Friday, December 26, 2008
In the past decade, the Chinese loaned trillions of excess savings to the US at very low interest rates. China invested earnings mostly from manufacturing exports by buying U.S. T-Bills, bonds and government-backed mortgage debt. The more they bought, the lower the interest rates. Lowered interest rates helped fuel a historic consumption binge and housing bubble in the United States.
US leaders became complacent about borrowing from a communist country & American consumers were lulled into complacency about spending beyond their means. Economists say Americans should have recognized borrowing from abroad for consumption and deficit spending at home was not a formula for economic success. Its not rocket science! WHAT WERE WE THINKING??
China accumulated trillions of US debt instruments (2/3rds of US national debt) & the US taxpayers in turn pay billions of dollars in interest, with which China competes for oil supplies against the US. If China had allowed its currency to float according to market demand in the past decade, its export growth probably would have moderated & it would not have acquired the same vast hoard of dollars to invest abroad.
"This was a blinking red light," said Kenneth Rogoff, a professor of economics at Harvard and a former chief economist at the International Monetary Fund. "We should have reacted to it."
But the Fed & Alan Greenspan didn't react. Interest rates stayed low, contributing to the US housing bubble even as China stoked our easy-money economy to export more goods. These so-called economic experts looked right at that blinking red light like a deer in headlights & stoked speculation in real estate. Perhaps Alan fell asleep at the wheel, but were the Fed's other members asleep, or mesmerized by the blinking red light?
Thursday, December 18, 2008
The old adages, "Everything is timing" & "90% of what happens is due to attitude" is very pertinent to smart investing. Economic pendulums swing back from going too far in either direction - its just a matter of attitudes gathering speed. Much depends on consumers.
Bear market money-makers see global economies continuing to contract well into late 2010. They expect consumers outstripped their ability to pay huge levels of debt after a decade of decadent spending like there's no tomorrow. They expect most will spend only on necessities to pay off credit card debt & car loans, but those w/low-paying or no jobs will default. They believe this process will stretch out over several years - slowing annual growth to 1.0% (down from 3.5%), and that stock prices have not yet fully priced in this timing.
Speakers' motives at the Reuters Investment Summit play a huge role. They all try to influence their particular markets up or down depending on their strategy to make money. Never mind there are few alternatives for that big load of money flowing out of hedge funds.
Bears like Atteberry, who runs a $2 billion bond fund at First Pacific Advisors in LA focused on income funds, hopes to gain more institutional & high-value clients disenchanted with hedge funds & seeking safe harbors. Taylor, an old guy who trades currencies with a $14 billion hedge fund, hopes global traders will dump currencies so he can buy cheaper.
Bullish speakers like O'Shaunessy are also trying to influence managers of institutional & high-value clients to release their big load of money to buy equities now, which would drive those market up. Even if growth in spending slows to a crawl, they believe it will pick back up so best to get into equities of companies with solid fundamentals while their stock is undervalued. How severely undervalued is the question here.
Monday, December 8, 2008
Consider giving cash or gift cards issued by your bank this Holiday Season - rather than merchant-branded gift cards - to avoid redemption problems should a merchant close its business.
The FDIC approved insuring "stored value cards" IF the cards are purchased from banks. The FDIC will recognize card holders as insured "depositors" if the issuing bank fails. FDIC insurance does not cover merchant-brand cards.
With several large bankruptcies came large shocks to consumers holding gift cards in those companies. SharperImage had close to $20 million in outstanding gift cards when it filed. The Bankruptcy Court ruled gift cards are booked as debt owed card holders as unsecured creditors and discharged the debt. Circuit City filed and asked the Bankruptcy Court to allow the company to redeem the cards at stores that will remain open during its reorganization. States Attorney Generals are moving to protect consumers by getting state legislatures to pass laws extending time limits for redemption; e.g., Illinois law allows up to 5 years.
Thursday, November 20, 2008
Georgia's 10th District Rep. Paul Braun used HATE with fear-mongering code words to belittle our 44th President at a Rotary meeting. How his hateful words made national news to be repeated on talk radio is another story. Braun's ploy to use national media to drive voters back to the polls for Saxby Chambliss in a run-off worked stunningly well.
Contrast that with ELEGANT words about what it means to be American in a published essay by Waverli Rainey, a teenager in Wasilla, Alaska. Waverli (who is white) was deeply disturbed by disrespect shown a new president on election night at Wasilla's Sports Complex & by open hate-filled bigotry at school the next day. Waverli decries her own lack of courage to speak out, but with courage & essay in hand, went to the local paper.
The Frontiersman published Waverli's essay on Nov. 13. Certain blogs took note, but not the national news media. Why is that?
Waverli turned aside hate, not by a rant like Rep. Braun, but with ELEGANT writing... as did our Founding Fathers. Her most powerful writing is her description of what being an American means - feelings shared by millions of silent Americans who spoke with their votes. [Note: Please read this letter from Waverli's mother before reading the article.]
Valley teen has some big questions
By Waverli Rainey
Frontiersman Spectrum | Nov. 13, 2008
Hats off to Waverli Rainey & other young people who want a better America where hate words have no power at all. They are the future of our nation.
The question is - will national news give Waverli's elegant words as much attention as Dr. Broun's hateful fear-mongering words?
Freedom of the press carries within certain responsibilities & tremendous power. We the people must insist our national press give more power to words of ELEGANCE than words of HATE - if WE want a better nation.
Kudos also to other young people who walk the talk. They put their own lives on hold, drove long distances to Georgia, & are working long 12 hr. days - just to get out the vote for Democrat Jim Martin, who's challenging the incumbent Senator in a run-off. Same young people worked tirelessly for another challenger who walks the talk - Barrack Obama.
Sunday, November 9, 2008
Sarah Palin’s heavy involvement with C. Peter Wagner’s Apostolic Council of Prophetic Elders should give us all heartburn! Wagner's New Apostolic Reformation's "The Seven Mountains Mandate" is intended to equip HIS "Christians" (exclusive) to begin taking control of education, business, banking, government plus 3 others.
Talk2Action called the lack of coverage scandalous!
~ An informed electorate is necessary for a strong nation. ~
Saturday, November 8, 2008
Results were so astounding - people are still digesting their own emotional reaction.
I watched the returns come in with my daughter & her husband. She & I cheered loudly when Iowa results came in (we’re proud to be from Iowa, where Obama’s campaign was launched). Soon the Electoral Vote count shot up with west coast results in & we all jumped up cheering roundly, including the dog. Fireworks went off nearby in their neighborhood.
We marveled at McCain’s concession speech in Phoenix. We all thought the old McCain is back! He was gracious & respectful - as if he was speaking code to old friends that the REAL John McCain was still there. Good for him!
Soon after the singer finished at Grant Park in Chicago, Barack Obama walked out with his family to a HUGE uproar. After hugging his wife & kids, he stepped to the podium - looking punch-drunk exhausted - & launched one of his finest speeches, firing up that crowd of supporters in Grant Park even more! Not long after more fireworks go off nearby.
Loved the families up on stage at Grant Park!! Pictures like that are worth 1,000,000 words when the world is looking on. Their mothers! Well, what can I say?
Listening to NPR analyse the results the next morning, I realized Obama had been given a mandate. I found myself quietly crying, my heart swelled knowing there were more than 60 million Americans who also want our beloved country to once again be respected & loved by the rest of the world.
The pride I feel is not related to electing a man of bi-racial heritage. It is directly connected to Obama's stand against invading Iraq when it was risky for him to do so as a candidate for the Illinois Senate. He called it dumb then & he was right!
Obama didn’t know then just how many good old-fashioned Americans agreed!!
~ An informed electorate is necessary for a strong nation. ~
Thursday, October 23, 2008
Monday, October 20, 2008
That old adage has never been truer than now. Fearful hysteria overrode fundamentals this past 2-3 months - especially last 2 weeks - driving prices to the bargain basement. Governments world-wide pledged $3.3 TRILLION to remedy the worst financial crisis in decades.
Making History: If you blinked twice last week, you likely missed this history in the making. 9 largest US banks were NATIONALIZED on Oct. 14 when Henry Paulsen, US Treasurer, did a fast U-turn & handed their CEO's a 1-page agreement that required each bank to sell the US government preferred stock plus warrants to buy common for a $25 billion capital infusion whether they needed it or not. Objecting & grumbling, the CEO's did as they were told after Paulsen gave them an ultimatum: take the deal or we'll raise the ante on your banks (translation: raise capital requirements).
The Treasury - on behalf of taxpaying citizens - received preferred shares paying 5% dividends (increasing to 9% w/in 5 yr.); plus warrants to buy common equal to 15% of the initial investment, which would not be voting shares. The rising dividends & warrants are intended to give banks an incentive to buy back the shares. Supposedly, Paulsen basically demanded from the banks what Warren Buffett demanded from Goldman Sachs - only the banks got a slightly better deal.
Henry Paulsen took a page out of Warren Buffett's "HARD BARGAIN" play book... or maybe it was bridge - Warren's favorit game. (Heh! Heh!)
Pay attention now & don't blink when I tell you Warren Buffett is Obama's chief economic advisor & will likely be sitting at his Cabinet table should Obama win this election. Make you feel better about SOCIALISTIC moves the Bush Administration put on those US banks? Good ~ now that you KNOW the sky isn't falling, can we get on with figuring out whether our pensions & 401k's will head back into better territory??
Now global credit is starting to kick in and, while volatile, stocks & bonds should solidify the bottom of the markets this coming week. If you've been sitting on cash, now is the time to start buying back in - but on a $-cost weekly basis until Thanksgiving. Don't overlook investment-grade bonds (w/i-rate spreads are at historical highs) - of companies that are sitting on $640 billion of cash. Stocks will rise along w/these corp bonds. We'll be seeing a wobbly u-turn in the markets to match 1988, but 5 years from now you'll be glad you were in the market!
World stocks are bouncing up as confidence in credit begins to grow. This Monday morning S&P 500 futures rose 17.10 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 147 points, and Nasdaq 100 futures added 22 points. Also short-term lending rates are beginning to narrow. Indications that markets are getting back to normal.
Warren Buffett gave his thumbs up on Friday in a NY Times Op-Ed. Stating with his usual Midwestern wisdom ("So, if you wait for the robins, spring will be over.")& utmost confidence, Warren said he's moving from 100% US government bonds to 100% American stocks in his personal account:
"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now."Today the world's biggest investors - managers of the largest asset management companies sitting on cash - followed Buffett & gave their collective thumbs up, too. Cautiously, of course...
Hoo-wee!! Time for a GROUP HUG!! ~ MomsHugs
~ An informed electorate is necessary for a strong nation. ~
Sunday, October 12, 2008
The worst of them blames the bleeding-heart Democrats who helped people buy homes they could ill-afford if times got tough. Guess its too much trouble to dig into the documentation of those bleeding-heart Republicans who helped people buy risky loans they could ill-afford if times got tough.
Well, its NOT for the faint of heart, unless you have a lot of time & courage to drill down into the evidence - apparently gushing talk-show hosts don't have either time nor courage!!!
Comments on Proposed Rule: Alternative Net Capital Requirements for Broker-Dealers That Are Part of Consolidated Supervised Entities [Release No. 34-48690; File No. S7-21-03]This financial house of cards would not have been as likely to collapse had the SEC followed the advice of Leonard Bole, software consultant to the U. of Chicago. Bole's comments were the sole dissenting opinion in opposition to letting the investment banks use their own computer models to measure variable risk. [Comments of Leonard D. Bole, L.D.B. Consulting, Inc., January 22, 2004 (File name: s72103-9.pdf)]
Chairman Cox has had an illustrious career... until now. His 2005 bio indicates he is truly a very smart guy - earned a joint MBA-JD from Harvard (like Obama, he was also an Editor of Harvard Law Review) He clerked for a federal judge before joining a prestigious international law firm in LA, specializing in venture capital & corporate finance as head of its Orange Co. corporate department. He left to serve Pres. Reagan as Assoc. White House Counsel in 1986 - a year before the stock market crashed big time in 1987. Reagan assigned Cox as White House liaison to Greenspan's "Brady Commission" charged with investigating the causes of the October 1987 stock market crash.
He returned to California, was elected to Congress, where he served 17 years in the House - 10 of those years with a Republican majority. As a few excerpts from his bio futher illustrates, Rep. Cox truly looked out for his corporate constituents....
"Among the significant laws he authored were the Private Securities Litigation Reform Act, which protects investors from fraudulent lawsuits, and the Internet Tax Freedom Act, which protects Internet users from multiple and discriminatory taxation. His legislative efforts to eliminate the double tax on shareholder dividends — the subject of a thesis he authored at Harvard University in 1977 — led to the enactment in May 2003 of legislation that cut the double tax by more than half.
"In addition, he served in a leadership capacity as a senior Member of every committee with jurisdiction over investor protection and U.S. capital markets, including the House Energy and Commerce Committee (as Vice Chairman of the Oversight and Investigations Subcommittee); the Financial Services Committee; the Government Reform Committee (as Vice Chairman of the full Committee); the Joint Economic Committee; and the Budget Committee."
"During his tenure at the SEC, Chairman Cox has made vigorous enforcement of the securities laws the agency's top priority, bringing ground breaking cases against a variety of market abuses including hedge fund insider trading, stock options backdating, fraud aimed at senior citizens, municipal securities fraud, and securities scams on the Internet. He has assumed leadership of the international effort to more closely integrate U.S. and overseas regulation in an era of global capital markets and international securities exchanges."
How well has that worked? History repeats itself – in 11 stock market crashes since WWII. Now trust in government is gone bust & trust in banks is once again hanging by a thread. Whatever happened? Farmers Bush-Cheney & Company (Farmer Bush & Team) ignored history in the name of eradicating that ultimate evil - regulation. Our nation’s 5 largest investment banks complained of burdensome regulation… poor babies whined!
The Fox – the nation’s largest banks - had already formed “holding companies” to shield themselves from oversight of subsidiary “regulated” banks. In 1999 under Sen. Phil Gramm's leadership, the Gramm-Leach-Biley Act allowed financial holding companies to offer banking, securities, and insurance products under one corporate roof. The law didn’t permit the SEC to examine holding companies’ books nor require sufficient equity to meet the SEC’s capital requirements. The SEC needed new legislation to close that gap – especially after global hedge fund, Long-Term Capital Management (LTCM) collapsed in 1998, and the following stock market mini-crash in 2000.
The gap in SEC enforcement was left gaping by the Senate Committee on Banking (Financial Institutions, Securities & Investments Subcommittees) and the House Financial Services Committee - which have jurisdiction over the SEC & Securities Investor Protection Corporation. These Committees are responsible for oversight of government-issued securities, financial exchanges and markets, financial derivatives, accounting standards, and insurance. Who was in charge of the henhouse?
By 2001, Fox knew Farmer Bush & Team had locked the “shotguns” away rather than “keep it behind the door” as earlier SEC Chairmen did. Still believing Fox is best at catching a thief in the henhouse, Farmer Bush & Team - armed with a Republican majority in Congress - sat on the porch smoking… what? Pot???
In 2005, the year after the SEC tossed out capital requirements, Farmer Bush & Team Congressman Christopher Cox in charge of guarding the henhouse. Rep. Cox (R-CA) spent years leading efforts to block investor lawsuits & investigation of complaints, and to keep rules favoring executive stock options. Yep… Rep. Cox was a true Friend of Fox (FOFox).
As new SEC Chairman, FOFox Cox dismantled the risk oversight office assigned by former Chairman Donaldson, and then fully embraced Bush & Team’s new Treasurer, Henry Paulson. Paulson, Uber-Fox at Goldman Sachs, master-minded gutting of capital requirements in 2004. Not too surprising that FOFox Cox also embraced Uber-Fox’s ultimate plan to lock up ALL shotguns in Farmer Bush Team’s Cabinet, too. Farmers Bush-Cheney & Company quickly shushed complaints.
Fox & Friends were free to gorge on chicken to the point of becoming very sick. With bellies full of the offending evidence, Fox & Friends went to Uber-Fox who took it up with Farmer Bush & Team to… what? Put them out of their misery? Nope… Uber-Fox begged them to buy more chickens while Fox & Friends upchucked all over the farm & then some. GM-Fox will be next after gorging on SUV profits. With Paulsen’s blueprint, will there be ANY chickens left to reproduce a brood???
What would George Orwell say today? He’d probably repeat what he wrote in Animal Farm – “Some animals are created more equal than others.”
Thursday, October 9, 2008
Looking for energy innovation in 100,000 garages out there!
Wednesday, October 8, 2008
TOOTH TELLING: News flash about deregulation of the banks... can't pin that one on Clinton. Bank deregulation was one of the first big pieces of legislation the Republican leadership pushed through beginning in Jan. of 1995 - when the GOP took over the majority in both House & Senate - that bill wasn't Bill's! Both House & Senate outflanked Clinton (Oxford Rhodes Scholar in economics) - in office only 2 years & a pragmatic centrist politician (and flagrant philanderer!). The rest of the story is here
Now for a bit more economic history. The US financial system has been operating for almost 30 years on Reagan's "trickle-down" economic plan (mid-1980's), and NAFTA was another of his plans carried out later by GOP leadership in the mid-1990's - with Clinton's blessing. Our economic system weathered the following:
- collapse of the country's immense savings & loan industry,
- Chicago's Continental Bank in 1984 (largest until now),
- fallout of the Asian financial implosion in 1997, and
- bailout of hedge-fund Long-Term Capital Management in 1998.
McCain downplays his proposed tax on employee healthcare benefits while touting his $5000 tax credit ($2500 singles). Now his tax on benefits that grow at 10-20% per year will soon swamp a tax credit growing at only 3-5% per year. Well, you do the math & get a clue.
Notice how NonsenseNews bleats on & on about silly distractions while failing to discover & inform the public about the fallout on Wall Street? Where were their investigative reporters while Swedish officials were briefing our Treasury & Federal Reserve chiefs on the outcome of Sweden's bank bailout from its similar implosion 10 years ago? Had they informed the public, people would've had some warning to move out of stock funds before getting burned so badly.
Are you tired of hearing McCain can go any minute? Another news flash! Either candidate could have a short life span from natural or unnatural causes. Carefully evaluating the VP candidates is very important because the VP is needed to help govern - whether advising the Cabinet or casting the lone deciding vote to break a Senatorial tie. Ck those dudes out - Bridges - More Bridges
Don't know about you, but I am also SO tired of hearing about change, reform, maverick, or getting government on the side of the people (as opposed to off our backs or out of our bedrooms).... Need I go on? You're tired of it, too??? We need to keep in mind that regardless what either party/candidate says now, their promises will go by the wayside once in office what with that bloated budget, bailout & a war soon to surge into Afghanistan.
Financing our government will be the war we fight over the next decade. Hopefully voters will consider - very carefully - which candidate & VP, along with their team of Cabinet members, has the smarts & capability to deal with ALL of those problems AT ONCE! The rest on NonsenseNews is best left behind....
An better informed electorate makes a better nation! ~ MomsHugs
Monday, October 6, 2008
Sunday, October 5, 2008
In 2004 the SEC Commissioners decided to loosen capitalization requirements -- after only 1 hr. & slight discussion. The 5 largest investment banks had urgently asked for an exemption to hold larger amounts of riskier assets... increasing leverage by taking on more debt - $30 to every $1 of equity - greatly increases profits, too... IF nothing caused the markets to fly off the shelf that is. The banks wanted to swap older objective rules with their own subjective computer models to measure financial risk.
One Commissioner - Harvey Goldschmid, law professor at Columbia (Democrat) – raised concerns (“We said these are the big guys that clearly will be involved here, but that means if anything goes wrong, its going to be an awfully big mess...” – a twitter can be heard). They did have one letter from Leonard Bole, a software consultant from Indian, warning the computer models proposed would not work to determine risk. Bole stated the models could not correctly anticipate market turbulence. The Commissioners simply ignored it.
Annette Nazareth, Director of SEC’s Market Regulation Division, also backed the banks. (1) Her staff explained that their proposed computer models would track variable risk, replacing previous strict capitalization requirements. Annette assured the Commissioners it was okay (“we have very, very broad discretion & will be meeting with these firms on a monthly basis… so, hopefully, we’ll have a lot of early warnings & ability to restrict activity that we think is problematic”).
They reassured the Commissioners the changes were not only for the better, but necessary. Staff explained they had hired mathematicians & auditors to review everything, “So we’re going to going to depend on the firms, obviously the front line. They’re going to have to develop their entire risk framework… we’ll be reading that first & they’ll have to explain that to us in a way that it makes sense… then we’ll do the examinations of the process in addition to approving their models & their risk control systems.” Ultimately they would have to rely on the firms to police themselves!
WHAT?!! Voluntary self-supervision??! What a novel regulatory concept!
(1) Annette Nazareth: J.D. Columbia Law - Held various positions in major NYC/DC law firms & government. She is married to Roger W. Ferguson, Jr., former vice chairman of the Board of Governors of the Federal Reserve and current CEO of TIAA-CREF. Reference: SEC Meeting 4-28-04 - Final Item #3 on the agenda: Alternative Net Capital Requirements for Broker-Dealers that are Part of Supervised Facilities and Supervised Investment Bank Holding Companies (Division of Market Regulation). Explanation | NYTimes Video
Sunday, September 28, 2008
The letter (signed & dated 9/25/08) is the consensus of 100 leading economists:
3 Nobel Laureates & economists from major universities, colleges & institutes. [MIT, Chicago, Stanford, Harvard, Yale, Duke, Northwestern, Notre Dame, Vanderbilt, Stockholm, California (LA, SC, Berkley, Davis, Santa Barbara, San Diego), Columbia, John Hopkins, Indiana, Michigan, Ohio State, Iowa (UNI, UI, ISU), Wisconsin, Pennsylvania, Minnesota, Kansas, Washington, Maryland, New York, Texas (Austin, A&M), Louisiana Xavier, George Mason, Vassar, Hoover Institute, Chapman (Nobel Laureate), Boston College, Dartmouth, Miami, and the London Business School.
Friday, September 26, 2008
McCain's good buddy, Phil 'Nation of Whiners' Gramm of TX led the Republicans to sponsor & pass the Financial Services Modernization Act of 1999. It passed on a vote of 54 (GOP) to 44 (Dem) w/2 present. [S. 900 An Act to enhance competition in the financial services industry by providing a prudential framework for the affiliation of banks, securities firms, and other financial service providers, and for other purposes. Ck out the Roll Call Votes]
These "trickle down" economic policies were bound to get on that "free market" slippery slope leading to this mortgage/derivative debacle. So, now Wall Street's 'Welfare Kings' cry, "HELP US!" - maybe we do need regulatory babysitters after all.McCain has indicated he will appoint Phil Gramm as Treasury Secretary! BIG reason to support Obama - smarts, resilience & demeanor attracts the best brains in the country to work with him.