9/30/11
The salacious news on the local political scene over the last few weeks involved one State Senator Suzi Schmidt (R., Lake Villa). Why we should take anyone who insists, at the age of 60, on being called, for professional reasons, by the name of a little girl is another question, but I digress. It has apparently come out that, in a series of 911 calls made last December during what can charitably be called heated arguments with her husband, Bob Schmidt, Suzi Schmidt suggested that the 911 operator ignore any calls from her husband because, first, the situation was under control, and, second, she was a big time (in her own mind) political operator. The 911 operator rebuffed Mrs. Schmidt’s attempts at bullying her, pointing out that she, or any 911 operator, could not ignore any 911 call.
In the course of the calls, which were made in response to physical confrontation between the Senator and her husband, Bob Schmidt’s being locked out of the house on a cold Christmas day, and Suzi allegedly ramming her Cadillac (The woman does have great taste in cars; I’ll give her that much.) into her husband’s vehicle, we hear screaming, shouting and audible manifestations of all manner of incivility. The Senator attributes her manifest rage on her husband’s infidelity (One wonders why on earth a guy would stray when he has such a sweetheart for a wife, but I digress and, by doing so in this instance, will probably get myself into a great deal of trouble with much of my readership.) and suggests too much was made of the whole thing because, after all, she was, and is, going through a difficult personal time. I’ll say.
The most salient portions of the 911 calls were Senator Schmidt’s pointing out that she formerly was Chairman of the Lake County Board and that her husband was afraid of her because “he knows I have connections.” I suppose that could be one reason her husband is afraid of her, but, again, I digress. Clearly, the Senator somehow feels that, because she is, in her mind anyway, some kind of big time political muckety-muck, she deserves, and demands, obsequious obeisance from the hoi polloi, the salt of the earth public employees, who, like the 911 operator, actually work for a living, perform their stressful jobs on a daily basis, and do their best to protect us from the criminals and the crazies. Those of the mindset manifested by Senator Schmidt feel that those lowly genuine public servants who are on the front lines of the truly indispensable government functions owe their livelihoods to the beneficence of those who have make their livings lapping at the public trough and primping and preening for the cameras.
Before I get too condemnatory of Suzi Schmidt, I should point out that she differs, if at all, from many of her colleagues only in degree. How many of her colleagues in “public life” would not also attempt to use their clout to circumvent the rules they mandate for the rest of us? Remember, we only hear of such incidents when intrepid public employees stand up to the pols who are trying to intimidate them. How many times do less valiant public employees, probably wisely, simply yield to the demands of those who actually could have their jobs in this clout infested, overly politicized, state? Why should we be surprised at the likes of Suzi Schmidt’s trying to muscle a public employee by citing her “connections” and her former job as Lake County Board Chairman? People like Suzi Schmidt who, again, is by no means unique among those who seek self-aggrandizement through public office for a living, consider themselves a governing class, an Olympian pantheon who do us a favor by deigning to condescend to us and dispense their superior insight as to how we should live.
Note the responses of the profiles in courage who inhabit the Lake County Republican Party to Mrs. Schmidt’s self-inflicted travails. State Representative JoAnn Osmond (R., Antioch), who apparently has some trouble with English sentence structure, whimpered
“It’s just hurting so bad to loser her if that’s (resigning or deciding not to stand for reelection) her (Schmidt’s) choice. She’s upset. She never meant it the way it’s coming out…I’m praying something happens that she’ll stay.”
No, Suzi Schmidt didn’t mean to sound like a pompous popinjay; she just thought the 911 operator’s next question would be her profession, so Mrs. Schmidt generously pointed that she is a former Lake County Board Chairman who has “connections.”
And how about the reaction of Bob Cook, chairman of the Lake County Republican Party, who doubtless polished the apple while stating
“She didn’t threaten the operator. She didn’t try to make any kind of deal or press the issue. We’re talking about a two-minute phone call over 15 years in politics, helping people, doing the right thing, and being there.”
Mr. Cook didn’t point out that among those “right thing”s that Mrs. Schmidt did was to play ball with Mr. Cook. And the Senator didn’t try to “to make any kind of deal or press the issue”? Suzi Schmidt simply, and plainly, implied to the 911 operator that she knew people who could have her fired. Nothing coercive about that, no sir.
Given that Suzi Schmidt is surrounded by such sycophants, perhaps one can understand why she has such a high opinion of herself.
The only thing that can mitigate the arrogance of office that Suzi Schmidt so manifestly displayed in her conduct with the 911 operator would be term limits so that the self-styled governing class would somehow change their “We’re the barons, you’re the peasants, so fill our cups and make it snappy” attitude. Ms. Schmidt was only in her first term in the Senate, so limits would not purge this parasite quickly enough. But they might have prevented her from sticking around the Lake County Board long enough to assume that we are all desperately in need of her superior insights regarding how we ought to live our lives and that she was thus compelled to share her manifest wisdom and goodness with the entire state of Illinois.
Friday, September 30, 2011
Wednesday, September 28, 2011
MINISTRY OF PUTTING THINGS ON TOP OF OTHER THINGS?
9/28/11
Chicago Inspector General Joe Ferguson made some headlines yesterday by proposing a legion of ideas for saving the city some money. Most of the attention was garnered by a handful of proposals that will go nowhere, including a city income tax, a commuter tax, and tolls on Lake Shore Drive. In the almost immediate wake of the release of Mr. Ferguson’s report, Mayor Emanuel stated
“…as I have said from the beginning, raising property taxes, income taxes or the sales tax is off the table. Asking drivers on Lake Shore Drive to pay a toll is also a nonstarter.”
The Mayor’s artful, perhaps deliberately vague, use of the term “income tax” is interesting; there seems to be room in the use of that particular term for consideration of a commuter tax. But a commuter tax is going nowhere because such a tax would have to be approved by the Illinois General Assembly, where nobody outside the city of Chicago has any incentive to pass such an abomination. Even if the Mayor is, or gets, behind a tax, even his legendary arm-twisting skills won’t get legislators from what the late Mayor Daley referred to as “the country towns” (i.e., any town or city in the state of Illinois other than Chicago, including such bucolic burgs as Blue Island, Berwyn, and Calumet City) to tax their own residents to support the city of Chicago. Even with the Mayor’s gargantuan ego, he has to be smart enough to know that. Mr. Emanuel also is smart enough to know, or at least I hope he is smart enough to know, that such a tax would be economically deleterious at best and disastrous at worst for the city. All the city’s major employers need, especially at this point, is more incentive to move operations to, say, Oakbrook, Naperville, Dallas, or Shanghai. Note further that the IG’s report supported the argument for a commuter tax by pointing out, with a straight face, that Detroit, Cleveland, and Philadelphia impose such a tax. One would hope that toward Cleveland, Detroit, or Philadelphia is not the direction in which either Mr. Ferguson or Mr. Emanuel would like us to go. Note, however, that there is no evidence, only speculation based on careful dissection of his words, to indicate that Mr. Emanuel would back such a tax, so it’s probably a non-starter even before the legislature gets its hands on it.
What got yours truly’s attention in the articles on the Inspector General’s report was Mr. Ferguson’s proposal to save $190mm by eliminating supervisory personnel in the Police and Fire Departments. To support this idea, the report stated that there are 3.58 supervisors for every rank and file employee in the Fire Department and 8 supervisors for every employee in the Police Department. Yes, I, too, had to look at those numbers again. Those ratios can’t be right, can they? Someone should look at the definition of “supervisor” and “employee” used to conjure up that report because these numbers elicit images of 8 guys standing around with clipboards watching one guy work, and that simply cannot be the case. Alderman Pat O’Connor, the Mayor’s floor leader, stated
“If those figures are correct and if those folks just supervise and don’t have other duties, he (Mr. Ferguson) may be on to something.”
I agree that IF those figures are correct, Joe Ferguson may be on to something. But, as my dad used to say, figures don’t lie, but liars figure. Someone has to take a closer look at those supervisor/employee ratios.
Chicago Inspector General Joe Ferguson made some headlines yesterday by proposing a legion of ideas for saving the city some money. Most of the attention was garnered by a handful of proposals that will go nowhere, including a city income tax, a commuter tax, and tolls on Lake Shore Drive. In the almost immediate wake of the release of Mr. Ferguson’s report, Mayor Emanuel stated
“…as I have said from the beginning, raising property taxes, income taxes or the sales tax is off the table. Asking drivers on Lake Shore Drive to pay a toll is also a nonstarter.”
The Mayor’s artful, perhaps deliberately vague, use of the term “income tax” is interesting; there seems to be room in the use of that particular term for consideration of a commuter tax. But a commuter tax is going nowhere because such a tax would have to be approved by the Illinois General Assembly, where nobody outside the city of Chicago has any incentive to pass such an abomination. Even if the Mayor is, or gets, behind a tax, even his legendary arm-twisting skills won’t get legislators from what the late Mayor Daley referred to as “the country towns” (i.e., any town or city in the state of Illinois other than Chicago, including such bucolic burgs as Blue Island, Berwyn, and Calumet City) to tax their own residents to support the city of Chicago. Even with the Mayor’s gargantuan ego, he has to be smart enough to know that. Mr. Emanuel also is smart enough to know, or at least I hope he is smart enough to know, that such a tax would be economically deleterious at best and disastrous at worst for the city. All the city’s major employers need, especially at this point, is more incentive to move operations to, say, Oakbrook, Naperville, Dallas, or Shanghai. Note further that the IG’s report supported the argument for a commuter tax by pointing out, with a straight face, that Detroit, Cleveland, and Philadelphia impose such a tax. One would hope that toward Cleveland, Detroit, or Philadelphia is not the direction in which either Mr. Ferguson or Mr. Emanuel would like us to go. Note, however, that there is no evidence, only speculation based on careful dissection of his words, to indicate that Mr. Emanuel would back such a tax, so it’s probably a non-starter even before the legislature gets its hands on it.
What got yours truly’s attention in the articles on the Inspector General’s report was Mr. Ferguson’s proposal to save $190mm by eliminating supervisory personnel in the Police and Fire Departments. To support this idea, the report stated that there are 3.58 supervisors for every rank and file employee in the Fire Department and 8 supervisors for every employee in the Police Department. Yes, I, too, had to look at those numbers again. Those ratios can’t be right, can they? Someone should look at the definition of “supervisor” and “employee” used to conjure up that report because these numbers elicit images of 8 guys standing around with clipboards watching one guy work, and that simply cannot be the case. Alderman Pat O’Connor, the Mayor’s floor leader, stated
“If those figures are correct and if those folks just supervise and don’t have other duties, he (Mr. Ferguson) may be on to something.”
I agree that IF those figures are correct, Joe Ferguson may be on to something. But, as my dad used to say, figures don’t lie, but liars figure. Someone has to take a closer look at those supervisor/employee ratios.
Tuesday, September 27, 2011
THICK AS A BRIC?
9/27/11
While the world was focusing on developments in the European Union’s efforts to punish German, Finnish, and Dutch frugality and reward Greek, Portuguese, Spanish, and Italian profligacy and call the result progress (Who am I kidding? The world wasn’t focused on developments in Europe; the world, or at least most observers in the United States, was focused on the latest lurid developments in the lives of its favorite celebrities, but even I can be hopeful once in awhile.), yours truly noticed two international stories that deserve perhaps not as much attention as the eurocrats’ efforts to destroy the last vestiges of fiscal sanity in the western world but that still merit our consideration.
First, the countries that are supporting Syrian President Bashar-Al-Assad in his efforts to suppress his population are, according to today’s (i.e., Tuesday, 9/27, page A8) Wall Street Journal are Brazil, Russia, Indian, China, and South Africa. Yes, that’s right, the BRICS, the countries that are the rising stars in the financial world and the countries that the Europeans are increasingly hoping to play the next sucker who will bail out the dying democracies on the continent’s southern periphery. What this seems to mean, especially since Russia and China have vetoes in the UN Security Council, is that Mr. Assad’s rule is not in serious jeopardy and probably will remain in place for the foreseeable future. No one, not Europe, which is looking to the BRICS to pay its bills, nor the United States, which owes over $1.3 trillion to China alone, is in a position to bully the BRICS into tossing their ally under the bus.
One can assume a position of high dudgeon and say how terrible it is that a brutal dictator will remain in place because the West has, by means of its own profligacy, squandered its ability to influence world affairs. But before one condemns the BRICS stance, and the Western inability to influence it, one must consider the long forgotten virtue of non-intervention in the affairs of other countries. Yes, Assad is a monster, but does that mean that the United State, the West, or the “international community” has a responsibility to overthrow him? Is it our job to overthrow all the world’s bad guys? Don’t be too quick to answer that question, especially since the BRICS, at least, seem to notice what a raging success the “Arab Spring” has been in such places as Egypt (Loyal readers could see this anarchy, or full circle back to dictatorship, coming while the consanguineous American press was gushing over the noble actions of the “young Egyptian protestors” who had nary a clue as to how the world works; see the following posts:
8/2/11 PERHAPS ALL WE NEED IS A LITTLE RE-EDUCATION
1/28/11 YOU BREAK IT YOU BOUGHT IT…
1/29/11 “…HE’S AN EGYPTIAN…” ???
2/3/11 AFTER ALL THESE CENTURIES, THE EGYPTIANS STILL HAVE SOMETHING TO TEACH US, Parts I and II)
and Libya. See my 8/22/11 post I HOPE MICHELE BACHMANN WASN’T COUNTING ON LIBYA TO GET OIL TO $2.
Further, the BRICS are dependent, to varying degrees, on oil and thus are dependent on Middle Eastern stability. So are we, but we seem to place a higher priority on the dewy-eyed, ingenuous pursuit of “democracy” in the Middle East.
The second recent foreign policy item that yours truly deemed significant was reported in today’s (Tuesday, 9/27’s) Wall Street Journal in an article entitled “Japan, Philippines Seek Tighter Ties to Counter China.” Despite all the whoop-whoop in which the War Party (Republicans like John McCain, Rick Santorum, and, especially, Lindsey Graham and anyone else of either party that draws an effective paycheck from the defense industry) is engaged, what is happening in the South China Sea is quite simple. The Chinese are asserting what they consider their territorial rights, the prerogative of any power, great or small. China’s neighbors, including Japan, the Philippines, South Korea, Vietnam, Indonesia, Brunei, etc. are defending what they consider their territorial rights, which, again, is the prerogative of any power, great or small. This is the way the world should work, and the United States, rather than try to conjure up another bad guy in order to feed our military-industrial complex, should just let these neighbors work it out in whatever way they see fit. This will, of course, never happen; we badly need a bogeyman in this country, and it looks like China has already been fitted with the jacket. See, inter alia, my 8/24/11 post “EGAD…IT’S LON CHANEY, JR.!”
While the world was focusing on developments in the European Union’s efforts to punish German, Finnish, and Dutch frugality and reward Greek, Portuguese, Spanish, and Italian profligacy and call the result progress (Who am I kidding? The world wasn’t focused on developments in Europe; the world, or at least most observers in the United States, was focused on the latest lurid developments in the lives of its favorite celebrities, but even I can be hopeful once in awhile.), yours truly noticed two international stories that deserve perhaps not as much attention as the eurocrats’ efforts to destroy the last vestiges of fiscal sanity in the western world but that still merit our consideration.
First, the countries that are supporting Syrian President Bashar-Al-Assad in his efforts to suppress his population are, according to today’s (i.e., Tuesday, 9/27, page A8) Wall Street Journal are Brazil, Russia, Indian, China, and South Africa. Yes, that’s right, the BRICS, the countries that are the rising stars in the financial world and the countries that the Europeans are increasingly hoping to play the next sucker who will bail out the dying democracies on the continent’s southern periphery. What this seems to mean, especially since Russia and China have vetoes in the UN Security Council, is that Mr. Assad’s rule is not in serious jeopardy and probably will remain in place for the foreseeable future. No one, not Europe, which is looking to the BRICS to pay its bills, nor the United States, which owes over $1.3 trillion to China alone, is in a position to bully the BRICS into tossing their ally under the bus.
One can assume a position of high dudgeon and say how terrible it is that a brutal dictator will remain in place because the West has, by means of its own profligacy, squandered its ability to influence world affairs. But before one condemns the BRICS stance, and the Western inability to influence it, one must consider the long forgotten virtue of non-intervention in the affairs of other countries. Yes, Assad is a monster, but does that mean that the United State, the West, or the “international community” has a responsibility to overthrow him? Is it our job to overthrow all the world’s bad guys? Don’t be too quick to answer that question, especially since the BRICS, at least, seem to notice what a raging success the “Arab Spring” has been in such places as Egypt (Loyal readers could see this anarchy, or full circle back to dictatorship, coming while the consanguineous American press was gushing over the noble actions of the “young Egyptian protestors” who had nary a clue as to how the world works; see the following posts:
8/2/11 PERHAPS ALL WE NEED IS A LITTLE RE-EDUCATION
1/28/11 YOU BREAK IT YOU BOUGHT IT…
1/29/11 “…HE’S AN EGYPTIAN…” ???
2/3/11 AFTER ALL THESE CENTURIES, THE EGYPTIANS STILL HAVE SOMETHING TO TEACH US, Parts I and II)
and Libya. See my 8/22/11 post I HOPE MICHELE BACHMANN WASN’T COUNTING ON LIBYA TO GET OIL TO $2.
Further, the BRICS are dependent, to varying degrees, on oil and thus are dependent on Middle Eastern stability. So are we, but we seem to place a higher priority on the dewy-eyed, ingenuous pursuit of “democracy” in the Middle East.
The second recent foreign policy item that yours truly deemed significant was reported in today’s (Tuesday, 9/27’s) Wall Street Journal in an article entitled “Japan, Philippines Seek Tighter Ties to Counter China.” Despite all the whoop-whoop in which the War Party (Republicans like John McCain, Rick Santorum, and, especially, Lindsey Graham and anyone else of either party that draws an effective paycheck from the defense industry) is engaged, what is happening in the South China Sea is quite simple. The Chinese are asserting what they consider their territorial rights, the prerogative of any power, great or small. China’s neighbors, including Japan, the Philippines, South Korea, Vietnam, Indonesia, Brunei, etc. are defending what they consider their territorial rights, which, again, is the prerogative of any power, great or small. This is the way the world should work, and the United States, rather than try to conjure up another bad guy in order to feed our military-industrial complex, should just let these neighbors work it out in whatever way they see fit. This will, of course, never happen; we badly need a bogeyman in this country, and it looks like China has already been fitted with the jacket. See, inter alia, my 8/24/11 post “EGAD…IT’S LON CHANEY, JR.!”
Monday, September 19, 2011
THE GAME THAT TIES YOU UP IN KNOTS
9/19/11
Much of the Fed talk last week and, presumably, this week, centers around an old policy, last implemented by the Bill Martin Fed in the early ‘60s, that the Bernanke Fed apparently is dusting off as part of its ongoing “What the heck; that didn’t work, so let’s try something else that won’t work” approach to monetary policy. This policy, known as the “twist,” after the Chubby Checker hit that was so popular at the time of its first implementation, essentially amounts to the Fed’s selling its short term treasury and other holdings, or, more likely, letting them run off, and then using the proceeds to buy longer maturity, perhaps stretching to the ten year area, treasuries. The idea is to force down long rates and flatten the yield curve, thus further depriving banks of profit opportunities, but I digress on that last point. The thinking, to the extent it exists, behind this policy is that lower long rates will encourage borrowing, spending, and investing and thus help spur the recent financial equivalent of the Flying Dutchman, an economic recovery.
Much of the conversation surrounding this particular twist revolves around its efficacy; i.e., will it work? It probably won’t; this economy suffers from many maladies, but onerously high interest rates anywhere along the curve, and a steep yield curve, isn’t one of them, or two of them, I suppose. But efficacy shouldn’t be the focus here; advisability should be the focus. Should the Fed be manipulating the yield curve, or should it be manipulating the yield curve beyond the normal influence it exerts on the curve through it customary open market operations? Those of us who believe in markets would answer with a resounding “No!” One of the great, and perhaps underrated, contributions of western thought is that markets, whether for kumquats, personal computers, automobiles, or interest rates, work in dispensing resources and applying capital. The workings of the market have done more to advance the living standards of the great mass of people than could ever be calculated. The problem many people, especially political people masquerading as financial people, have with markets is that markets don’t often work the way these self-styled masters of the universe would like them to work. So they begin to make exceptions, to wit, “Yes, markets work for XXXX, but they don’t work for YYYY, and therefore we must help the market for YYYY by freely applying our solonic wisdom in order to foster the efficiency of the market for YYYY.” One of our problems is not, as some of these Olympians apparently perceive, that rates are too high but, rather, that the list of things one could insert for YYYY in the last sentence never stops growing and has come to include a growing list of financial assets, most saliently interest bearing, and interest benchmarking, assets. If we want to get out of this mess, the place to start, one would suppose, is to get out of the way the poseurs at the Fed, in the Congress and the Administration, and in the alphabet soup of agencies that has bred its own class of people who are overly impressed with themselves and determined to inflict outcomes on the rest of us and let the market do its job, perhaps most especially in the area of interest rates. Yes, the results may be messy and they may be painful, but they are necessary if a true solution to our economic maladies is to emerge. Delaying market solution at best serves to prolong the extreme discomfort in the interest of avoiding a short term agony.
One can imagine, however, making the above argument to Obsequious Ben and the Washingtonians or any of their fellow travelers in the financial bureaucracies that hold sway in places like Washington, London, and Brussels. To do so would be very much akin to having the following conversation: (I only used BAC because it has been very much in the news of late; I could have used any stock, financial or otherwise.)
Master of the Universe: "Do you think the Fed (or some financial super authority populated by Harvard grads) should set the price of Bank of America (BAC) at $7.00?"
Sensible Person: "Have you taken leave of your senses?"
Master of the Universe: "So you think we should set BAC at $8.00?"
They just don’t get it and, despite their protestations to the contrary, they don’t trust the markets. And who can blame them? The markets are not delivering the outcomes these wunderkinds have determined are the correct outcomes.
Much of the Fed talk last week and, presumably, this week, centers around an old policy, last implemented by the Bill Martin Fed in the early ‘60s, that the Bernanke Fed apparently is dusting off as part of its ongoing “What the heck; that didn’t work, so let’s try something else that won’t work” approach to monetary policy. This policy, known as the “twist,” after the Chubby Checker hit that was so popular at the time of its first implementation, essentially amounts to the Fed’s selling its short term treasury and other holdings, or, more likely, letting them run off, and then using the proceeds to buy longer maturity, perhaps stretching to the ten year area, treasuries. The idea is to force down long rates and flatten the yield curve, thus further depriving banks of profit opportunities, but I digress on that last point. The thinking, to the extent it exists, behind this policy is that lower long rates will encourage borrowing, spending, and investing and thus help spur the recent financial equivalent of the Flying Dutchman, an economic recovery.
Much of the conversation surrounding this particular twist revolves around its efficacy; i.e., will it work? It probably won’t; this economy suffers from many maladies, but onerously high interest rates anywhere along the curve, and a steep yield curve, isn’t one of them, or two of them, I suppose. But efficacy shouldn’t be the focus here; advisability should be the focus. Should the Fed be manipulating the yield curve, or should it be manipulating the yield curve beyond the normal influence it exerts on the curve through it customary open market operations? Those of us who believe in markets would answer with a resounding “No!” One of the great, and perhaps underrated, contributions of western thought is that markets, whether for kumquats, personal computers, automobiles, or interest rates, work in dispensing resources and applying capital. The workings of the market have done more to advance the living standards of the great mass of people than could ever be calculated. The problem many people, especially political people masquerading as financial people, have with markets is that markets don’t often work the way these self-styled masters of the universe would like them to work. So they begin to make exceptions, to wit, “Yes, markets work for XXXX, but they don’t work for YYYY, and therefore we must help the market for YYYY by freely applying our solonic wisdom in order to foster the efficiency of the market for YYYY.” One of our problems is not, as some of these Olympians apparently perceive, that rates are too high but, rather, that the list of things one could insert for YYYY in the last sentence never stops growing and has come to include a growing list of financial assets, most saliently interest bearing, and interest benchmarking, assets. If we want to get out of this mess, the place to start, one would suppose, is to get out of the way the poseurs at the Fed, in the Congress and the Administration, and in the alphabet soup of agencies that has bred its own class of people who are overly impressed with themselves and determined to inflict outcomes on the rest of us and let the market do its job, perhaps most especially in the area of interest rates. Yes, the results may be messy and they may be painful, but they are necessary if a true solution to our economic maladies is to emerge. Delaying market solution at best serves to prolong the extreme discomfort in the interest of avoiding a short term agony.
One can imagine, however, making the above argument to Obsequious Ben and the Washingtonians or any of their fellow travelers in the financial bureaucracies that hold sway in places like Washington, London, and Brussels. To do so would be very much akin to having the following conversation: (I only used BAC because it has been very much in the news of late; I could have used any stock, financial or otherwise.)
Master of the Universe: "Do you think the Fed (or some financial super authority populated by Harvard grads) should set the price of Bank of America (BAC) at $7.00?"
Sensible Person: "Have you taken leave of your senses?"
Master of the Universe: "So you think we should set BAC at $8.00?"
They just don’t get it and, despite their protestations to the contrary, they don’t trust the markets. And who can blame them? The markets are not delivering the outcomes these wunderkinds have determined are the correct outcomes.
Friday, September 16, 2011
“I WILL NOT SEEK, NOR WILL I ACCEPT, THE NOMINATION OF MY PARTY…”
9/16/11
Like many people, ideas, great or otherwise, tend to come to me while I am showering. One wonders why the shower is such fertile ground for mental mastication, but that is another issue. At any rate, the other morning, a question occurred to me while taking an uncharacteristically hot (in order to battle the bug with which I have been struggling this week) shower: Could President Obama pull a Johnson and drop out of the race for the presidency in 2012?
No, I don’t think this will happen; the idea of a modern politician having the scruples, and concern for his country, of even as despicable a character as LBJ is ludicrous. The only thing that matters to our hyper-narcissistic, even relative to the likes of Johnson, modern political class is the self, and Mr. Obama is no exception to this rule. But the idea is interesting to consider. The economy may be the President’s Vietnam, an intractable problem resistant to any solution the president is willing to try, an unrelenting source of misery best left to somebody else. Some say that Johnson left the 1968 race because he knew he could not win, but that was certainly not the case; his announcement came in the wake of his having won the New Hampshire primary, albeit to the unelectable Gene McCarthy, but not having won by a sufficiently substantial margin to convince him that winning the nomination would be a slam dunk and thus would not divide his party. There is little question, though, that, had he stuck it out, LBJ would have been the nominee of his Party and, given the hair’s breadth margin by which Richard Nixon beat the eventual Democratic nominee, LBJ’s vice-president Hubert Humphrey, it seems entirely plausible, if perhaps not likely, that LBJ would have been reelected. LBJ just decided, apparently, that it just wasn’t worth dividing the country to win reelection or, more likely, he was sick and tired of it and if all these other people wanted his job so badly they could have it.
One obvious part of the Lyndon Johnson/Barack Obama parallelism is primary opposition…but maybe not. Barack Obama will not get serious, if any, opposition in the primaries if for no other reasons that, first, it is getting late and, second, any serious opponent risks alienating, to put it mildly, black voters and thus winding up with at best a pyrrhic victory for the nomination and no (zero) chance of winning the general election. But those of us who were around in 1968 remember that Gene McCarthy was very much a fringe candidate in 1968, a gadfly backed by a handful of rich guys who backed him for, mirabile dictu, almost purely ideological reasons. Senator McCarthy had no chance of becoming president, as is clearly evidenced by the sudden influx of legitimate contenders (Hubert Humphrey, Bobby Kennedy, and, later, even George McGovern) after LBJ dropped out. So even a similarly, though amplified, quixotic candidacy by a Dennis Kucinich type character from the fringes that manages to come close enough to scare the President could result in a 1968 redux.
Could, but probably won’t. But those of us who like the horse race aspects of politics like to play with perhaps implausible scenarios.
Like many people, ideas, great or otherwise, tend to come to me while I am showering. One wonders why the shower is such fertile ground for mental mastication, but that is another issue. At any rate, the other morning, a question occurred to me while taking an uncharacteristically hot (in order to battle the bug with which I have been struggling this week) shower: Could President Obama pull a Johnson and drop out of the race for the presidency in 2012?
No, I don’t think this will happen; the idea of a modern politician having the scruples, and concern for his country, of even as despicable a character as LBJ is ludicrous. The only thing that matters to our hyper-narcissistic, even relative to the likes of Johnson, modern political class is the self, and Mr. Obama is no exception to this rule. But the idea is interesting to consider. The economy may be the President’s Vietnam, an intractable problem resistant to any solution the president is willing to try, an unrelenting source of misery best left to somebody else. Some say that Johnson left the 1968 race because he knew he could not win, but that was certainly not the case; his announcement came in the wake of his having won the New Hampshire primary, albeit to the unelectable Gene McCarthy, but not having won by a sufficiently substantial margin to convince him that winning the nomination would be a slam dunk and thus would not divide his party. There is little question, though, that, had he stuck it out, LBJ would have been the nominee of his Party and, given the hair’s breadth margin by which Richard Nixon beat the eventual Democratic nominee, LBJ’s vice-president Hubert Humphrey, it seems entirely plausible, if perhaps not likely, that LBJ would have been reelected. LBJ just decided, apparently, that it just wasn’t worth dividing the country to win reelection or, more likely, he was sick and tired of it and if all these other people wanted his job so badly they could have it.
One obvious part of the Lyndon Johnson/Barack Obama parallelism is primary opposition…but maybe not. Barack Obama will not get serious, if any, opposition in the primaries if for no other reasons that, first, it is getting late and, second, any serious opponent risks alienating, to put it mildly, black voters and thus winding up with at best a pyrrhic victory for the nomination and no (zero) chance of winning the general election. But those of us who were around in 1968 remember that Gene McCarthy was very much a fringe candidate in 1968, a gadfly backed by a handful of rich guys who backed him for, mirabile dictu, almost purely ideological reasons. Senator McCarthy had no chance of becoming president, as is clearly evidenced by the sudden influx of legitimate contenders (Hubert Humphrey, Bobby Kennedy, and, later, even George McGovern) after LBJ dropped out. So even a similarly, though amplified, quixotic candidacy by a Dennis Kucinich type character from the fringes that manages to come close enough to scare the President could result in a 1968 redux.
Could, but probably won’t. But those of us who like the horse race aspects of politics like to play with perhaps implausible scenarios.
Friday, September 9, 2011
“I’LL GLADLY PAY YOU TOMORROW FOR A HAMBURGER TODAY.”
9/9/11
Just a few weeks ago, all the talk among the Washington punditry and “public service” community was of cutting spending, getting the budget under control, and reducing deficits. The Republicans, to their credit, used the crude and curious tool of the debt limit to forge something of a plan to address the profligacy that has characterized Washington for just about as long as anyone can remember but that has become especially acute since the Bush/Obama administration came to power in 2000. Yes, sir, we were told, we were going to change our evil, spendthrift ways; if we didn’t the country was going to go broke.
So what happened last night? President Obama proposed $447 billion in new spending in order to “get America back to work,” or some such nonsense. Yes, I know more than half of that pile was composed of reductions in the payroll tax, but a targeted tax reduction is little more than a spending cut in disguise. But let’s assume that those cuts in payroll taxes are genuine tax cuts; then the spending increases amount to “only” $202 billion. And even those tax cuts add to the deficit that we were told will drive us to poor house. The President assured us, however, that the deficit reduction committee, charged with finding an additional $1.2 trillion in deficit reduction (See my 8/2/11 post HAVE YOU NO SENSE OF SMELL, SIR?), which so far has met only once and has found $0 (zero) of deficit reductions will be instructed, or at least encouraged, to find another $447 billion or so in future cuts to negate the long run fiscal consequences of the spending spree he is proposing for the present.
Speaking of that phony baloney deficit reduction panel, one of its member, Senator John Kyl a Republican who nominally represents Arizona but in reality represents the military industrial complex about which perhaps the greatest president of many of our lifetimes, Dwight Eisenhower, warned us, has said he will quit the panel if it proposes further reductions in “defense” spending. Senator Kyl thus takes 22% of the budget off the table, and that’s before addressing any of the entitlements that are the real fiscal time bomb. Good luck with that deficit reduction thing, esteemed panel members.
The general silliness taking place in Washington merely reinforces a point that I have been making for years but made especially vociferously over lunch with a trusted friend and confidante earlier this week: The poltroons that we have sent to Washington cannot possibly operate in an environment that requires penuriousness with the public purse. The politicasters who populate the city on the banks of the Potomac see their role in life as giving your money to people who can propel them on the flight of self-aggrandizement that characterizes their existence; i.e., they are using your money to buy power and perpetual panegyrics for themselves. Saving money would involve denying such larder to the people who can make their dreams of fulfilling their dual narcissistic/messianic dreams come true. Does that make any sense to them, especially since it isn’t their money? So why should they make any effort to save your money? Even these dolts can see the pointlessness, indeed, the counterproductivity, of such pursuits.
Just a few weeks ago, all the talk among the Washington punditry and “public service” community was of cutting spending, getting the budget under control, and reducing deficits. The Republicans, to their credit, used the crude and curious tool of the debt limit to forge something of a plan to address the profligacy that has characterized Washington for just about as long as anyone can remember but that has become especially acute since the Bush/Obama administration came to power in 2000. Yes, sir, we were told, we were going to change our evil, spendthrift ways; if we didn’t the country was going to go broke.
So what happened last night? President Obama proposed $447 billion in new spending in order to “get America back to work,” or some such nonsense. Yes, I know more than half of that pile was composed of reductions in the payroll tax, but a targeted tax reduction is little more than a spending cut in disguise. But let’s assume that those cuts in payroll taxes are genuine tax cuts; then the spending increases amount to “only” $202 billion. And even those tax cuts add to the deficit that we were told will drive us to poor house. The President assured us, however, that the deficit reduction committee, charged with finding an additional $1.2 trillion in deficit reduction (See my 8/2/11 post HAVE YOU NO SENSE OF SMELL, SIR?), which so far has met only once and has found $0 (zero) of deficit reductions will be instructed, or at least encouraged, to find another $447 billion or so in future cuts to negate the long run fiscal consequences of the spending spree he is proposing for the present.
Speaking of that phony baloney deficit reduction panel, one of its member, Senator John Kyl a Republican who nominally represents Arizona but in reality represents the military industrial complex about which perhaps the greatest president of many of our lifetimes, Dwight Eisenhower, warned us, has said he will quit the panel if it proposes further reductions in “defense” spending. Senator Kyl thus takes 22% of the budget off the table, and that’s before addressing any of the entitlements that are the real fiscal time bomb. Good luck with that deficit reduction thing, esteemed panel members.
The general silliness taking place in Washington merely reinforces a point that I have been making for years but made especially vociferously over lunch with a trusted friend and confidante earlier this week: The poltroons that we have sent to Washington cannot possibly operate in an environment that requires penuriousness with the public purse. The politicasters who populate the city on the banks of the Potomac see their role in life as giving your money to people who can propel them on the flight of self-aggrandizement that characterizes their existence; i.e., they are using your money to buy power and perpetual panegyrics for themselves. Saving money would involve denying such larder to the people who can make their dreams of fulfilling their dual narcissistic/messianic dreams come true. Does that make any sense to them, especially since it isn’t their money? So why should they make any effort to save your money? Even these dolts can see the pointlessness, indeed, the counterproductivity, of such pursuits.
FISCAL LAPDOGGERY IN THE LAND OF LINCOLN
9/9/11
So Illinois Governor Pat Quinn (no relation), in a naked attempt to have the legislature come up with more money for him to spend on his various friends and constituencies, proposes closing seven mental health, disability, and juvenile justice facilities, thus giving 1,938 state workers their pink slips while disingenuously bleating that the closures are all the fault of the evil legislature that refuses to give him everything he wants, even when he roles around on the floor, stomps his feet, and holds his breath until he turns blue.
A legislature, and a state GOP, with even a modicum of courage, would have called the Governor’s bluff and said something like “Great, Governor. Good to see you doing something to get this budget under control before the Land of Lincoln goes the financial way of Bangladesh. We’ll see you those reductions and raise you another several hundred million dollars.”
But, of course, our lily-livered GOP did nothing of the sort. Whining that, of the seven facilities to be closed, six are in Republican districts, they argue AGAINST the spending cuts, putting the small government GOP in the curious position of opposing the admittedly disingenuous attempts at frugality by the biggest spending governor in our history.
I don’t know if closing these facilities was the best way to cut the budget. Further, I strongly suspect that the facilities slated for closure were selected for political, rather than humanitarian, or hard-headed budgetary, reasons; everything Governor Quinn does, he does for political reasons, making him not at all unique among most politicians, and certainly most politicians in Illinois. Finally, I know, or at least strongly suspect, that Governor Quinn (no relation) has no intention of really shutting these facilities down. But these are cuts to the budget that the Republicans and, not incidentally, Speaker Mike Madigan, profess to want so much to cut. So why not quickly ratify these closures while proposing more? Not only would the budget be cut but the Governor’s bluff would be called, putting him in a very uncomfortable position politically.
By whining about actual cuts proposed by a governor who sees expanding omniscient government to the point of omnipotence, the GOP in this case is adding even more credibility (as if more credibility were needed!) to the arguments of those of us who see the Republicans for the hypocritical frauds that they are, piously professing their opposition to the growth of government while always working to preserve and expand government spending and even government interference in people’s lives, when, on its face, such government involvement can line their pockets of those of the people who finance their phantasmic flights of fancy.
So Illinois Governor Pat Quinn (no relation), in a naked attempt to have the legislature come up with more money for him to spend on his various friends and constituencies, proposes closing seven mental health, disability, and juvenile justice facilities, thus giving 1,938 state workers their pink slips while disingenuously bleating that the closures are all the fault of the evil legislature that refuses to give him everything he wants, even when he roles around on the floor, stomps his feet, and holds his breath until he turns blue.
A legislature, and a state GOP, with even a modicum of courage, would have called the Governor’s bluff and said something like “Great, Governor. Good to see you doing something to get this budget under control before the Land of Lincoln goes the financial way of Bangladesh. We’ll see you those reductions and raise you another several hundred million dollars.”
But, of course, our lily-livered GOP did nothing of the sort. Whining that, of the seven facilities to be closed, six are in Republican districts, they argue AGAINST the spending cuts, putting the small government GOP in the curious position of opposing the admittedly disingenuous attempts at frugality by the biggest spending governor in our history.
I don’t know if closing these facilities was the best way to cut the budget. Further, I strongly suspect that the facilities slated for closure were selected for political, rather than humanitarian, or hard-headed budgetary, reasons; everything Governor Quinn does, he does for political reasons, making him not at all unique among most politicians, and certainly most politicians in Illinois. Finally, I know, or at least strongly suspect, that Governor Quinn (no relation) has no intention of really shutting these facilities down. But these are cuts to the budget that the Republicans and, not incidentally, Speaker Mike Madigan, profess to want so much to cut. So why not quickly ratify these closures while proposing more? Not only would the budget be cut but the Governor’s bluff would be called, putting him in a very uncomfortable position politically.
By whining about actual cuts proposed by a governor who sees expanding omniscient government to the point of omnipotence, the GOP in this case is adding even more credibility (as if more credibility were needed!) to the arguments of those of us who see the Republicans for the hypocritical frauds that they are, piously professing their opposition to the growth of government while always working to preserve and expand government spending and even government interference in people’s lives, when, on its face, such government involvement can line their pockets of those of the people who finance their phantasmic flights of fancy.
Thursday, September 8, 2011
BUT MAYBE THEY’LL COME SO THEY CAN COMPETE ON AMERICAN IDOL!!!
9/8/11
The 9/8/11 edition of the Chicago Sun-Times contains an article on page 3 headlined
“What do rich in China want most? A way out of the country.”
It appears that, as the Sun-Times reports
Among the 20,000 Chinese with at least 100 million yuan ($15 million) in individual investment assts, 27% have already emigrated and 47% are considering it…”
The destination of first choice is, of course, the United States. Last year, nearly 68,000 Chinese born people became legal permanent residents of our country. When asked why he chose to emigrate to the U.S., one Chinese millionaire gave an interesting, if obvious, answer:
“In China, nothing belongs to you. Like buying a house. You buy it but it will belong to the country 70 years later. But abroad, if you buy a house, it belongs to you forever.”
If people with the work ethic and the moxie necessary to accumulate $15mm in investable assets in China want to come to the United States and apply their considerable talents here, things may not be as gloomy here as yours truly has long supposed.
Probably, though, things are indeed as gloomy as yours truly had thought and our future as an economy and as a society remains as dark as ever, despite our being, for a few years anyway, the beacon that draws the talented and dedicated from throughout the world. Why? We’ll manage to eliminate the aspects of American society that make us so attractive to potential immigrants, thus extinguishing the beacon that denotes the shining city on a hill, either in the name of “national security,” if the Republicans are in charge, in the pursuit of “economic justice” if the Democrats are in charge, or just as a result of the decay that accompanies an indifferent, inattentive society consumed with tawdry silliness.
We remain doomed.
The 9/8/11 edition of the Chicago Sun-Times contains an article on page 3 headlined
“What do rich in China want most? A way out of the country.”
It appears that, as the Sun-Times reports
Among the 20,000 Chinese with at least 100 million yuan ($15 million) in individual investment assts, 27% have already emigrated and 47% are considering it…”
The destination of first choice is, of course, the United States. Last year, nearly 68,000 Chinese born people became legal permanent residents of our country. When asked why he chose to emigrate to the U.S., one Chinese millionaire gave an interesting, if obvious, answer:
“In China, nothing belongs to you. Like buying a house. You buy it but it will belong to the country 70 years later. But abroad, if you buy a house, it belongs to you forever.”
If people with the work ethic and the moxie necessary to accumulate $15mm in investable assets in China want to come to the United States and apply their considerable talents here, things may not be as gloomy here as yours truly has long supposed.
Probably, though, things are indeed as gloomy as yours truly had thought and our future as an economy and as a society remains as dark as ever, despite our being, for a few years anyway, the beacon that draws the talented and dedicated from throughout the world. Why? We’ll manage to eliminate the aspects of American society that make us so attractive to potential immigrants, thus extinguishing the beacon that denotes the shining city on a hill, either in the name of “national security,” if the Republicans are in charge, in the pursuit of “economic justice” if the Democrats are in charge, or just as a result of the decay that accompanies an indifferent, inattentive society consumed with tawdry silliness.
We remain doomed.
“REBRANDING” THE PATHETICOS
9/8/11
The following is a small portion of dialog from the presidential debate of the Republican Party, the party of small, limited government and free enterprise:
Rick Perry: “Michael Dukakis created jobs faster than you did, Mitt.”
Mitt Romney: “Well, as a matter of fact, George Bush and his predecessors created jobs at a faster rate than you did, Governor.”
Most people thought this was a snappy comeback on Romney’s part. Yours truly was appalled. The two leading contenders for the presidential nomination of the party that never stops trumpeting its fealty to free enterprise argue about which GOVERNOR, which POLITICIAN, created more jobs?
It is businesses, big, small, and medium, and their investors, that create jobs, not the politicians. One would think that one would not have to explain that to the party of free enterprise but, alas, that would require believing that these carnival barkers actually believe what they say.
The following is a small portion of dialog from the presidential debate of the Republican Party, the party of small, limited government and free enterprise:
Rick Perry: “Michael Dukakis created jobs faster than you did, Mitt.”
Mitt Romney: “Well, as a matter of fact, George Bush and his predecessors created jobs at a faster rate than you did, Governor.”
Most people thought this was a snappy comeback on Romney’s part. Yours truly was appalled. The two leading contenders for the presidential nomination of the party that never stops trumpeting its fealty to free enterprise argue about which GOVERNOR, which POLITICIAN, created more jobs?
It is businesses, big, small, and medium, and their investors, that create jobs, not the politicians. One would think that one would not have to explain that to the party of free enterprise but, alas, that would require believing that these carnival barkers actually believe what they say.
Wednesday, September 7, 2011
“…IF I WERE A WEALTHY MAN…”
9/7/11
This morning’s (i.e., Wednesday, 9/7/11’s) Wall Street Journal featured, on page A1, one of those seminal articles that every sentient individual should read. This one was entitled “Debt Hobbles Older Americans,” and was written by E.S. Browning. The article continues the closest thing to a continual theme this blog has had since its inception, i.e., that Americans (and, apparently, plenty of southern Europeans) have spent themselves into such a hole out of a sense of entitlement to a lifestyle they could not even imagine affording that we have no hope of continuing as a going economic and societal concern. Our society is doomed and there is no hope, at least in this world. And it’s (almost) all our own fault. Like spoiled children, we have eaten through all the seed corn left us by the sacrifices and hard work of prior generations and then, still not having satisfied our “just gotta have it because I deserve it and I need to rub my neighbors’ faces in it” attitude, we borrowed even more and then decided we didn’t want to repay the debt we had accumulated because, after all, we are the most wonderful generation in history and we deserve to have other people finance the lifestyles we pursue to fill the spiritual, emotional, and psychological holes in our lives created by the very pursuit of those lifestyles. It’s an ever accelerating downward spiral that will never be arrested; America is doomed. Well, perhaps E.S. Browning would not put it in those words, but any sensible person would come up with the above interpretation of the data, but I digress.
The article contains a parade of statistics that confirm the dire description of the last paragraph, including:
--39% of households with heads aged 60 through 64 had primary mortgages in 2010, up from 22% in 1994.
--20% of households with heads aged 60 through 64 had secondary mortgages in 2010, up from 12% in 1994 (and note that we were not exactly a frugal bunch in 1994, either)
--Americans of all ages owed $11.4 trillion on 6/30/11. While we congratulate ourselves on that number’s being down 15% from 2007, largely due to defaults (i.e., stiffing our creditors), that $11.4 trillion is more than twice what Americans owed in 1999, adjusted for inflation and population.
--The median amount of mortgage debt for households with heads aged 62 through 69 was $71,000 in 2007, FIVE TIMES the 1987 inflation adjusted median.
…and on and on.
Lest we wonder why we got ourselves into such an unfixable fix, the story contained the tale of a couple in their 50s who insist that, despite their financial problems, they simply MUST continue to live in Glencoe (For those of you not in the Chicago area, Glencoe is about as expensive a town as there is in these parts.) in order to provide stability for her son (his stepson). Apparently, such stability can ONLY be provided in Glencoe. Who knew that my wife and I were subjecting our kids to such brutal instability by living in vertiginous Naperville? And those of you who live in, say, Wheaton, Winnetka, Beverly, Palos, Oak Forest, Downers Grove, Archer Heights, Oak Lawn, Evergreen Park, Glenview, etc.…you ought to be ashamed to call yourself parents. But I digress.
Besides the main theme of the article, something else caught my eye. (I am writing this section more for my Investments classes than for general consumption, but even those of you who are not taking one of my classes should find this portion of the post enlightening and entertaining.) A financial planner named Greg Heller of the eponymous Heller Capital Resources in Los Angeles is quoted in the article as saying
“We have gotten into this ‘debt’s okay’ mentality and it is going to be very hard to get out of it.”
Mr. Heller is to be commended for such an astute diagnosis of the problem. However…
The article goes on to report that Mr. Heller says he has wealthy clients in their 50s with financial problems.
Hmm…
I don’t know if Mr. Heller used the word “wealthy” of if the author used that word. I certainly hope it wasn’t Mr. Heller, who advertises that he is a financial planner. If one is “wealthy,” then, by definition, or at least by correct definition, he or she cannot have financial problems. One’s wealth is defined, financially, as one’s assets minus one’s liabilities. It is a balance sheet concept. If one is “wealthy,” then one has great wealth; i.e., s/he owns more than he owes, by a large amount, and thus cannot have financial difficulties, other than, perhaps, a temporary liquidity problem, and temporary liquidity problems were not the subject of the Journal article.
If the article, or Mr. Heller, is defining “wealthy” as “having a high income,” as most of our politicians, whose financial knowledge would be laughable if it weren’t for their complete lack of appreciation for their own ignorance, then, yes, financial problems are surely possible for high income earners; indeed, such problems seem to be likely for high income earners in today’s world. But then the definition of “wealthy” would be wrong; income is an income statement concept while wealth is a balance sheet concept.
If the article, or Mr. Heller, is defining wealthy as “having lots of useless, silly, worthless, pointless geegaws and gimcracks,” another popular definition of wealth, then the article, or Mr. Heller, is simply wrong on all counts. Having accumulated a lot of vestigial garbage on credit does not make one wealthy; it makes one poor and defines one as silly, if not outright stupid. The inherently futile attempt to convince others, and ourselves, that we are wealthy by displaying the supposed trappings of wealth has contributed mightily to the economic dystopia into which we have descended.
Hopefully, Mr. Heller did not use the term “wealthy” in describing some of his clients with financial problems; we have enough charlatans who pose as “financial planners,” (Note my post of long ago in which I commented on Patti Blagojevich’s aspirations to become a financial planner after having helped drive herself and Rod into the poor house.) and their presence is giving the (admittedly not many) good financial planners a bad name. Given Mr. Heller’s above observations on debt, I am betting he is not so mistaken…or at least I HOPE he is not so mistaken.
This morning’s (i.e., Wednesday, 9/7/11’s) Wall Street Journal featured, on page A1, one of those seminal articles that every sentient individual should read. This one was entitled “Debt Hobbles Older Americans,” and was written by E.S. Browning. The article continues the closest thing to a continual theme this blog has had since its inception, i.e., that Americans (and, apparently, plenty of southern Europeans) have spent themselves into such a hole out of a sense of entitlement to a lifestyle they could not even imagine affording that we have no hope of continuing as a going economic and societal concern. Our society is doomed and there is no hope, at least in this world. And it’s (almost) all our own fault. Like spoiled children, we have eaten through all the seed corn left us by the sacrifices and hard work of prior generations and then, still not having satisfied our “just gotta have it because I deserve it and I need to rub my neighbors’ faces in it” attitude, we borrowed even more and then decided we didn’t want to repay the debt we had accumulated because, after all, we are the most wonderful generation in history and we deserve to have other people finance the lifestyles we pursue to fill the spiritual, emotional, and psychological holes in our lives created by the very pursuit of those lifestyles. It’s an ever accelerating downward spiral that will never be arrested; America is doomed. Well, perhaps E.S. Browning would not put it in those words, but any sensible person would come up with the above interpretation of the data, but I digress.
The article contains a parade of statistics that confirm the dire description of the last paragraph, including:
--39% of households with heads aged 60 through 64 had primary mortgages in 2010, up from 22% in 1994.
--20% of households with heads aged 60 through 64 had secondary mortgages in 2010, up from 12% in 1994 (and note that we were not exactly a frugal bunch in 1994, either)
--Americans of all ages owed $11.4 trillion on 6/30/11. While we congratulate ourselves on that number’s being down 15% from 2007, largely due to defaults (i.e., stiffing our creditors), that $11.4 trillion is more than twice what Americans owed in 1999, adjusted for inflation and population.
--The median amount of mortgage debt for households with heads aged 62 through 69 was $71,000 in 2007, FIVE TIMES the 1987 inflation adjusted median.
…and on and on.
Lest we wonder why we got ourselves into such an unfixable fix, the story contained the tale of a couple in their 50s who insist that, despite their financial problems, they simply MUST continue to live in Glencoe (For those of you not in the Chicago area, Glencoe is about as expensive a town as there is in these parts.) in order to provide stability for her son (his stepson). Apparently, such stability can ONLY be provided in Glencoe. Who knew that my wife and I were subjecting our kids to such brutal instability by living in vertiginous Naperville? And those of you who live in, say, Wheaton, Winnetka, Beverly, Palos, Oak Forest, Downers Grove, Archer Heights, Oak Lawn, Evergreen Park, Glenview, etc.…you ought to be ashamed to call yourself parents. But I digress.
Besides the main theme of the article, something else caught my eye. (I am writing this section more for my Investments classes than for general consumption, but even those of you who are not taking one of my classes should find this portion of the post enlightening and entertaining.) A financial planner named Greg Heller of the eponymous Heller Capital Resources in Los Angeles is quoted in the article as saying
“We have gotten into this ‘debt’s okay’ mentality and it is going to be very hard to get out of it.”
Mr. Heller is to be commended for such an astute diagnosis of the problem. However…
The article goes on to report that Mr. Heller says he has wealthy clients in their 50s with financial problems.
Hmm…
I don’t know if Mr. Heller used the word “wealthy” of if the author used that word. I certainly hope it wasn’t Mr. Heller, who advertises that he is a financial planner. If one is “wealthy,” then, by definition, or at least by correct definition, he or she cannot have financial problems. One’s wealth is defined, financially, as one’s assets minus one’s liabilities. It is a balance sheet concept. If one is “wealthy,” then one has great wealth; i.e., s/he owns more than he owes, by a large amount, and thus cannot have financial difficulties, other than, perhaps, a temporary liquidity problem, and temporary liquidity problems were not the subject of the Journal article.
If the article, or Mr. Heller, is defining “wealthy” as “having a high income,” as most of our politicians, whose financial knowledge would be laughable if it weren’t for their complete lack of appreciation for their own ignorance, then, yes, financial problems are surely possible for high income earners; indeed, such problems seem to be likely for high income earners in today’s world. But then the definition of “wealthy” would be wrong; income is an income statement concept while wealth is a balance sheet concept.
If the article, or Mr. Heller, is defining wealthy as “having lots of useless, silly, worthless, pointless geegaws and gimcracks,” another popular definition of wealth, then the article, or Mr. Heller, is simply wrong on all counts. Having accumulated a lot of vestigial garbage on credit does not make one wealthy; it makes one poor and defines one as silly, if not outright stupid. The inherently futile attempt to convince others, and ourselves, that we are wealthy by displaying the supposed trappings of wealth has contributed mightily to the economic dystopia into which we have descended.
Hopefully, Mr. Heller did not use the term “wealthy” in describing some of his clients with financial problems; we have enough charlatans who pose as “financial planners,” (Note my post of long ago in which I commented on Patti Blagojevich’s aspirations to become a financial planner after having helped drive herself and Rod into the poor house.) and their presence is giving the (admittedly not many) good financial planners a bad name. Given Mr. Heller’s above observations on debt, I am betting he is not so mistaken…or at least I HOPE he is not so mistaken.
Tuesday, September 6, 2011
“EXCUSE ME, SANDY, BUT IF I KILL ALL THE GOLFERS, THEY’RE GONNA LOCK ME UP AND THROW AWAY THE KEY.”
9/6/11
Today’s “The Outlook” section in the Wall Street Journal (9/6/11, page A2) reported on
“One idea that sounds easy enough: Stimulate consumer spending and stem further carnage in the housing market by allowing more homeowners to refinance.”
The article, just the latest edition of this argument, then goes on to outline some of the barriers to large scale refinancings, such as Fannie and Freddie’s “buy back” policy’s chilling effect on home lending, Fannie and Freddie’s higher fees on riskier buyers (i.e., the buyers who would comprise most of the refinancees under such a program), and the claims of second mortgagees. But the article concludes, as do most other article on this subject, that refinancing would be a terrific, painless way to give the economy a shot in the arm.
Excuse my ignorance on this issue, but I have a question: What about the incomes and purchasing power of the people who are currently receiving the payments on the mortgages that will be refinanced? When these loans are refinanced at lower rates, won’t these investors be receiving less income and thus have their potential spending (more on this later) impaired? Wholesale refinancing is not the financial equivalent of dumping pixie dust on the economy, anointing winners while creating on losers. Borrowers will win, lenders will lose.
One must have to assume that the mortgages are held by those evil banks to think that refinancing will be the elixir that its proponents would have us believe it will be. But the despicable banks’ holding the lion’s share of this paper is highly unlikely; these mortgages have been packaged into mortgage backed securities (“MBS”s) that serve as the collateral for collateralized mortgage obligations (“CMO”s). These CMOs are held by a whole range of investors either directly or, more likely, indirectly through mutual funds, pension funds, hedge funds, or any number of investment vehicles more or less widely available to individual and institutional investors. When the mortgages are refinanced, these investors must accept even lower yields on their investments. These are people who spend money, or invest money, too; will not their reduced incomes have an impact on the economy? To the extent that such investors are retirees living on their nest eggs, this latest impairment of incomes and purchasing power, coming on top of the virtual robbery of such fixed income investors being conducted by the Bush/Obama administration and its henchmen, Obsequious Ben and the Washingtonians, will be just another step toward having to survive on subsistence incomes.
Perhaps those who promote massive refinancings as an economic elixir are counting on all the paper into which these mortgages have been sliced and diced being held overseas, perhaps by our latest all purpose bete noir, those evil Chinese (See, inter alia, my 8/24/11 post, “EGAD…IT’S LON CHANEY, JR.!”) It is a logical supposition that some, perhaps a large chunk, of such paper is held overseas, but taking this supposition too far is dangerous given the traditional risk aversion of overseas public investors, especially, perhaps, Chinese and other Asian public investors. Further, the argument that refinancing will help the economy because those whose monthly payments are being reduced are more likely to spend the money than are those whose incomes are being reduced (The second supposition is dubious but maybe plausible if these investors are the domestic elderly or the domestic anybody and reasonable if the investors are overseas, at least as far as spending in this country goes.) rests on the very questionable proposition that the way to solve a problem born of too much spending and too much debt is to encourage more spending and more debt. Unfortunately, the Bush/Obama administration, Obsequious Ben and the Washingtonians, 99% of Congress, 95% of the punditry, maybe 90% of the economics profession, and, say, 85% of the “investment community” buys into such nonsense. So, one way or the other, we will see programs designed to foster massive refinancings of home mortgage loans in order to “put more money into the pockets of consumers.” Then we will wonder why no one wants to save money in this country.
Today’s “The Outlook” section in the Wall Street Journal (9/6/11, page A2) reported on
“One idea that sounds easy enough: Stimulate consumer spending and stem further carnage in the housing market by allowing more homeowners to refinance.”
The article, just the latest edition of this argument, then goes on to outline some of the barriers to large scale refinancings, such as Fannie and Freddie’s “buy back” policy’s chilling effect on home lending, Fannie and Freddie’s higher fees on riskier buyers (i.e., the buyers who would comprise most of the refinancees under such a program), and the claims of second mortgagees. But the article concludes, as do most other article on this subject, that refinancing would be a terrific, painless way to give the economy a shot in the arm.
Excuse my ignorance on this issue, but I have a question: What about the incomes and purchasing power of the people who are currently receiving the payments on the mortgages that will be refinanced? When these loans are refinanced at lower rates, won’t these investors be receiving less income and thus have their potential spending (more on this later) impaired? Wholesale refinancing is not the financial equivalent of dumping pixie dust on the economy, anointing winners while creating on losers. Borrowers will win, lenders will lose.
One must have to assume that the mortgages are held by those evil banks to think that refinancing will be the elixir that its proponents would have us believe it will be. But the despicable banks’ holding the lion’s share of this paper is highly unlikely; these mortgages have been packaged into mortgage backed securities (“MBS”s) that serve as the collateral for collateralized mortgage obligations (“CMO”s). These CMOs are held by a whole range of investors either directly or, more likely, indirectly through mutual funds, pension funds, hedge funds, or any number of investment vehicles more or less widely available to individual and institutional investors. When the mortgages are refinanced, these investors must accept even lower yields on their investments. These are people who spend money, or invest money, too; will not their reduced incomes have an impact on the economy? To the extent that such investors are retirees living on their nest eggs, this latest impairment of incomes and purchasing power, coming on top of the virtual robbery of such fixed income investors being conducted by the Bush/Obama administration and its henchmen, Obsequious Ben and the Washingtonians, will be just another step toward having to survive on subsistence incomes.
Perhaps those who promote massive refinancings as an economic elixir are counting on all the paper into which these mortgages have been sliced and diced being held overseas, perhaps by our latest all purpose bete noir, those evil Chinese (See, inter alia, my 8/24/11 post, “EGAD…IT’S LON CHANEY, JR.!”) It is a logical supposition that some, perhaps a large chunk, of such paper is held overseas, but taking this supposition too far is dangerous given the traditional risk aversion of overseas public investors, especially, perhaps, Chinese and other Asian public investors. Further, the argument that refinancing will help the economy because those whose monthly payments are being reduced are more likely to spend the money than are those whose incomes are being reduced (The second supposition is dubious but maybe plausible if these investors are the domestic elderly or the domestic anybody and reasonable if the investors are overseas, at least as far as spending in this country goes.) rests on the very questionable proposition that the way to solve a problem born of too much spending and too much debt is to encourage more spending and more debt. Unfortunately, the Bush/Obama administration, Obsequious Ben and the Washingtonians, 99% of Congress, 95% of the punditry, maybe 90% of the economics profession, and, say, 85% of the “investment community” buys into such nonsense. So, one way or the other, we will see programs designed to foster massive refinancings of home mortgage loans in order to “put more money into the pockets of consumers.” Then we will wonder why no one wants to save money in this country.
Monday, September 5, 2011
WE WANT OUR MONEY BACK!
9/5/11
Rick Perry is governor of Texas. He is also a candidate for president of the United States. How does one do both? We hear constantly from incumbent governors (and most stentorially and unceasingly from he who holds that job in the Land of Lincoln and is no relation to yours truly) how hard the job is, how it is more than a full time job, how the incumbent never gets time off, and other such blather. So how is Rick Perry, or any sitting governor who has ever run for president, suddenly able to find time in his grueling, demanding, never a day off schedule to run for president? Are the people of Texas getting a refund of at least part of Mr. Perry’s salary, for the portion of that salary attributable to the time during which he is on his flight of further self-aggrandizement rather than serving the people of Texas?
This is not, of course, a knock exclusively on Rick Perry; I am, at least at this juncture, neither hot nor cold on Mr. Perry’s candidacy. The same questions would apply to Chris Christie should he decide to throw his hat in the ring, an unlikely prospect. If my memory serves me effectively, Bill Clinton, who, in retrospect, and certainly by comparison to the two that followed him, was one of our great presidents, ran for the Oval Office while an incumbent governor. And I suppose the same logic applies to sitting Congresspersons (including Ron Paul and Michele Bachman) and senators (Though one wonders how tough getting one’s hindquarters kissed by shameless lobbyists and having various sycophants bow and scrape at your feet all day, approximately the job description of a member of Congress, can be. Surely one can take a break from the obsequiants to seek further self-glorification, but I digress.), at least as far as the taxpayers getting some kind of refund of their salaries. Come to think of it, a similar argument applies to presidents: if, as we hear, the president’s job is so grueling, how does he, whether Obama, Bush, Clinton, Bush I, Reagan, Carter, Ford, Nixon…. find so much time to prance around and tell us how wonderful he, and what a scoundrel his challenger, is? We should at least get some of our money back. Better yet, the incumbents should take at least a temporary, unpaid leave of absence and put the country, their states, or their seats in the hands of someone who wants to do the job rather than use it as a platform for seeking another one.
If one had a job in the private sector or the public sector doing actual work rather than the primping and preening that is involved in holding and seeking public office, one would not be able to suddenly take off a year or more to spread the gospel of one’s self and still get paid for the job one wouldn’t be doing. Why do our public servants get to do so?
And, for future reference…the same reasonable expectation of a leave of absence or at least a refund of salary while running for president would apply to a mayor seeking our nation’s most vainglorious office.
Rick Perry is governor of Texas. He is also a candidate for president of the United States. How does one do both? We hear constantly from incumbent governors (and most stentorially and unceasingly from he who holds that job in the Land of Lincoln and is no relation to yours truly) how hard the job is, how it is more than a full time job, how the incumbent never gets time off, and other such blather. So how is Rick Perry, or any sitting governor who has ever run for president, suddenly able to find time in his grueling, demanding, never a day off schedule to run for president? Are the people of Texas getting a refund of at least part of Mr. Perry’s salary, for the portion of that salary attributable to the time during which he is on his flight of further self-aggrandizement rather than serving the people of Texas?
This is not, of course, a knock exclusively on Rick Perry; I am, at least at this juncture, neither hot nor cold on Mr. Perry’s candidacy. The same questions would apply to Chris Christie should he decide to throw his hat in the ring, an unlikely prospect. If my memory serves me effectively, Bill Clinton, who, in retrospect, and certainly by comparison to the two that followed him, was one of our great presidents, ran for the Oval Office while an incumbent governor. And I suppose the same logic applies to sitting Congresspersons (including Ron Paul and Michele Bachman) and senators (Though one wonders how tough getting one’s hindquarters kissed by shameless lobbyists and having various sycophants bow and scrape at your feet all day, approximately the job description of a member of Congress, can be. Surely one can take a break from the obsequiants to seek further self-glorification, but I digress.), at least as far as the taxpayers getting some kind of refund of their salaries. Come to think of it, a similar argument applies to presidents: if, as we hear, the president’s job is so grueling, how does he, whether Obama, Bush, Clinton, Bush I, Reagan, Carter, Ford, Nixon…. find so much time to prance around and tell us how wonderful he, and what a scoundrel his challenger, is? We should at least get some of our money back. Better yet, the incumbents should take at least a temporary, unpaid leave of absence and put the country, their states, or their seats in the hands of someone who wants to do the job rather than use it as a platform for seeking another one.
If one had a job in the private sector or the public sector doing actual work rather than the primping and preening that is involved in holding and seeking public office, one would not be able to suddenly take off a year or more to spread the gospel of one’s self and still get paid for the job one wouldn’t be doing. Why do our public servants get to do so?
And, for future reference…the same reasonable expectation of a leave of absence or at least a refund of salary while running for president would apply to a mayor seeking our nation’s most vainglorious office.
Sunday, September 4, 2011
“HE’S EITHER IN ON IT OR HE’S AN IDIOT; EITHER WAY, I HAVE TO LET HIM GO.”
9/4/11
We learned on Friday that the Federal Home Financing Agency (“FHFA”) is suing 17 of the world’s largest financial institutions on behalf of Fannie Mae and Freddie Mac, now wards of the state overseen by the FHFA. The basis of the lawsuits is that these financial institutions sold $196 billion of risky home loans to Fannie and Freddie without adequately disclosing the risks involved. The presumption behind these suits must be that the political hacks, lackeys, and toadies who constituted Fannie’s and Freddie’s management were mere babes in the woods, hornswoggled by crafty Wall Street types who preyed upon their ingenuousness at every turn. There may be something to at least the first section of that argument, but that is not the point of this post.
Though I haven’t heard or seen this assertion being made elsewhere, I am quite confident that I am not the first person who has made the following point:
The amounts we are talking about are staggering, even in these days of $1.3 trillion budget deficits and a surfeit of funny money designed to somehow jump start the productive engines of this country. For example, the suit involves $57.4 billion of loans from Bank of America, $33 billion from J.P. Morgan Chase, and $30.4 billion from RBS Securities, to name a few. The ultimate settlements of these suits, be it in cash or, more likely, in the form of these banks’ doing things that will mollify the bureaucrats and help in the reelection efforts of our public servants, such as, say, allowing people to stay in homes they couldn’t afford in the first place even under the best of conditions or giving foreclosed homes to people whose familiarity with their local Congressmen and the “political process” is far stronger than their familiarity with work, are likely to be large enough to devastate, or at least impair, the capital bases of these banks. And what will happen when these banks, their capitalizations weakened by the settlements demanded by the preening poltroons who govern us, get into trouble, as is likely in our weak and apparently deteriorating economy? You, Mr. and Mrs. Taxpayer, will bail them out. The government (you, really, or Obsequious Ben Bernanke and the Washingtonians) will provide the money to keep the banks afloat, a provision made necessary by the banks’ being forced to provide the government money, or, more likely, to provide money and services to those the political system favors. So what these suits will effectively amount to is either the government suing itself or the government transferring money to constituencies who would never have been able to tap the Treasury had their pleas been subject to the normal political process.
The government’s suing itself is thus either incredibly idiotic or incredibly Machiavellian. But what else is new?
We learned on Friday that the Federal Home Financing Agency (“FHFA”) is suing 17 of the world’s largest financial institutions on behalf of Fannie Mae and Freddie Mac, now wards of the state overseen by the FHFA. The basis of the lawsuits is that these financial institutions sold $196 billion of risky home loans to Fannie and Freddie without adequately disclosing the risks involved. The presumption behind these suits must be that the political hacks, lackeys, and toadies who constituted Fannie’s and Freddie’s management were mere babes in the woods, hornswoggled by crafty Wall Street types who preyed upon their ingenuousness at every turn. There may be something to at least the first section of that argument, but that is not the point of this post.
Though I haven’t heard or seen this assertion being made elsewhere, I am quite confident that I am not the first person who has made the following point:
The amounts we are talking about are staggering, even in these days of $1.3 trillion budget deficits and a surfeit of funny money designed to somehow jump start the productive engines of this country. For example, the suit involves $57.4 billion of loans from Bank of America, $33 billion from J.P. Morgan Chase, and $30.4 billion from RBS Securities, to name a few. The ultimate settlements of these suits, be it in cash or, more likely, in the form of these banks’ doing things that will mollify the bureaucrats and help in the reelection efforts of our public servants, such as, say, allowing people to stay in homes they couldn’t afford in the first place even under the best of conditions or giving foreclosed homes to people whose familiarity with their local Congressmen and the “political process” is far stronger than their familiarity with work, are likely to be large enough to devastate, or at least impair, the capital bases of these banks. And what will happen when these banks, their capitalizations weakened by the settlements demanded by the preening poltroons who govern us, get into trouble, as is likely in our weak and apparently deteriorating economy? You, Mr. and Mrs. Taxpayer, will bail them out. The government (you, really, or Obsequious Ben Bernanke and the Washingtonians) will provide the money to keep the banks afloat, a provision made necessary by the banks’ being forced to provide the government money, or, more likely, to provide money and services to those the political system favors. So what these suits will effectively amount to is either the government suing itself or the government transferring money to constituencies who would never have been able to tap the Treasury had their pleas been subject to the normal political process.
The government’s suing itself is thus either incredibly idiotic or incredibly Machiavellian. But what else is new?
Subscribe to:
Posts (Atom)
