Friday, October 31, 2008

Consumer Spending Drop A Brick

To the surprise of absolutely nobody, consumer spending dropped this month. This is not rocket science, since the grocery stores have not dropped prices while our wages and wealth have fallen, if we have work at all. I still see milk for 4 dollars a gallon even with the price of gas halved here. It's a very curious thing that when gas prices rise they are directly fueling price increases, but when they plummet they are not a factor to cause price drops. If only consumers here would stop buying overpriced goods, then market forces might work. Unfortunately that is only a pipe dream, as one in five American house buyers has a house worth less than the remaining mortgage.

Tuesday, October 28, 2008

Fed Meeting Today

Everyone's favorite group of quasi independent bankers meets today to discuss the probable rate reduction, which would be just another notch in the belt of the Bernanke Fed and its love for the low interest rate.

The Fed believes that inflation is not a worry because the world's economies are so bad, which I also aree in the very short term to be true. If stock markets are losing 70% of their value from last year such as the Shanghai Index, then the loss in wealth tempers inflation concerns because a lot of money is not needed to be printed to cover the new wealth in an economy.

In the long term, however, the story is quite different since there has been an inertia from the last two Fed groups to raise interest rates regardless of inflation. When the markets stabilize and prices run up on commodities again, your dollar will buy much less with a 1% interest rate than a 3% interest rate, etc. Beware the short term fixes for they may hold long term curses.

Sunday, October 26, 2008

9 more days until the end of the three year election

One of the problems with early voting is that you get weeks of hearing about the campaign when you no longer care since it does not apply to your vote. Well in my trip to the polling place at my school I noticed a couple of things: 1) turnout is way,way up, 2)black voters are coming out in huge numbers, and 3) young people are showing up in bigger numbers. If this is the case in a state where McCain will not lose unless he cooks Bevo(the UT Mascot) while wearing an OU Jersey, I can only imagine the trends in places where the presidential race is actually close.

That being said, this was also the first election I really cared about none of the candidates. My only view was to vote them all out, as nobody currently in power should be reelected since they have presided over such incompetent rule.

Tuesday, October 21, 2008

Today's update on the Fed's Printing Press Operations

Just when you thought the Fed could not blow more money on attempted market manipulation comes word that we are now on the hook for up to 450 billion more. With this latest round of fiscal malfeasance, the Fed and Treasury have add over a trillion and a half dollars in debt just this year. In other words, the debt level added this year is more than a quarter of what the total national debt was in 1993. Hurray for the party of small government.

Here's a video where Bush claims his 2003 budget will cut the deficit in half in five years. This pretty much sums up the legacy of Bush on economic matters, speak a big game and fail to follow through.

Friday, October 17, 2008

Getting Drunk on The Taxpayer's Money AIG Style

Apparently billions of dollars in the past two weeks has not been enough to satiate the pirate at AIG, as they are now tapping on a paper purchasing agreement from the Fed worth up to ten billion dollars. The same company that took 87 billion, or $87,000,000,000 of my money and your money, then received an additional 37.8 billion, and now they want a little extra time at he government trough.

Why is a company too big to fail? In a country where for years the economic mantra has been that "free market capitalism is the best way to achieve wealth" there should be riots in the streets over such government intervention. Instead, the corporate fascism is accepted as though government actually has power to do good for the economy. The problem is that government cannot effectively decide what 300 million people want on a daily basis, and no corporation can do so either. If the people do not want to invest in companies because they are illiquid, then government can only delay the problem because they cannot make every illiquid company liquid so that investors will flock to financials. If only someone actually advocated personal responsibility in DC...

Wednesday, October 15, 2008

final debate, final analysis

To borrow a tired cliche, McCain accomplished too little, too late. He finally came out swinging and bringing up the dubious connections Obama has with people like the terrorist Bill Ayers and Obama's propensity for government largesse. When McCain referred to Obama as "Senator Government" I actually saw a spark of life in their campaign. Unfortunately, a quick joke won't roll back the huge market losses, the bailouts, the high oil prices.

McCain also brought up the issue of school vouchers which are long overdue. Competition between schools for students is necessary because the current educational system is stuck in neutral since the current funding allocation gives high funding to both high and low performing schools. This means that the incentive for a poor performing school to improve is not that great since a lot of funding will dry up if there is too much improvement. If students could choose where the tax money for education went, then school districts would have to treat the students and parents as customers rather than serfs. As it is now the taxpayer is only seen as a dollar amount by the school districts since they are tied to the land via geographical school tax assessment. Vouchers will free the taxpayer from the school district fiefdom, which is long overdue.

Tuesday, October 14, 2008

Market volatility and political reality

Last week saw people losing over half their portfolio value in one week, and Monday saw the largest absolute increase in the Dow in history, so are happy days here again? The answer is that we will not know until the injection of capital into the financial system is completed. If(and that is a big if) the bailout plan succeeds the velocity of money should increase, which would avoid a depression since a low velocity means money is not being loaned out or used to purchase goods and services.

Even if the bailout succeeds, the political landscape will be changed by the economic realities of the last eight years. The first lesson is that the Republican party cannot claim to be the party of financial responsibility as they have presided over the complete removal of any spending restraint. Secondly, the McCain/Caribou Barbie campaign is in very dire straights with three weeks left in the election. Since early votes are already beginning in some states and will all be starting by next Monday, this last debate is really the final gasp in the campaign. If McCain comes across as badly as he has the last two debates, with stumbling and playing for a tie, prepare for the polls showing Obama up double digits to increase. Is the debate performance going to be too little too late?

Thursday, October 9, 2008

Thoughts on the economic meltdown

From hearing the word on the street, I get the impression that everyone is going to bail out of stocks soon who is still in. That is only a wise idea if you need the money to live offi n the very near term. Otherwise, withdrawing the stocks locks in losses, since the stock price is only set when you sell and buy, so right now it has no value until you cash it in. Also, moving to cash right now is also a losing proposition since the interest rates at banks are in the mid fours, meaning you get a negative rate of return on cash accounts. Government CDs are also negative return gainers, so rather than fret over immediate investment I would rather see people save some money and use some of it that they can spare to buy things before the post bailout0bearstearns-aig-stimulus payment borrowing starts to really kick up the inflationary dust storm. I feel confidernt having invested in the growing wheelbarrow market. It is the next big thing in banking.

Wednesday, October 8, 2008

Another day, another bit of corporate welfare.

Apparently the executives at American International Gang got a new nearly $40 billion dollar loan from the Weimar Republic, I meant the US Federal Reserve. This comes after they were reported to have blown $400k on a spa day which you and I paid for.

Here are some quotes from de Tocqueville as he toured the nascent America for you to contemplate against the backdrop of the rape of the American experiment by the suits on Wall Street:

"In towns it is impossible to prevent men from assembling, getting excited together and forming sudden passionate resolves. Towns are like great meeting houses with all the inhabitants as members. In them the people wield immense influence over their magistrates and often carry their desires into execution without intermediaries." Compare that to the closed door meethings between energy companies and the government which end up with more powerful companies and more gouged consumers.

""The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."" No more needs to be said.

Think about those two ideas when you hear about how dangerous certain ideas are from different candidates or about how we taxpayers must give our hard earned money to billionaires. If this is a free, capitalist society, I would not want to know what a socialist one is like.
This is the face of America's downfall.
(Former AIG CEO Martin Sullivan)

Friday, October 3, 2008

Congress just gave you a pay cut

Today's bailout means that everyone in this nation just took a pay cut thanks to the inflation which will follow the bailout. When more money is printed to cover debts, inflation occurs because the scarcity of money decreases. I was physically ill listening to Nancy Pelosi cackling at the press conference, like a school girl who just got dad's credit card. I need to sleep and dream of a fiscally conservative country, since I won't be waking up in one.

Thursday, October 2, 2008

Debate Post Mortem

After watching the vice Presidential debate, one must analyze the debate in sections and conclude that there was no runaway winner. The following analysis discussed the debate and what was most noticeable about each part.

I. The opening questions/the economy:

The first two questions showed a very nervous Sarah Palin repeating talking points no matter how far they deviated from the question. For example she was asked about the bailout and talked about her time as mayor and cutting taxes, but never mentioned the bailout. Edge:Biden

II. Foreign policy:

Foreign policy questions were very friendly to Joe Biden, with him utilizing his years of foreign policy experience to talk about the governance in Iran, the prevention of nuclear proliferation, and the need to prevent more atrocities in Darfur. They both agreed on interventionism in Darfur, which seemed like a lot of hot air to me since we already have two wars going on and cannot afford a third. Edge: Biden

III. Personal questions/closing statements:

This area was where Sarah Palin had a chance to narrow the gap with her (whether it is real or not) folksy charm and references to being outside the mainstream of politics. Biden did his usual act of talking about his blue collar roots (whether real or not) and both did an admirable job. Palin came across as very likable with her references to her and her opponents sons both being in Iraq and the graciousness in ending the debate. Edge: Palin

Overall winner: Biden
Biden did what he needed to do, coming across as a seasoned veteran against a neophyte governor. Palin did her best to not hurt her cause, making no mistake and only showing nervousness as the onset and improving performance as the night wore on. Unfortunately when you campaign is sinking like a lead balloon, you need better than a tie if you plan on winning.

Caribou Barbie and The Big Debate

Tonight is the big night when Caribou Barbie debates with Joe Biden, it will be the beauty queen versus the foot eater, hockey mom versus blue collar mansion dweller. Hopefully this debate performance by Caribou Barbie is so bad that it dooms the McCain campaign so this endless election will finally go away.