The GM Affect

Interest rates have gone haywire the last couple of days. You won’t hear it reported in the media though. Why? Because it would look bad for certain economic positions and actions taken by the current Administration …at least that’s my take on it…

The problem is that the bond markets are upset about the way the Obama Administration has handled the bond holders for Chrysler and fear the same will happen with GM. At the administrations urging, the judge in the Chrysler bankruptcy case forced the bond holder to take on more risk.

Usually bond holders are the first to be protected in a bankruptcy but this time it was other interests that were protected first. (think Unions) The bond holders took a back seat to almost every other concern.

Before you go saying those ‘evil’ bond holders (lenders) deserve it, think about this. Bond holders invest in companies by making loans to them because they are risk adverse. Investing in normal stocks is to risky for these investors. There reason? They are investing money from pension funds and insurance companies. This money needs to be invested in areas with very little volatility and steady returns with low risk to the money. (think about your pension, you want safety right?)

The way these bond holders are being treated is a huge change from how large restructuring like this normally takes place. And this sets a dangerous precedent going forward. So with a bankruptcy from GM looming on the horizon, the bond market got very, very nervous and everyone backed out of the market in one day!

I’m calling this The GM Affect because it was so awful. We saw rates jump 1% in less than 24 hours ….by the way… That is completely unheard of!

Rates have come back down today, but I don’t know how long that will last. Rates jumped up to 5.5% from a low the previous day of 4.5%. Rates today are back down to 5% but no one knows for how long.

With a very scary economic report just out about a 5.7% decline in GDP the first quarter of this year and about companies slashing inventories and jobs (approximately 2,000,000 more jobs lost) I’m not sure how much longer rates can stay this low.

So while the Administration rolls our their latest campaign touting the ‘good’ that the stimulus package has done and while they roll out the parties for the supposed 150,000 jobs that were created, our economy has had the second largest contraction since 1981. (By-the-way, only about $11 million of the $45 Billion that has hit the economy was for worthwhile make- work projects. The rest was for one-time payments for welfare and Medicare and for the extension of unemployment benefits.)

I know that this sounds like political commentary and I apologize because it is truly not meant to be a political view point. I'm commenting on my concern about the numbers The numbers don’t lie, and since they don't lie, then someone or something else is lying. Could that something be the government, maybe both parties? Some will point back to the Bush administration as an excuse to support Obama’s actions. Guess what? Bush was wrong as well!

All the economic tricks and gimmicks being tried today have been attempted before. We did here in the late 70's to early 80's. and it didn't work. Heck countries all around the world have tried what we are doing and they will tell you it doesn’t work.

Call it Keynesian Theory, call it Social Democratization, call it whatever you want but understand this. If it is illegal for you to 'kite' checks to cover your debt, then why do we allow the government to do it? (Kiting a check is when you deposit a check from one of your own checking accounts into another and then from that account back into the original account in a never ending circle just to cover checks that you right elsewhere, at some point it will catch up to you.

So why are we allowing our government to do a thing that we would be put in jail for doing? Because of some ‘theory’? Does this make sense to anyone?

At some point we will not be able to print enough money to buy our own bonds to fund our bloated and bureaucratic government. I’m hoping for the best and preparing for the worst. Here’s a link to a great article with the bad news/good news that can help you make up you own mind. http://www.marketwatch.com/story/us-gdp-revised-to-57-decline-in-first-quarter

Danger, Danger Will Robinson

It seems like I’ve been running around like that silly, bubble headed robot from the 1960’s ‘sci-fi drama’, Lost In Space! Danger Will Robinson, Danger!

Why have I been flapping my arms wildly about and pronouncing warnings for so long? It’s because our elected officials seem to have no concept of reality.

Little did I know that when I put the motto of my blog up; Cracked Up, Whacked Out and Completely Out of Control, how right I would be!

From our president who is proclaiming that we will unilaterally reduce our nuclear weapons arsenal while at the same time North Korea launches a test of an intercontinental missile capable of carrying a nuclear warhead to him bowing at the waste to the so-called King of Saudi Arabia, we seem to have lost our since of pride.

Added on top of these foreign relations miscues are domestic issue missteps such as the bonuses for AIG execs that were approved by a Democratic congress and signed by the president. Did Senator Dodd and the President really believe we would believe them when they said they knew nothing … didn’t they write the bill?

Now we have the situation of an American Flagged ship being held hostage by pirates. This demands a quick and concise response from our government.

Now I hear the Obama Justice department has sent FBI negotiators to the seen as if this were a criminal action. It is not, it is a war. I hear the DOJ wringing their hands over what to do and it sickens me.

‘We haven’t had to deal with this for 200 years…’ bla,bla,bla. Can someone help me out here, how do we deal with scum bags when we have a Navy ship in the area?

Can anyone say; Navy Seals? How about .50 cals and 5 inch deck mounted guns?

Negotiations my eye! In the old days we didn’t send out the constable to try to get Black Beard to stop terrorizing the Barbary Coast did we? Nope, we put a bunch of our war ships out to see and when we found him we blasted the heck out of him!

I’m fed up with the American Apology tour, the diminution of individualism and the fear of naming a ‘thing’ for what it really is because we might offend somebody. These pirates are thugs and terrorist and they deserve to be treated like we are at war with them!

This is NOT a police action. Let the military pop a few of the pirate support ships and put them on the bottom of the ocean and then see if this crap continues. Come on people, let me here a little H**L Yeah! (sorry, got a little carried away with that last part. LOL)

A Lesson on Greed

When you look around the world and see the haves and have-nots, does it make you wonder if this capitalist society filled with greed is injurious to the world?

A powerful question to be sure. I like the answer given by Milton Freeman and countless other modern day philosophers. Is there some benevolent benefactor within mankind that is so pure that they can order our society for us?

The answer is NO. When you look around the world, the truth is that the societies with a free enterprise system (capitalism) have the highest living standards on the planet. As a matter of fact the freest people have the best quality of life.

However, look at the world where governments restrict free trade and control societies. Their standard of living is squashed and the motivation to improve society is squandered.

Ah, but human nature is not abated. The leaders of these ‘controlled’ and closed societies are greedy. We need only look at the standard of living the leaders enjoy as compared to the poverty they force upon their populous. Is this not Greed?

The problem with heading towards socialism was best stated by Margaret Thatcher when she said that the problem with Socialism is that eventually you run out of other people’s money.

But I think there is an even greater problem. When you look at the history of countries that trend towards Socialism and Communism you see what happens when men are entrusted with ultimate power.

Their Human Nature overtakes them and the next thing you know you move towards Totalitarianism. In a free trade, free enterprise, capitalist society with a Republic form or government, the market and the rule of law helps to minimize our human nature and acts as a checks and balance to human greed.

Sure, greedy people do succeed, but so do people those that aren’t greedy. In a capitalist system, the non-greedy can compete with the greedy and many times the non-greedy win. This creates a better society, not control by some authoritarian overseer.

Some would blame our current economic situation of the greed of capitalism, but the truth is that this situation was caused by poor government policy, shoddy oversight and mismanaged regulations.

In other words, this problem was caused by powerful politicians attempting to dictate to industry how they should operate.

Now the USA moves towards Socialist policies and I find it ironic that as our President visits his once vaunted campaign trail in Europe he is being met with cold shoulders and words of warning.

Even the once Socialist stalwart nations of Germany, France and Italy are now looking upon the actions of Barak Obama with disdain. They have publicly questioned the soundness of the Presidents push for governments to spend more money to get the world economy moving again.

What they are saying (without saying it) is that this has been tried before. They have tried it before …and…. IT DOES NOT WORK!

So I leave with this one question. If the great Socialist Utopias of Europe are not willing to go further down this path because they understand that it will only do more harm than good, then why are we the citizens of the freest nation on earth allowing our government to lead us this way?

Watch the video and learn… I welcome your opinion.

Winners and Losers Who Chooses

It's taken me a couple of days to completely absorb the fact that a sitting president just reached into the board room of a major corporation and fired the CEO. Notice I didn't say that the Board of Directors asked for the government’s assistance ...they didn't...

The news has been all over the place on this one, some say he needed to go. Others say the government shouldn't have this kind of power. Even others justify the action 'this one time' because of all the money given to the company to keep it afloat.

As is usual with me, I have a completely different take on the situation and it is one that hasn't dawned on many people yet. My question is not whether government should be in the business of firing CEO's of private companies.

My questions is have we crossing some precipice? Some invisible line that takes into a dark abyss where government decides which companies succeed and which should fail.

I know many will argue that this has gone on for years visa vie tax policy and regulations and I would agree. However, when this economic mess started in earnest and we allowed the Treasury and the Feds to save some investment banks while allowing others (Lehman Bros., Bear Stearns, etc.) to fail, we started down a slippery slope.

Now we are in full slide! It’s not just which banks should be saved and which should be allowed to fail, now it’s giving one company 30 days to fix a problem and allowing another 60 days. It’s firing a CEO and putting in another by dictation rather than a vote by the Board.

When the Obama administration announced that the government would stand behind the warranty of GM’s cars, they took an even greater step towards choosing winners and losers in this economy.

I ask one simple question, how is Ford to compete with GM (Government Motors) when Government Motors has billions of our Tax dollars funding it?

I admire Ford for recognizing its problems many years ago and setting out on a goal to fix them. I admire Ford for eschewing government hand outs and showing the rugged individualism and toughness that is genuinely American.

I am genuinely worried that we are on a destructive path here. When ‘BIG’ Government gets to choose the businesses that will be winners and the ones that will be losers, the people are bound to suffer.

I need only point to one example. Take a look at the history of England. You will see that at one time the government controlled all the car companies. You will also find out that there were waiting lists months and months long to get a new car.

So get ready, if government gets to choose the winners in this economy, you could be standing in a long line for your new GM, your new ‘free’ health care and maybe even your block of government cheese very soon!

Obama Lied; The Economy Died

Obama Lied; The Economy Died

The title of this article is one powerful statement and I was in shock when I read it. It’s the title of an article written by a conservative author, Tony Blankley.

Before you cry foul! Remember that liberal Democrats used the saying Bush Lied; People Died as the center piece of an entire campaign, not just an article in a newspaper …much more incendiary rhetoric I’d say.

Blankly, playing on this same theme makes some very good points in his op-ed piece in the Washington Post. He posits that Obama ran as one ‘thing’ but is really another.

Take the Preisdents message of ‘change’ as example #1. Obama ran on the promise of change in Washington. His stated goal was a more civil tone and more bipartisanship.

However, what we see happening is Obama and his Democratic cohorts ramming legislation down the throats of the Republican minority. His side is using tricks like only issuing legislation in printed format (not electronic) and expecting thousands of pages to be digested and voted on in just days of review.

When legislation is opposed, the President says; ‘We were elected, it’s our turn.’ And when the Republicans decide not to vote for legislation they haven’t had time to review the Obama team calls them obstructionist.

What change? Sounds like the same ole Washington to me!

There’s more, Obama professed to be for fiscal responsibility and no ear marks. Here again he has lied. We have only to look at the huge stimulus package which was one giant earmark made into law and had nothing to do with stimulating anything!

Other examples of Obama’s lies exist as well. The omnibus spending package with over 8,000 earmarks in the billions of dollars is being pushed for passage. The President says its last year’s business, BUT, if that’s true then why wasn’t it passed last year.

This is another example of the big lie. Obama claims to have inherited the Deficit and he did inherent some of the deficit but in the two months since he’s been in office, he’s tripled the size of the deficit.

The constant, persistent and now accelerated growth in spending and government regulations is killing the markets and slaying our economy. Obama ran to the center as a fiscally conservative Democrat in order to get elected, what he’s become is a Harry Reid and Nancy Pelosi tax and spend style liberal!

Obama Lied; The Economy Died; how very apropos.

Shut Up and Get Out of the Way!

There ...I said it! The talking heads in the government need to just shut up and get out of the way. What gives me the right to be so pointed? Well I'll tell you.

I have a unique perspective, being one of the few people in the mortgage industry that didn't go gonzo and make loans to every breathing Jack that walked through my door. I didn't get rich off the housing boom and I wasn't part of the "problem."

I sit everyday watching the stock markets, analyzing the bond market and reading about the mortgage backed securities market trying to give my clients some direction about where interest rates are headed. Right when I think I see a trend developing, BAM! something happens that causes huge volatility in the market!

That 'something' that causes volatility and turns good markets into bad is usually very simple to identify. It is a press conference. Not just any press conference, it's usually a press conference by the President or one of his newly appointed minions.

Case in fact, on Tuesday, February 10, 2009, Sec. Tres. Geihtner has a press conference to announce how the Treasury plans to move forward to 'fix' the crisis, the markets tank and theirs huge volatility everywhere. It's not directional, it's just panic selling without solid trends. It's mindless and crazy.

So what's going on? Well the markets begin to settle and everyone is becoming comfortable. In many cases trends are forming and they are good trends, Whew! We can breath a sigh of relief right?

Wrong! Before a good trend has a chance to take hold and before the capitalism side of our capitalist economy can begin to do what it does, someone from the government announces some new spending, printing or borrowing plan that throws everything out of whack again.

The markets can fix themselves with some oversight and some slight tightening of regulations. But before a real fix can take hold two things have to happen!

One, the government has to Shut Up! Stop telling the markets what your going to do and start listening to what the markets are saying. Step two, is to supply the markets with what they say the need! THEN..... GET OUT OF THE WAY!

If the government officials would quit trying to get face time so they can claim credit for the fix then the fix would come a lot sooner. I for one am tired of seeing the people that got us in this mess claim that they have the fix to get us out.

And I dare you to tell me there's a whole new crowd in charge now and they didn't have anything to do with this mess, come on....I dare you... ;-)

To One Sided

Okay, I just realized something. I've been to one sided. I'm bashing the so-called stimulus plan, referring to it as a huge chunk of pork. It really is nothing more than one giant 'earmark' written as a law.

But that's not the point I want to make today. Along come the Republicans and they band together and not a single Republican votes for the bill. They rant about the pork and they rave about the lie Obama supposedly told about working with both parties.

The one thing they don't do is offer any viable solutions themselves! Tax cuts is cannot be the end-all/be-all answer for the Republican Party every time their is an economic crisis. The answer must be radical change, but not in the way that the dems want. More spending is NOT the answer either!

These guys just don't get it! We need real change! Change, real change, would be the elimination of the tax code as we know it. You want to talk change, let's change our economy from a spending economy to a saving economy by installing the Fair Tax! That's real change.

Change would be the elimination of Corporate Taxes. Everybody talks a good game about bringing manufacturing jobs back to the U.S. but nobody is doing anything about it! Imagine if corporations didn't pay any tax at all! (well they don't really, we pay the tax in the form of higher prices on goods and services)

All that money would be enough to make up for the extortion large manufacturers pay to the Unions. That's CHANGE!

Nobody gets it. Obama hasn't changed anything yet, he's just changed who's in charge. We still have the same old politics. The Republicans need to quit complaining and start offering us something real.

Just pinning the bad ideas on the Democrats so that they get full credit when these ideas fail ...and believe me, they will fail... is not good for America. If Republicans want to be seen as more than obstructionist, then they need to propose real and radical change!

"Change we can believe in", it's what Americans thought we voted for, now can we get some please?!

Exit Stage Right

For those of you who are part of the baby boom crowd you may remember Hanna Barbara's Snagglepuss cartoon. I used to love it when he would do something to get in trouble and say; "Exit! State Right!" and pewang! He was off the screen.

For some reason that memory makes me laugh. It reminds of a simple time in my life. It reminds me of when I was safe and didn't have to worry about anything.

As one president takes office another has 'exited, stage right'. To him our nation owes a debt of gratitude. Those of you who scoff at this comment and who laughed at V.P Dick Cheney in a wheel chair because he hurt his back moving boxes, I say grow up!

To those who booed the President Bush as he arrived at the inauguration ceremony and to those who joked and laughed about him on National T.V. (supposed objective journalist), I say grow up! You think you are being patriotic but your unprofessional and childish displays only prove your lack of objectivity.

I will concede that he was not the best President where the economy is concerned, however, we have not had a single attack on American soil since the horrific 9/11 attacks. He has taken the fight to an enemy that has attacked our nation for years and he has injured that enemy greatly.

So I say to President Bush and Vice President Cheney, THANK YOU! Our nation is safer because of your unwavering principles and because of your steadfast dedication to eradicating evil threats to keep this nation safe!

Obama in One Word... Amazing!

I am proud to be an American today! I proud for many reasons, to many to be able to list here today. Our new President has been inaugurated!

His speech was inspiring. He is one of the best orator since John Kennedy. His clear and concise message was one of hope for everyone in our country.

His message to the world was one of stern warning tempered with hope to help the worlds less privileged.

I loved our 43rd President. I admired his principled nature and the way that he did not waiver in his undying devotion to keep our nation safe.

No matter how much you hate President Bush, if you are truly honest, you cannot deny that our nation is safer today because of his willingness to have his name sullied while he did what he thought was right. But his time has come and gone and it now a new day and a new time.

Change is upon us and that change appears hopeful. All Americans should be proud today and everyone should put their differences aside and pray for the success of our new leader!

A Tribute to a King

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

In our nations great history, we started out with these words emblazoned on a piece of parchment. Our forefathers boldly presented this document, the Declaration of Independence to a despot that enslaved through high taxation and a self proclaimed 'divine right' to rule.

While our country was born on this proclamation, it's dream was never realized by all who lived on American soil. Many peoples were burdened with a very real slavery that was hidden from the light by the guise of States Rights.

This contradiction would be partly solved by a great man who would become president, Abraham Lincoln. Yet even the War between the States (the civil war) could not fully resolve the inequality that slavery in America had caused.

It would not be until many, many years later that a man would come along that could so capture a world with his message that we would all stand up and take notice. With his Christian teachings, his Gandhi type insistence on non-violent protest and his spell binding oratory, Doctor King inspired a nation to recognize a heinous truth.

http://www.youtube.com/watch?v=PbUtL_0vAJk

As a nation we were forced to recognize our prejudice. Doctor King died for his cause, martyred by a mad man, but his legacy lives on. Today we honor a King, Doctor Martin Luther King.

Tomorrow, 46 years from his great speech in Washington, we honor his legacy as we inaugurate the first black man to become president of this once prejudice and dividend nation.

Even with all the economic problems and the anger and divisiveness and strife around the world; Today, on this very special day, I am proud to be an American!

http://www.youtube.com/watch?v=gdJ7Ad15WCA&feature=related

Tax Cuts For the Rich? Oh No!

That's right, you heard me, tax cuts are coming ... or continuing .... depending on who you are listening to. The Obama administration has signaled that tax hikes are definitely off the table and that tax cuts may actually be needed to get this economy moving again.

Amazing isn't it? Looks like our new President is a very savvy politician and a pretty bright guy. We were all worried that his Tax the Rich mantra during the campaign would ruin the country.

As it turns out, it may have been a ploy to keep his liberal/socialist base pumped up and headed to the polls. When in reality he has had a mindset to rule as a centrist all a long.

The thing I love here is that even a democrat is acknowledging that lower taxes stimulates the economy and creates growth. But while they talk about the need to lower the taxes to get things moving again, they still signal that taxes will need to be raised in a couple of years.

The argument is that spending cuts alone will not be enough to stem the tide of a rising deficit. I say hog wash! Spending cuts alone stemmed the tide of rising deficits in my household. Was it painful? You betcha! Was it necessary? Damn straight!

According to an article on MarketWatch.com, tax stimulus that give tax payers $500 at a time doesn't stimulate the economy because we (the consumer) just put that money in the bank as savings. However, lower tax rates that can add $10-$20 per week to a paycheck add just enough money that it doesn't get saved and increases consumer spending.

http://www.marketwatch.com/news/story/Tax-perks-stimulate-economy-coming/story.aspx?guid=%7BDD44159D%2DD4AD%2D45C7%2D8AE6%2D5B765653CDA5%7D

So here we go again! Spend, Spend, Spend! Note in the article that 'saving is bad'. The implied message is that spending is good. However, in that very same article some economist state that saving IS good and we should encourage it.

In the end, even though there is a glimmer of hope that someone in D.C. 'gets it', it appears that the inmates still run the asylum .... So, I'm going to save, save, save and hope that these idiots finally get a clue. Until then, watch your wallets, their safe for now, but at some point the government is coming and they will force you to give them your last thin dime!