being highlighted by Obama for things to ‘change’ this country, because you don’t know better.

News Link

Morgan Stanley, the second-biggest U.S. securities firm, told thousands of clients this week that they won’t be allowed to withdraw money on their home-equity credit lines, said a person familiar with the situation.

Most of the clients had properties that have lost value, according to the person, who declined to be identified because the information isn’t public. The New York-based investment bank will review home-equity lines of credit, or HELOCs, monthly from now on, the person said yesterday.

Wall Street firms including Morgan Stanley are ratcheting back on risks after the collapse of the subprime mortgage market and ensuing credit contraction saddled banks and brokerages with almost $500 billion of writedowns and losses. Consumers fell behind on home-equity credit lines at the fastest pace in two decades in the first quarter, the American Bankers Association reported last month.

“Morgan Stanley periodically reassesses client property values and risk profiles,” said Christine Pollak, a Morgan Stanley spokeswoman in Purchase, New York. “A segment of clients was recently notified of a change in the status of their home- equity line of credit, or HELOC, due to a change in the value of their property and/or their credit profile.”

Pollak declined to specify the dollar amount of the frozen credit lines. The firm’s global wealth management division, which doesn’t disclose how many clients it serves, had 8,350 advisers managing $739 billion of customer assets at the end of May, according to its second-quarter earnings report.

No Recovery Seen

“It’s evidence that they don’t think the economy is going to recover quickly,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York who rates Morgan Stanley shares “outperform” and who owns some of the stock. “The fact that they’re trying to get ahead of the problem is very good.”

Morgan Stanley has already taken about $14.4 billion of losses related to leveraged loans and collateralized debt obligations. The clampdown on home-equity loans mirrors similar efforts by commercial banks, said David Hendler, an analyst at Credit Sights Inc. in New York.

“All consumer lenders and home-equity lenders are reassessing the environment given the pressure on housing and the economy,” Hendler said.

JPMorgan Chase & Co., the second-biggest U.S. bank by market value after Bank of America Corp., has notified 150,000 customers about changes in their home-equity lines of credit since March, said Christine Holevas, a Chicago-based spokeswoman.

Changes Made

In some cases the lines have been reduced and in other cases they’ve been suspended, depending on the change in home values, she said. The changes affect about 15 percent of JPMorgan’s home- equity credit customers, Holevas said.

Bank of America and Washington Mutual Inc. are among the other lenders that have frozen home-equity credit lines this year.

“Morgan Stanley customers are typically coming out of their wealth management side, so typically a high net worth customer,” said Christopher Whalen, co-founder of Institutional Risk Analytics in Torrance, California. “This shows you they are under the same pressures as everybody else.”

This may be a good time folks to look at what you have in your line, access if you may need it for a rainy day fund (like I will be doing) and see if taking out some of that money now before it disappears is a good idea.

Don’t forget about the interest rate you will be paying to take that money out. Best thing to do to offset it, is to put that money into a structured CD or online savings bank account that will at the very least give you some 4% interest rate on it. Most people are paying 6-8% on HELOC’s. Access if a 3% loss on that borrowing is worth it for emergency funds that may not be there later.

Looks like even Wal-Mart sees that democrats controlling both branches of Govt is a bad idea.
They too see Obama’s socialist tendencies. Couple that with those of Pelosi and Reid and you have a situation that could very well bury this economy for good.

Sounds great right?

News Link

Wal-Mart Stores Inc. is mobilizing its store managers and department supervisors around the country to warn that if Democrats win power in November, they’ll likely change federal law to make it easier for workers to unionize companies — including Wal-Mart.

In recent weeks, thousands of Wal-Mart store managers and department heads have been summoned to mandatory meetings at which the retailer stresses the downside for workers if stores were to be unionized.

According to about a dozen Wal-Mart employees who attended such meetings in seven states, Wal-Mart executives claim that employees at unionized stores would have to pay hefty union dues while getting nothing in return, and may have to go on strike without compensation. Also, unionization could mean fewer jobs as labor costs rise.

The actions by Wal-Mart — the nation’s largest private employer — reflect a growing concern among big business that a reinvigorated labor movement could reverse years of declining union membership. That could lead to higher payroll and health costs for companies already being hurt by rising fuel and commodities costs and the tough economic climate.

The Wal-Mart human-resources managers who run the meetings don’t specifically tell attendees how to vote in November’s election, but make it clear that voting for Democratic presidential hopeful Sen. Barack Obama would be tantamount to inviting unions in, according to Wal-Mart employees who attended gatherings in Maryland, Missouri and other states.

“The meeting leader said, ‘I am not telling you how to vote, but if the Democrats win, this bill will pass and you won’t have a vote on whether you want a union,'” said a Wal-Mart customer-service supervisor from Missouri. “I am not a stupid person. They were telling me how to vote,” she said.

“If anyone representing Wal-Mart gave the impression we were telling associates how to vote, they were wrong and acting without approval,” said David Tovar, Wal-Mart spokesman. Mr. Tovar acknowledged that the meetings were taking place for store managers and supervisors nationwide.

Wal-Mart’s worries center on a piece of legislation known as the Employee Free Choice Act, which companies say would enable unions to quickly add millions of new members. “We believe EFCA is a bad bill and we have been on record as opposing it for some time,” Mr. Tovar said. “We feel educating our associates about the bill is the right thing to do.”

People really don’t see how damaging Unions have been do they?
Look no further than the Big 3 automakers. Whom are all swimming in pension debt that they are all too eager to get rid of as soon as possible. Its no wonder Detroit is in Shambles and the governor nor the Mayor for that matter have any sort of response other than increase taxes. Like that is the solution?

The bill was crafted by labor as a response to more aggressive opposition by companies to union-organizing activity. The AFL-CIO and individual unions such as the United Food and Commercial Workers have promised to make passage of the new labor law their No. 1 mission after the November election.

First introduced in 2003, the bill came to a vote last year and sailed through the Democratic-controlled House of Representatives, but was blocked by a filibuster in the Senate and faced a veto threat by the White House. The bill was taken off the floor, and its backers pledged to reintroduce it when they could get more support.

The November election could bring that extra support in Congress, as well as the White House if Sen. Obama is elected and Democrats extend their control in the Senate. Sen. Obama co-sponsored the legislation, which also is known as “card check,” and has said several times he would sign it into law if elected president. Sen. John McCain, the likely Republican presidential nominee, opposes the Employee Free Choice Act and voted against it last year.

Wal-Mart’s labor-relations meetings are led by human-resources managers who received training from Wal-Mart on the implications of the Employee Free Choice Act.

This bill is almost CERTAIN to pass with Obama in the white house.
I said it before and I will go on record saying it again.
Obama’s ‘economic’ and ‘social’ plans will destroy the US economy for SURE.
People think things are bad now, wait till the big O gets in there.