Yesterday President Obama fired GM CEO Rick Wagoner. Rick, who has lead GM since 2000, will receive a $23 million severance package. This for running a company that has lost $82 billion in the last decade, and is now on government life support just to stay afloat.
So I get it, Rick did a terrible job, or was unlucky enough to be at the helm during a terrible time, or both. He should go. And I wouldn't pay him $23 million just for finding the exit. But should the White House be the ones to tell him he has to leave?
What about the bank CEOs? What about the Wall Street CEOs? What about Chrysler and Ford? What is the policy that allows us to know when Washington can step in and change the management of a company?
I ask these questions because I am severely bothered by the idea of Washington running businesses. They can't balance their own budget, the SEC can barely read financial statements, and many of them were born with silver spoons in their mouths. So what makes us think they can fun businesses?
Firing management is the responsibility of the Board of Directors, which are elected by shareholders. The process is tried and true. If GM shareholders couldn't bring enough pressure to bear on Wagoner, then what decision making process did the White House use when it decided to step in and fire him? It's a HUGE question. We need to know, as shareholders, when the government has the right to step in and change key management positions in a company.
I don't like Wagoner, or GM. But the White House was out of line. And such a move will not restore confidence from the business community, who seem to have more reason to fear the White House every day.
Tuesday, March 31, 2009
Saturday, March 28, 2009
Bank Failures
Friday the FDIC took over the OMNI Bank headquartered in Georgia. It was the 21st bank to fail in 2009. For comparison sake, 25 banks failed in 2008. That initially sounds like we are on a much faster pace of bank failures, but not really. The bank failures that took place in 2008 happened late in the year, mostly in the 4th quarter.
So the good news is that we are not drastically increasing the rate of bank failures that began six months ago. The bad news is that we are not slowing it down at all. The worst news is that banks are failing on a regular basis.
OMNI Bank was basically a $1 billion bank. The FDIC will insure the account holders, up to $250,000 each, with our tax money. This insurance of deposits stems from banking policy that was created at the end of the Great Depression to increase public confidence in the banking system, and for the most part it works very well. But it does involve taxpayers making up for the poor decisions made by banks that fail. In short, it creates more debt. This is one of the quietly growing categories of government expenditure that bothers me.
I don't want to change the FDIC policy, but I would like the insurance amounts added to the federal budget conversation. This money has to come from somewhere (our tax dollars).
Interestingly enough, one of the other major legacies of the Great Depression is the Federal Bureau of Investigations. That's right, the FBI. Poverty during that desperate time created a kidnapping industry, and in order to fight it we created the FBI. Curiously enough, the FBI is on a massive hiring campaign...
So the good news is that we are not drastically increasing the rate of bank failures that began six months ago. The bad news is that we are not slowing it down at all. The worst news is that banks are failing on a regular basis.
OMNI Bank was basically a $1 billion bank. The FDIC will insure the account holders, up to $250,000 each, with our tax money. This insurance of deposits stems from banking policy that was created at the end of the Great Depression to increase public confidence in the banking system, and for the most part it works very well. But it does involve taxpayers making up for the poor decisions made by banks that fail. In short, it creates more debt. This is one of the quietly growing categories of government expenditure that bothers me.
I don't want to change the FDIC policy, but I would like the insurance amounts added to the federal budget conversation. This money has to come from somewhere (our tax dollars).
Interestingly enough, one of the other major legacies of the Great Depression is the Federal Bureau of Investigations. That's right, the FBI. Poverty during that desperate time created a kidnapping industry, and in order to fight it we created the FBI. Curiously enough, the FBI is on a massive hiring campaign...
Friday, March 27, 2009
Rebound Relationship
I hope I'm wrong, but...
The current market rally is exactly like a rebound relationship. You feel burned and really just want someone to tell you everything will be OK. You are willing to believe anything they say, because with a few drinks it almost makes sense. Almost...
Then the moment comes when you come to your senses, and can't believe that you even considered this person as relationship material. Welcome to our economy. I want the recent rally to be true. I want the bad news to be over. I want to believe that the worst is behind us. And I almost can. Almost, but not quite (something about horseshoes and hand grenades?).
In the next 90 days the federal government is going to see just how bad tax income has gotten. Corporations and individuals willing be sending in less money because they made less. All of this will be happening as the fight over the proposed $4 trillion budget is in full swing.
Ugh. Thank God it is Friday!
The current market rally is exactly like a rebound relationship. You feel burned and really just want someone to tell you everything will be OK. You are willing to believe anything they say, because with a few drinks it almost makes sense. Almost...
Then the moment comes when you come to your senses, and can't believe that you even considered this person as relationship material. Welcome to our economy. I want the recent rally to be true. I want the bad news to be over. I want to believe that the worst is behind us. And I almost can. Almost, but not quite (something about horseshoes and hand grenades?).
In the next 90 days the federal government is going to see just how bad tax income has gotten. Corporations and individuals willing be sending in less money because they made less. All of this will be happening as the fight over the proposed $4 trillion budget is in full swing.
Ugh. Thank God it is Friday!
Wednesday, March 25, 2009
Dear AIG - I Quit
Here is a link to a NY Times editorial from a VP at AIG. It is his resignation letter, and it is worth reading.
http://www.nytimes.com/2009/03/25/opinion/25desantis.html?pagewanted=2&_r=1&ref=opinion
While Washington and the media focus on $160 million in bonuses, that they had previously agreed to, we the taxpayers are being asked to pay trillions in bailouts. I know that $160 million is a lot of money, certainly more than I have every seen, but it is pennies compared to the $787 stimulus package, the $700 billion TARP program, the $1 trillion in toxic assets bailout, or the billions in other bailouts (like the homeowners with bad mortgages).
Trillions. That's 1,000,000,000,000, Twelve zeros. 1,000 billion.
It makes me wonder. All this time we have been told that bailing out the banks, and homeowners, and automakers, etc., was the cheaper way out. That the economic price we would pay for letting these groups fail would be too high. How does that compare to the taxes we will have to pay for this huge new debt?
What do these big numbers mean to each of us that pay taxes? Well, there are 308 million people in the United States, but only 100 million pay taxes annually (due to age, income, and other factors). Here's the math:
This is a subtotal (because we aren't done spending yet) of $3,487 trillion dollars in less than six months. That amounts to $34,870 per taxpayer. So my wife and I are on the hook for $69,740 between the two of us.
The median household income in the United States in 2005 was $48,000.
Anyone else in a full panic? Because I sure am. And I am having a hard time believing that this is the cheaper way out.
http://www.nytimes.com/2009/03/25/opinion/25desantis.html?pagewanted=2&_r=1&ref=opinion
While Washington and the media focus on $160 million in bonuses, that they had previously agreed to, we the taxpayers are being asked to pay trillions in bailouts. I know that $160 million is a lot of money, certainly more than I have every seen, but it is pennies compared to the $787 stimulus package, the $700 billion TARP program, the $1 trillion in toxic assets bailout, or the billions in other bailouts (like the homeowners with bad mortgages).
Trillions. That's 1,000,000,000,000, Twelve zeros. 1,000 billion.
It makes me wonder. All this time we have been told that bailing out the banks, and homeowners, and automakers, etc., was the cheaper way out. That the economic price we would pay for letting these groups fail would be too high. How does that compare to the taxes we will have to pay for this huge new debt?
What do these big numbers mean to each of us that pay taxes? Well, there are 308 million people in the United States, but only 100 million pay taxes annually (due to age, income, and other factors). Here's the math:
- $500 billion mortgage bailout / 100 million taxpayers = $5,000 per taxpayer
- $1 trillion toxic asset program / 100 million taxpayers = $10,000 per taxpayer
- $787 billion stimulus program / 100 million taxpayers = $7,870 per taxpayer
- $700 billion TARP program from 2008 / 100 million taxpayers = $7,000 per taxpayer
- $100 billion automaker bailout / 100 million taxpayers = $1,000 per taxpayer
- $400 billion AIG bailout / 100 million taxpayers = $4,000 per taxpayer
This is a subtotal (because we aren't done spending yet) of $3,487 trillion dollars in less than six months. That amounts to $34,870 per taxpayer. So my wife and I are on the hook for $69,740 between the two of us.
The median household income in the United States in 2005 was $48,000.
Anyone else in a full panic? Because I sure am. And I am having a hard time believing that this is the cheaper way out.
Tuesday, March 24, 2009
Hedging Medical Expenses in the Market
I recently injured my wrist badly enough to require an MRI test. That test, which involved a nice nurse sticking a large needle into the middle of my wrist, injecting metallic fluid, and then placing my arm inside of a very loud MRI machine, cost over $3,000. I paid just a bit over half of that after insurance. OUCH!!! (on many levels!)
During this test, and the accompanying doctor visits, I asked the medical professionals how their business was doing. They all said the same thing: It's slower but we're OK. When pressed they told me that the main chunk of their business comes from people that NEED medical help. These people are sick, or injured in serious ways. For truly NEEDY people medical care is a must have.
However, a good chunk of medical profits come from people that WANT medical care. These are the people that require less work but pay the same fees. Picture a worried mother who's child has a cold. The doctor is with them for only 10 minutes, does nothing other than ask them to check back if the cold continues more than 2 weeks, and still collects his fee. This appointment is the cream of the doctor's business.
But with the economy struggling people are simply choosing to tough it out longer. Less visits to the doctor. Less elective procedures. Less medical expenditures. Today, when a doctor says "surgery might fix that wrist" people (like me) tend to reply "I'll give it a few months first to make sure this is something that is worth a big check."
Thankfully for doctors we all still get sick, and injured, and will continue to NEED medical care.
But enter the new health plan that the current administration is proposing. I think it is safe to say that any government health plan means more government intervention in the industry as a whole. This intervention leads to the following side effects for business:
If costs go up for doctors, and prices come down, they will make less money. Making less money means that they will hire less help and/or pay their staff less. Doctors making less money will also have less money to invest in equipment purchase and repair. So the result of doctors making less money is worse medical care for all of us. Capitalism 101.
If we want great medical care (and cool 3D pictures when we need them) then we need to incent the people that take the risks on such technologies with profits. In short, we really NEED medical care to be profitable. And generally, the more profitable it is, the better the care will be.
What am I doing about it? This morning I bought the UltraShort Medical Fund (RDX), effectively shorting (selling) the overall stock exchange value of the medical industry. My chips are down, now we'll get to see what happens. I just can't see how government intervention in health care is a good thing for public companies, and this administration has made it clear that there is a fight coming over health care. Let's all hope I lose this bet. It won't do me much good to make some cash if the overall quality of my medical care goes down. The hedge just isn't that effective, nor can I afford to hedge a large enough portion to fairly protect my lifelong exposure to the risk of poorer care.
During this test, and the accompanying doctor visits, I asked the medical professionals how their business was doing. They all said the same thing: It's slower but we're OK. When pressed they told me that the main chunk of their business comes from people that NEED medical help. These people are sick, or injured in serious ways. For truly NEEDY people medical care is a must have.
However, a good chunk of medical profits come from people that WANT medical care. These are the people that require less work but pay the same fees. Picture a worried mother who's child has a cold. The doctor is with them for only 10 minutes, does nothing other than ask them to check back if the cold continues more than 2 weeks, and still collects his fee. This appointment is the cream of the doctor's business.
But with the economy struggling people are simply choosing to tough it out longer. Less visits to the doctor. Less elective procedures. Less medical expenditures. Today, when a doctor says "surgery might fix that wrist" people (like me) tend to reply "I'll give it a few months first to make sure this is something that is worth a big check."
Thankfully for doctors we all still get sick, and injured, and will continue to NEED medical care.
But enter the new health plan that the current administration is proposing. I think it is safe to say that any government health plan means more government intervention in the industry as a whole. This intervention leads to the following side effects for business:
- More paperwork and generally higher administration costs
- Pricing pressure as the government attempts to cap costs for patients
If costs go up for doctors, and prices come down, they will make less money. Making less money means that they will hire less help and/or pay their staff less. Doctors making less money will also have less money to invest in equipment purchase and repair. So the result of doctors making less money is worse medical care for all of us. Capitalism 101.
If we want great medical care (and cool 3D pictures when we need them) then we need to incent the people that take the risks on such technologies with profits. In short, we really NEED medical care to be profitable. And generally, the more profitable it is, the better the care will be.
What am I doing about it? This morning I bought the UltraShort Medical Fund (RDX), effectively shorting (selling) the overall stock exchange value of the medical industry. My chips are down, now we'll get to see what happens. I just can't see how government intervention in health care is a good thing for public companies, and this administration has made it clear that there is a fight coming over health care. Let's all hope I lose this bet. It won't do me much good to make some cash if the overall quality of my medical care goes down. The hedge just isn't that effective, nor can I afford to hedge a large enough portion to fairly protect my lifelong exposure to the risk of poorer care.
Monday, March 23, 2009
Back for More Trouble
I took a few days off and went to the beach, and tried to forget about all of the trouble the economy is in right now. Mostly it worked. That is, until I came back home...
Geithner wants to spend more tax money, this time in an effort to rescue banks from their toxic assets. The plan overview is simple:
The other troubling factor is that the toxic asset plan Geithner is proposing is not new. Instead, it is a slightly different version of what Hank Paulson (Bush's Treasury guy) proposed six months ago. And unfortunately, Paulson was an idiot, so the appearance of returning to his schemes is extremely bothersome. Paulson was a Wall Street insider (former investment banker) who heavily favored his old buddies. I was hoping for something better with Geithner.
The bill for all of this? Well, if we allow private investors to borrow up to 85% of their purchases of these toxic assets then the taxpayer is on the hook for another $850 billion. We just doubled down on the stimulus package. Spend, spend, spend.
Thanks for the debt, guys. I really appreciate it. Idiots.
Geithner wants to spend more tax money, this time in an effort to rescue banks from their toxic assets. The plan overview is simple:
- Let private investors borrow 85% of the money needed to buy these "undervalued" assets (the 85% is taxpayer money)
- If the markets go up the private investors get the profits
- If the plan fails (which I believe is likely) taxpayers eat the loss
The other troubling factor is that the toxic asset plan Geithner is proposing is not new. Instead, it is a slightly different version of what Hank Paulson (Bush's Treasury guy) proposed six months ago. And unfortunately, Paulson was an idiot, so the appearance of returning to his schemes is extremely bothersome. Paulson was a Wall Street insider (former investment banker) who heavily favored his old buddies. I was hoping for something better with Geithner.
The bill for all of this? Well, if we allow private investors to borrow up to 85% of their purchases of these toxic assets then the taxpayer is on the hook for another $850 billion. We just doubled down on the stimulus package. Spend, spend, spend.
Thanks for the debt, guys. I really appreciate it. Idiots.
Tuesday, March 17, 2009
St. Patty's Day Green!
It is very appropriate that the market is higher (at the moment), green is a big deal today. How big?
This plan requires the U.S. to announce August as an official global party month. Most of Europe is already on vacation in August, so I think they will be an easy sell. Asia might put up resistance, but if we remind them that 2009 is the year of the Ox (Chinese calendar) we might be able to convince them to drink like this beast of burden. Central and South America are already on the planning committee (but are always late to the meetings). Australia said yes, but doesn't want the Outback Steak House to be it's official location. Russia refused to answer.
There are over 1,000 cities in the world with at least 500,000 people in them (but China has a lot of them, so we really need them to buy in).
- The city of Savannah, GA goes all out with a special festival. Estimates place the economic impact at $30 million in a normal year.
- There are roughly 150 cities that can hold their own (in size) with Savannah.
- $30 million * 150 cities = $4.5 billion in party revenues
This plan requires the U.S. to announce August as an official global party month. Most of Europe is already on vacation in August, so I think they will be an easy sell. Asia might put up resistance, but if we remind them that 2009 is the year of the Ox (Chinese calendar) we might be able to convince them to drink like this beast of burden. Central and South America are already on the planning committee (but are always late to the meetings). Australia said yes, but doesn't want the Outback Steak House to be it's official location. Russia refused to answer.
There are over 1,000 cities in the world with at least 500,000 people in them (but China has a lot of them, so we really need them to buy in).
- 1,000 cities * $30 million = $30 billion per day (in party revenues)
- $30 billion per day * 30 days = $900 billion
If we could generate $900 billion in August party revenues we could pay for the U.S. stimulus package recently passed in Washington D.C.!
If we party in August we will have a huge headache from drinking too much, but no stimulus debt. If we don't party we still have a huge headache (stimulus debt). So if we are stuck with a headache either way- so I vote for the party!
Monday, March 16, 2009
Obama Gets Dangerous
In a recent New York Times article, the idea of what president Obama called in his campaign "the largest middle-class tax increase in history" is now clearly back in play.
Read the N.Y. Times article that claims the Obama administration is now open to taxing employer-provided health benefits:
http://www.nytimes.com/2009/03/15/us/politics/15health.html?_r=1&ref=politics
Is someone freakin' kidding me?! Obama ran TV ads against this idea during the election, and now he's open to it?! See one of his ads here on youtube:
http://www.youtube.com/watch?v=7l8ZOMd468o
I've got a better idea- why don't we lower the coverage that politicians receive (which is platinum-plated and totally awesome) to the level of the average American. I bet Washington could find a solution then!!
Seriously pissed...
Read the N.Y. Times article that claims the Obama administration is now open to taxing employer-provided health benefits:
http://www.nytimes.com/2009/03/15/us/politics/15health.html?_r=1&ref=politics
Is someone freakin' kidding me?! Obama ran TV ads against this idea during the election, and now he's open to it?! See one of his ads here on youtube:
http://www.youtube.com/watch?v=7l8ZOMd468o
I've got a better idea- why don't we lower the coverage that politicians receive (which is platinum-plated and totally awesome) to the level of the average American. I bet Washington could find a solution then!!
Seriously pissed...
The 7,000 Club
We have rallied the markets for a full week, and all of a sudden people want to believe that the worst is over. Well, it isn't, and here's why...
Nothing seems to have truly changed anything:
Dangerous Rumor:
Obama's health care plan is rumored to include a new tax for those of us with health insurance. The idea being that those with insurance should pay even more to help those without. If true, I fail to see how that helps small businesses and individuals struggling to maintain coverage. The idea of taxing our way to safety stresses me out, I just hope I don't get sick from it!
Nothing seems to have truly changed anything:
- AIG announced over the weekend a plan to pay over $160 million in bonuses to management. Nice work, guys! Thanks for the top notch performance!
- CitiGroup stock closed Friday afternoon under $2 per share, meaning that it is cheaper to buy their stock than it is to use one of their ATMs.
- Tax reports just now being submitted (the corporate filing deadline was March 15th) will give everyone final confirmation of the 2008 train wreck. Expect government agencies to hit full panic in the next few months as tax revenues drop further than expected.
Dangerous Rumor:
Obama's health care plan is rumored to include a new tax for those of us with health insurance. The idea being that those with insurance should pay even more to help those without. If true, I fail to see how that helps small businesses and individuals struggling to maintain coverage. The idea of taxing our way to safety stresses me out, I just hope I don't get sick from it!
Thursday, March 12, 2009
The Poor UAW :(
Did I read the news correctly? Did Ford proudly announce that it had renegotiated the union contracts to lower the pay rate to $55 per hour?! Are you freakin' kidding me?
I know one thing for sure, next time I need a negotiator I'm hiring the Ford union rep. If this guy can look sad about the fact that union factory workers are ONLY making $55 per hour then he should be up for an academy award!
Let's do a little math:
The average college graduate only makes $46,000 in income.
http://www.simplyhired.com/a/salary/search/q-college+graduate
Even if we use a 50% burden rate for benefits for these college grads (which I hate to do, because college grads don't get anything close to the kind of benefits union workers get) we still only have compensation rates of $33.82 per hour!
I know one thing for sure, next time I need a negotiator I'm hiring the Ford union rep. If this guy can look sad about the fact that union factory workers are ONLY making $55 per hour then he should be up for an academy award!
Let's do a little math:
- Union employees get three or more weeks of paid vacation time, so in essence they "work" 51 weeks per year.
- If they work 40 hours per week, that equates to 2,040 hours per year (51wks * 40 hrs/wk).
- At $55/hr they will make $112,200 per year (2,040 hrs/yr * $55/hr).
The average college graduate only makes $46,000 in income.
http://www.simplyhired.com/a/salary/search/q-college+graduate
Even if we use a 50% burden rate for benefits for these college grads (which I hate to do, because college grads don't get anything close to the kind of benefits union workers get) we still only have compensation rates of $33.82 per hour!
- $46,000 *1.5 = $69,000
- $69,000 per year / 2,040 hours worked per year = $33.82
Can we really fight for college educations when it is clear that we value unionized factory workers more? What should I tell my children now? Join a mob and negotiate your way to wealth, it doesn't matter if the company makes money (Ford lost reported operating losses over $17 billion in 2008)?
Sadly, this is our strongest auto company, by a mile.
BOOOOOO uaw! BOOOOO!
Wednesday, March 11, 2009
Suckers Rally
Yesterday the Dow was up by more than 300 points, and it felt good. Every news show talked about how nice it was to have a break from the slide. And it was nice. But I'm a long way from feeling like this is the end of our troubles.
With the market struggling to maintain it's current level, which is half of the record high (the highest closing price ever was 14,164.53 on 10/9/07), we can expect the trade to get a bit violent. Emotion-driven swings will whiplash us around as traders react to the latest rumors and news releases. At times, like yesterday, this will feel great. But not always.
The depths that we have reached, although painful, may not be the end (do I hear 5,000?). There are many jobs still in trouble, consumer confidence and spending will be extremely slow to warm up, and the number of unanswered policy questions still lingering in Washington D.C. will serve as a weight for at least the next six months. 2009, unfortunately, will remain a very risky time for us all.
Hunker down!
Do your work. Love your family. Remember to breathe. This to shall pass, albeit slowly. And when we emerge we will be stronger, happier, and less spoiled, all of which we need.
With the market struggling to maintain it's current level, which is half of the record high (the highest closing price ever was 14,164.53 on 10/9/07), we can expect the trade to get a bit violent. Emotion-driven swings will whiplash us around as traders react to the latest rumors and news releases. At times, like yesterday, this will feel great. But not always.
The depths that we have reached, although painful, may not be the end (do I hear 5,000?). There are many jobs still in trouble, consumer confidence and spending will be extremely slow to warm up, and the number of unanswered policy questions still lingering in Washington D.C. will serve as a weight for at least the next six months. 2009, unfortunately, will remain a very risky time for us all.
Hunker down!
Do your work. Love your family. Remember to breathe. This to shall pass, albeit slowly. And when we emerge we will be stronger, happier, and less spoiled, all of which we need.
Tuesday, March 10, 2009
Ride Into The Sunset
The children of the war veterans were now running most of the country, and in general it had been a peaceful and productive time (with the exception of Vietnam). They were living better than ever, but had made a mess of many traditional aspects of American life. Divorce was normal, bankruptcy was no longer shameful, and sexual morality was a sham. Now in their fifties (by the mid-nineties), they had failed to save much money, and were once again feeling the same hangover headache that they had felt after the summer of love, but this time the dark specter of mortality was impossible to avoid. What to do?
With time being short for the remainder of their careers, they got desperate and decided to stack the deck. Entitlements went through the roof. Social Security? Yes! Never mind that the numbers didn't work. Stock market abuse? Sure! It was helping their retirement accounts.
Then we ran straight into 9/11 (or it ran into us), and the perfect path was disrupted. Now what?! More desperation, more abuse, and more selfish behavior. Madoff steals $50 billion, AIG loses over $500 billion, and the "safe" banks turn out to be shell games run by idiots. No longer able to crank up the juice on financial markets, this generation of takers turns to the only organization left, the U.S. government.
The rally cry goes out:
This isn't fair! Someone else should pay to fix this! We deserve a guarantee!
Never mind that the debt they have racked up through abuse and entitlements will be passed on to their grandchildren. Never mind that they made the very situation that put them (and us) here. Never mind that their children will be the first generation in American history to make less money than their parents' generation (the most basic and true measure I know of).
The Greatest Generation may have fought hard, but in the end they were generally crappy parents, giving rise to the MOST SELFISH GENERATION in our history.
Now we (their children, grandchildren, and great grandchildren) will get the bills, the blame, and the mess. What more could we expect from self-centered whiners?
Are they all that bad? No, there are exceptions. But as a group they get the grade of F.
With time being short for the remainder of their careers, they got desperate and decided to stack the deck. Entitlements went through the roof. Social Security? Yes! Never mind that the numbers didn't work. Stock market abuse? Sure! It was helping their retirement accounts.
Then we ran straight into 9/11 (or it ran into us), and the perfect path was disrupted. Now what?! More desperation, more abuse, and more selfish behavior. Madoff steals $50 billion, AIG loses over $500 billion, and the "safe" banks turn out to be shell games run by idiots. No longer able to crank up the juice on financial markets, this generation of takers turns to the only organization left, the U.S. government.
The rally cry goes out:
This isn't fair! Someone else should pay to fix this! We deserve a guarantee!
Never mind that the debt they have racked up through abuse and entitlements will be passed on to their grandchildren. Never mind that they made the very situation that put them (and us) here. Never mind that their children will be the first generation in American history to make less money than their parents' generation (the most basic and true measure I know of).
The Greatest Generation may have fought hard, but in the end they were generally crappy parents, giving rise to the MOST SELFISH GENERATION in our history.
Now we (their children, grandchildren, and great grandchildren) will get the bills, the blame, and the mess. What more could we expect from self-centered whiners?
Are they all that bad? No, there are exceptions. But as a group they get the grade of F.
Saturday, March 7, 2009
Most Selfish Generation?
Tom Brokaw wrote a book a few years ago praising the Greatest Generation - those that fought and won World War I. He argued that the sacrifices they made turned history for the better, and I agree. They fought, died, and worked until we won that war, at great personal cost both home and abroad. They deserve respect.
But what happened to their children? Coming home from the war in the mid-forties our veterans got busy (ha!) at starting families. These war children hit college twenty years later in the sixties and promptly turned on the same establishment (the U.S. government) that had controlled their parents' lives. Declaring a constitutional right to be free, these flower children promptly turned on every rule they could find in an effort to discover a new way of living that might allow them to avoid the same sacrifices that the Greatest Generation had made.
But the summer of love burned out in a hurry. The flower children woke up after four years of partying only to realize that they had headaches and no prospects. The path to independence that this generation sought through rebellion, they now realized, was much easy to find in capitalism. Making money would allow them to indulge and have a say in politics, so they slowly faded into corporate America to follow a new dream: control wrestled from the inside of the existing power structures.
The seventies brought more partying, but with much nicer (at the time) cars, homes, and clothes. The eighties took this higher, as materialism became the new cool. Rebellion was officially dead, and Wall Street was the home of power. But innovating and working hard was never part of the plan. This now-entrenched, cash-rich flower generation had surfed a wave of economic expansion that they had little control of. But they did control something valuable; every major corporation, organization, and branch of government. The nineties would be their time to shine. The world was their playground.
To be continued...
But what happened to their children? Coming home from the war in the mid-forties our veterans got busy (ha!) at starting families. These war children hit college twenty years later in the sixties and promptly turned on the same establishment (the U.S. government) that had controlled their parents' lives. Declaring a constitutional right to be free, these flower children promptly turned on every rule they could find in an effort to discover a new way of living that might allow them to avoid the same sacrifices that the Greatest Generation had made.
But the summer of love burned out in a hurry. The flower children woke up after four years of partying only to realize that they had headaches and no prospects. The path to independence that this generation sought through rebellion, they now realized, was much easy to find in capitalism. Making money would allow them to indulge and have a say in politics, so they slowly faded into corporate America to follow a new dream: control wrestled from the inside of the existing power structures.
The seventies brought more partying, but with much nicer (at the time) cars, homes, and clothes. The eighties took this higher, as materialism became the new cool. Rebellion was officially dead, and Wall Street was the home of power. But innovating and working hard was never part of the plan. This now-entrenched, cash-rich flower generation had surfed a wave of economic expansion that they had little control of. But they did control something valuable; every major corporation, organization, and branch of government. The nineties would be their time to shine. The world was their playground.
To be continued...
Thursday, March 5, 2009
I Hate To Say It, But...
On January 21st of this year I wrote an article saying that the Dow was headed for 6,500.
http://texaswildfire.blogspot.com/2009/01/dow-on-way-to-6500.html
As I type this, the Dow is trading at 6,552 -- OUCH!!!!
Where is our president?! We need some sort of plan, and we need it now. The stimulus was a good start at a plan (even though I don't believe it will save us), but who has any idea of what we are doing about AIG and GM? Not me.
The administration appears to be paralyzed, making president Obama look indecisive in a clear moment of need. It makes me wonder, is this the change people voted for? Is this what a gentler approach gets us?
I had originally said that I would re-enter the market at this level, but now that we are here I simply can't bring myself to do it. I see no reason to be optimistic. I see a huge UAW problem and a president unwilling to let them go bankrupt (the unions are huge democratic supporters). I see a global financial system that is backed by the empty house that AIG built. I see entitlement spending exploding. Quite simply, I see more downside risk.
I can hear the printing presses humming along at the Fed, and it makes me wonder, how low can we really go? A 67% drop leaves us at 4,675. Could it become reality? I certainly hope not. But I feel like stocking up on cat food - it might just be in high demand as broke retirees get hungry.
In the meantime, I watching the EURO. If Western Europe defaults on any of it's debt we have a whole new cliff to jump off of. Let's hope it doesn't come to that.
http://texaswildfire.blogspot.com/2009/01/dow-on-way-to-6500.html
As I type this, the Dow is trading at 6,552 -- OUCH!!!!
Where is our president?! We need some sort of plan, and we need it now. The stimulus was a good start at a plan (even though I don't believe it will save us), but who has any idea of what we are doing about AIG and GM? Not me.
The administration appears to be paralyzed, making president Obama look indecisive in a clear moment of need. It makes me wonder, is this the change people voted for? Is this what a gentler approach gets us?
I had originally said that I would re-enter the market at this level, but now that we are here I simply can't bring myself to do it. I see no reason to be optimistic. I see a huge UAW problem and a president unwilling to let them go bankrupt (the unions are huge democratic supporters). I see a global financial system that is backed by the empty house that AIG built. I see entitlement spending exploding. Quite simply, I see more downside risk.
I can hear the printing presses humming along at the Fed, and it makes me wonder, how low can we really go? A 67% drop leaves us at 4,675. Could it become reality? I certainly hope not. But I feel like stocking up on cat food - it might just be in high demand as broke retirees get hungry.
In the meantime, I watching the EURO. If Western Europe defaults on any of it's debt we have a whole new cliff to jump off of. Let's hope it doesn't come to that.
Wednesday, March 4, 2009
Dead Cat
In trading, when you are in a down market and suddenly get a bounce, they call it a "dead cat bounce". The explanation of that phrase is:
Even a dead cat will bounce if you drop it from high enough.
Not a pretty picture!
This is what we are seeing today in the market. People may think this is a good place to get back into the market, but they have lost money every time they thought that in the last year. Some may just be buying back stocks that they had sold, taking profits in the declining markets (this is called "shorting" a market). But whatever is happening, I don't see any reason to get excited.
We shed over 700,000 jobs last month. AIG is a black hole of bailout money. Banks are in trouble. All the same mess!
So turn off the news and read a book! This could take a while. I recommend the Bible. Always a good choice in depressing times!
Also- baseball is back! Go Cubs! This could be the year!
Even a dead cat will bounce if you drop it from high enough.
Not a pretty picture!
This is what we are seeing today in the market. People may think this is a good place to get back into the market, but they have lost money every time they thought that in the last year. Some may just be buying back stocks that they had sold, taking profits in the declining markets (this is called "shorting" a market). But whatever is happening, I don't see any reason to get excited.
We shed over 700,000 jobs last month. AIG is a black hole of bailout money. Banks are in trouble. All the same mess!
So turn off the news and read a book! This could take a while. I recommend the Bible. Always a good choice in depressing times!
Also- baseball is back! Go Cubs! This could be the year!
Monday, March 2, 2009
Wealth vs. Income
The DOW is down hard, but what does that mean to our lives? The answer to that question depends on how close you are to retirement.
If you plan on working for the next decade or two, then the market is not your prime focus. Instead you watch income (revenue) and expenses (and inflation of these expenses!). You work and spend and live, generally unaffected by the markets. Well, generally unaffected unless your job is tied to the markets.
But if you are retired, or close to retirement, then it is a whole different story. Then you live on wealth. But there is very little excuse for those that left themselves exposed to a market slaughter with money that was vital to there livelihood. You can't gamble the rent money! And if you choose to gamble the rent money and lose it, then you should expect yourself to go back to work.
It may not be the answer people want to hear, but markets are not safe. Markets can move violently. And you can lose it all. Just don't ask me to cover your gambling debts if it goes badly, I'm not OK with that. Not as a taxpayer, not as a neighbor, not at all.
If you plan on working for the next decade or two, then the market is not your prime focus. Instead you watch income (revenue) and expenses (and inflation of these expenses!). You work and spend and live, generally unaffected by the markets. Well, generally unaffected unless your job is tied to the markets.
But if you are retired, or close to retirement, then it is a whole different story. Then you live on wealth. But there is very little excuse for those that left themselves exposed to a market slaughter with money that was vital to there livelihood. You can't gamble the rent money! And if you choose to gamble the rent money and lose it, then you should expect yourself to go back to work.
It may not be the answer people want to hear, but markets are not safe. Markets can move violently. And you can lose it all. Just don't ask me to cover your gambling debts if it goes badly, I'm not OK with that. Not as a taxpayer, not as a neighbor, not at all.
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