Up In Smoke! Picking Winners & Loosers Again...

There is not doubt in my mind that there are winners and losers in every aspect of life and a person’s free will and ability to choose can determine whether they are a winner or a loser. We all have a choice. There is a point when we grow up and we can choose to good or bad, right or wrong, left or right.

I believe that the reason America is so strong is because our government was designed to allow this free will to exist. You can choose good and be rewarded or you can choose poorly and be punished.

That punishment can come in many forms. Some choices mean that you, the individual making the choice, are left out of the social or economic growth experienced by others. For instance, choose to sleep in every day and show up to work late and you’ll be unemployed. Bad!

However, choose to get up early, get to work on time and be productive and you will be rewarded! Good!

Choose to break a law and go to jail, choose to do the right thing and stay out of jail. I think you get my point and here’s where I’m going with all of this. It seems that lately we Americans have lost sight of the fact that allowing a winners and losers to be created in society through free will is much better than having a nanny state determine who the winners and losers are.

Now we seem to applaud the government for their daring efforts to save the banks. We MUST save the auto industry and now we’ve done it again. In an attempt to save people from themselves and their choices we have finally instituted stricter regulations on tobacco products.

An unintended consequence of this regulation is that it will establish one company above all others as the leader in the industry and may solidify them in that position for ever. As a matter of fact, Phillip Morris (the company destined to hold the top spot) actually lobbied FOR the regulation! http://www.marketwatch.com/story/under-fda-rule-big-tobacco-could-get-bigger?link=kiosk

So now we have the Government choosing winners and losers again! When does it all stop? If you think this is a good thing then ponder this. What happens when the government decides that the company that competes with the one you work for is more important than yours? What happens when you are on the losing side and you get laid off or see your sales drop so drastically that the company is shut down?

In the end having a government that chooses winners and loser can only lead to ruin. Look at the Soviet Union, Facist/Socialist eras in France and other Eastern European states during the 80’s. Is that what we want America to become? I thing not … and if it does, anyone up for sharing a plane ride to Australia?

Lending Lies

There is a great new show on Fox called Lie To Me. In the show the main characters are experts at facial expressions. They can literally tell when someone is lying by the look on their faces. Pretty amazing and fun to watch.

I wish I could get the bank execs in the room with these experts. Here's why, the banks say they are lending, but are they really? The truth is that many banks have increased lending but at a paltry rate.

Bank of Americas recent revelation that they earned a profit of almost $4 billion dollars in the last quarter was quickly quashed and the ‘real’ number was reduced to $2.5 billion. But even that number may not be accurate.

B of A, Citi and other large banks would have us believe that these profits stem from an increase in lending to home owners, when the truth is that lending increased less than 2% over the same period last year. So where did the profits come from?

The profits came from thin air. As reported in a very eye opening article on MarketWatch.com, much of the banks profits were driven by the TARP money they received. With TARP plugging gaps in the banks balance sheets, huge write downs allowed by larger banks swallowing up smaller failing banks and additional relaxed accounting rules allowed by regulators, the banks all of the sudden look very strong.

But that’s not the real story. The real story is this, banks aren’t lending for good reason. After years of excess and easy money the banks have learned their lesson and their hording their cash to protect them from further market turmoil.
In a recent quote in The Wall Street Journal, Fed Chairman Ben Bernanke talked about the need for more education about credit by addressing the inequities in wealth between whites and minorities.
He stated: "Part of it has to do I think with financial education," Mr. Bernanke told students at the historically black college. "There needs to be broader understanding in minority communities … about the importance of saving and building a credit record."
In my opinion Mr. Bernanke missed the point. This is more than a white vs. minority issue. He could have just said; There needs to be a broader understanding …and a core curriculum starting in grade school that teaches… the importance of saving …money… and building a …good... credit record. (the bold comments are mine.)

Additionally, I still hold to my belief that America needs to change our economy from a spending based econ to a savings based economy. Some have argued that this will limit growth and achievement.

Those that argue against a savings based economy miss the point completely. All a savings based economy refers to is an economy where the pace of credit spending does not outpace the rate of earned income and savings.

http://www.marketwatch.com/news/story/Banks-say-theyre-lending-theyre/story.aspx?guid=%7b4280B32E-53CB-49A7-8DC8-D0E95F855358%7d&print=true&dist=printMidSection

Watch the Birdy

Recently in the news there was a lot of furor over AIG giving out millions in bonuses to some of it's top executives. I don't want to get into the argument of whether that was correct or not, I'm sure there are many opinions on both sides.

What I want to point out today is something that many of us missed. While the left hand was waving for our attention the right hand was doing something else that the dolts in the media didn't see.

While the spectacle of Chris Dodd stuttering uncontrollably as he tried to explain his way out of allowing the AIG bonuses without throwing the Obama administration and Timothy Geihtner under the bus was amusing. It served to dupe the one-sided media types.

What didn't get reported this weekend and last week was the fact that the Feds decided to throw and additional $1 Trillion dollars at the market and made an additional $6 billion dollar commitment to keep buying MBS (mortgage backed securities).

Sounds good right? What's so bad about that. Well I'll tell you. They don't have the money ...or should I say WE don't have the money to do this with. So the printing presses were pushed into full gear and just to top the bad news off with more bad news... ready...

We used the freshly printed money to buy our own debt. Now in the real world this is essentially like 'kiting' a check. You know, you go down to the bank and you deposit a check from your own account back into that account.

You don't really have an extra grand in the bank but for a brief while the books show that you do. The government just did that. I dare you to try it! They would nail you for fraud and throw you in the slammer for sure!

But the hypocrisy of all this nonsense is not the worst part. The worst part of all this is that we know, everyone with any common since and historical economic knowledge knows that printing money devalues the currency and leads to inflation.

Our only saving grace is that monetary policy with regard to printing new dollars has been relatively tight over the years and we are in a recessionary time, so maybe, just maybe we make it without getting dinged to hard this time.

It's scary out there. While things should start to improve, we won't see real improvement and wealth generation until the bureaucrats and blow-hards in Washington quit with their Tax & Spend ways.

America, this is our wake up call! We can't spend our way out of the mess this time. We need to save and our government needs to save along with us. It's time to STOP spending money we don't have.

That's my opinion, I welcome yours.

Transparency Right?

Suffragette America: wham, bam, thank you mam’! Congratulations the recovery and reinvestment act is law!

Our government is borrowing and this bill is so freaking huge, both colossuses’ of Memnon couldn’t prop the thing between them if they tried. It’s ridiculous! Throughout the history of mankind this type of unchecked spending has collapsed societies.

While I am on the topic of ancient civilizations that no longer exist can I just scream out Rome! Thank you but I am dumbfounded by all of this and not in a good way. I can’t believe the people that are think certain aspects of this bill are good.

“Like, yo dude, I found an extra twenty-five dollars a week in my paycheck! It just appeared magically! Cool!” These knot heads don’t get it! Somebody will pay …all of us will pay… and we’ll pay and pay and pay!

Maybe it has all gotten to me but I see all of this borrowing as being a little like we have this giant drill and we’re boring through the earth. In the end we will pop out the other side and be siphoned into some impoverished third world nation but nobody will notice because it’s been such a slow downward spiral.

For many we are just nibbling on the sweet illusion of socialism but not quite ready for the commitment. Some are excited, some are exasperated and I just may be resigned to what is happening. Trust me I don’t want that and I am almost confident in saying that you don’t want to see it happen either, what a nightmare!

Now I know I am being a little rough on the new bill and some say we need to give it time. All I can say in my defense is that we’ve seen this before and it hasn’t worked. But this time we have ‘transparency’ so everyone can see what’s going on. Right? That makes it all different…

The seductress is Lady Transparency. She’s all dressed up for us and promises the fulfillment of our wildest fantasy, a government that is for the people, by the people and keeps the people free. A government with no corruption and where we can spend all this money and do ‘good’ for ALL people.

But underneath the seductive trappings is a two-timing tramp that is telling lies and stealing from us. You need proof, then just look at the new government web site, recovery.gov. It’s one huge piece of Socialist propaganda. The so called transparency is fiction, read the fine print and the asterisk on the site. Transparency my a**!

Hold on America! I started this blog entry with a song so I’ll end with one. Back in the USSR, you don’t know how lucky you are boy, back in the, back in the, back in the USSR!

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... ;-)

The Good, The Bad and The Ugly

Finally we might get some movement on solving the bank and mortgage mess! It is about time. I've always said if the problem is really bad loans then get them out of the system and everything will be fine.

Now we here that's exactly what might happen. New Tres. Sec., Timothy Gheithner has suggested the creation of a 'bad bank'. This bank would be an aggregator used to accumulate the loans that are in default, essentially removing them from banks books and getting them out of the system.

This 'bad bank' would absorb all of the delinquent assets and turn our banks back into 'good banks' again! Stupendous. But wait, here's the ugly part, there's not enough money left in the TARP fund to buy all the bad loans.

The answer might be to seek investment capital from the private sector. With enough government guarantees on returns, that money might come flowing in fast and furious. However, the real ugly part would be if the American tax payer were to be burdened further with those guarantees.

For now all we can do is take a wait and see stance on this. This is the most logical decision to be made by the Treasury since this whole thing started over two years ago.

Let's hope Timothy 'the dodger' Geithner is right. I think he is, it's what the economist I follow have been saying for a while ....and they are all conservatives so maybe they all got it right this time.

What? 'the dodger' comment above? What's that all about? Sorry, it's just my swipe at yet another Obama appointment where the appointee had a tax problem....but that's a subject for another blog isn't it.

Sorry, back to the subject at hand. If the Secretary of Tresury is correct on this one, the fix could be in and we might see our economy improve as early as the 4th quarter of this year.

But the recovery may still be blunted if the Democrats are successfully in Porking America again with this huge, over inflated, pork barrel, pig belly so called stimulus package. Again, we will all just have to wait and see.....zzzzz.....zzzzz..... Somebody wake me up when this nightmare is over please! ;-)

Porked Again!

While the President lectures America's CEO's about excessive pay and the Vice Pres plays buddy-buddy with Al Gore, the Democratically controlled Congress voted to hand $93,000 to each and every member!

So the earmarking will stop under the Obama administration, right? Of course that's unless you take into consideration that the $800 billion stimulus is nothing but one HUGE earmark!

Now the Dems have found a new way around future earmarks, you need only look at their most recent actions. They just gave themselves $93,000 per congressman as pocket change.

It's being sold to us as 'a necessary increase to help out constituents'. Bull Sh%#! It's an earmark without being an earmark!

It has been intimated by the Vice President that its patriotic to pay taxes. It has been suggested by Harry Reid and Nancy Pelosi that we all have to tighten our belts. So tell me something, why don't the politicians have to tighten theirs?

I thought we were going to get some leadership out of the Obama administration. Turns out we're all just getting Porked Again!

To Big To Fail

There is a huge problem right now and it's about to cost the American economy even more money! It is the concept of 'to big to fail.'

That's what was said about Chrysler back in the late 80's when they received their first bailout in the form of a loan from the federal tax payer. That's what happened with the Savings & Loan bailout that created the Resolution Trust Corporation.

To big to fail? Didn't we learn our lesson? Now we're at it again. Banks that are to big to fail! The problem was the repeal Glass-Steagall Act and Clinton's signing of Grahm, Leach, Bliley which deregulated the banks, securities and insurance companies allowing them to compete with each other and even combine operations.

Now CitiGroup is 'un'grouping and Bank of America (who thought it would be a good idea to swallow up Countrywide Home Loans) is getting another infusion of capital from the Feds. We're talking tens of billions of dollars of our money!

Well, as I think about it, I guess it isn't our money yet. From what I understand the Feds have the printing press ramped up and ROLLING! The green stuffs flying off the presses faster than lemmings over a cliff! (excuse the obscure reference to a 1980's arcade game, but you know, I'm olde! LOL)

The point here is that we keep buying into this to big to fail concept. Now we're creating a situation where our debt is escalating from an already unfathomable high amount and the dilution of our currency may some day create hyper inflation!

It has to stop! Yes, there will be some pain. We have to remember that we have bankruptcy laws for a reason. It's so businesses can restructure.

The bottom line is that we need to restructure our entire economy. We need to change from a spending economy to a savings economy and the only way to do that is to leave this 'to big to fail' concept in the trash heap and change our tax system from an income tax to an embedded consumption tax like the Fair Tax.

I mean, what are we thinking? Do we believe the World will look at America and decide that we are to big to fail? Doubtful, they'll cheer while they watch our collapse. Time to wake up before we reach the point of no return. The we really do fail.