Wednesday, October 21, 2009

It's the Jobs, Stupid

It's a good that the Obama White House controls the media, otherwise, the country might actually hear about how huge of a miscalculation the President has made on "job creation."

According to the Republican Way and Means Committee, at the end of September 2009, the country has lost 2.7M jobs year-to-date. Obama expects 3.4M jobs to be created by year-end. That's a difference of ~6.2M jobs!!!

The stimulus has failed. It failed for the exact reason that non-partisan economists said it would fail; the money stayed in the public economy instead of being spent in the private economy. The public economy (government) creates debt. The private economy creates growth, jobs, industry. Stimulating the public economy wasn't going to create jobs but rather put more burden on the Americans who still have jobs.

Sooner or later the media will have to report this failure and Obama will have to respond. The best thing Washington can do is reduce spending and cut taxes. Of course doing so would be an admission that Regan-era free market economics are far superior to tax-and-spend socialism.

Pay Cuts!!!

Exercising questionable authority, the Obama Administration is ordering (via Treasury) bailout firms to dramatically reduce executive level pay and bonuses.

Couple of thoughts...

1. When you sleep with dogs... These bailout firms should have known better! Hopefully the government will soon get out of private enterprise, but if it doesn't, some of these firms would have been better off failing. Failure would have allowed bankruptcy protection/restructuring and at worst would have left market share in the free market rather than under government control.

2. We can't expect recovery when the best talent can't be compensated. Do you work for free? Neither do I and the best execs expect a paycheck as well. You can disagree with the amount of compensation all day long. If companies can't pay, they can't attract the talent necessary to recover. This is especially important given that most Wall Street firms, and some big banks, still have bad assets on their sheets. Should interest rates rise, or the mark-to-market rules changes, we'll see fall '08 all over again.

3. The market knows the free market can't recover with this level of government intervention and the Dow demonstrates this. As soon as news of the exec comp limits was released the market went from around +50 to close at -92.12 in about 45 minutes!!!

Thursday, October 15, 2009

What It Takes

Like most people who believe in the Constitution, freedom, and America, I've been a little down lately. Okay, more than a little down, more like downright pessimistic about where this country will be in five-ten-twenty years from now.

We seem dead-set on spending "other peoples'" money while leadership lies about the costs of social programs, bailouts, and the effects of turning the IRS into a force for social change. The deficit is huge and getting bigger. Unemployment is increasing. Iran is build nuclear weapons. Afghanistan is out of control and Pakistan may fall to "militants" any day.

The worst part of this is thinking about what it would take to get the nation back on track because it's then that I realize it likely won't happen. The real sacrifice (not the Obama brand [i.e. someone else's sacrifice]) it will take to restore the country is immense. The individual strength it will take to hold fast to the Bill of Rights and ideals in the face of Democratic populism (the "me, me, me" entitlement block) is seldom seen in everyday life.

I don't think we have what it takes. I could still be convinced otherwise, but I fear the Republic is doomed.

And then I stumble upon this op-ed (via written by Wendy Button a former speechwriter for "John Edwards, Hillary Clinton, John Kerry, Barack Obama, and Mayor Tom Menino of Boston as well as other national and international leaders..." This is definitely worth a read if you can stomach the "growths in my uterus" bit.

Ms. Button learned something about her failed ideology; it creates consequences. Those individual consequences were unknown to her while she was promoting health care "reform" (i.e. socialism). She drank the collectivist Kool Aid and didn't understand there was a personal price she would pay for creating "social and economic justice." Now that the bill has come due, Ms. Button is singing a different tune--I wonder if her former employers are listening?

This is where I find my silver lining; consequence. When the individual consequences are fully known, individuals tend to make relatively good decisions. Had Americans known Social Security would be broke within 80 years and the Federal government would use the "fund" as a piggy bank for all sorts of budget misappropriations, the New Deal may have never happened in the first place.

Collective consequences are easier to stomach. We can always fix problem x with person y's money. Where y can be the "rich" or future generations of Americans. But it's the individual consequences that sting!

What it may take to get all Americans (including former liberals) to see the danger of socialism is individual consequences. And despite all of Obama's empty promises, the everyday, working class American will be the most impacted by these policies.

If consequences will be the start of a movement to restore this country to its Constitution, then I welcome them.

In the meantime, I'll be at the bar.

Wednesday, October 14, 2009

DOW 10,000!!!

Recession cancelled!!!

Not quite...

The fundamentals necessary for recovery are still lacking. Unemployment is increasing with no growth in GDP. So what's propping up the DOW?


One would think that fear would tank the markets rather than create a ~1,000 point rally, right? It's not fear in the equities market, but rather fear of inflation.

Gold prices are probably the best forward looking predictor of inflation we have. Government data (CPI) won't come out for at least a year after inflation starts hitting while gold prices are driven by the market and reported by the exchanges in real-time.

Look at the same chart as above compared to GLD (a gold ETF tracking just under 1/10 spot price)...

The fact that GLD and the DJIA are correlated during this "rally" shows it's no stock rally at all but rather a flight from USD based securities and reserves into equities. What's worse, than a misreported rally, is that because the fundamentals are lacking, the market is poised for another fear induced sell-off. Investors will think "oh no, not this AGAIN!" at the first sign of bad news and we could quickly enter another sell-off cycle.

Also, consider that the Fed has kept rates between 0% and 0.25% for almost a year now. If we do start to see inflation the Fed may raise rates to kept it in check creating a new wave of bankruptcies as credit is constricted and interest payments increase--this could also crash the DJIA.

[No, I'm not telling anyone to buy gold or GLD! This is not that kind of blog.]

I'm hopeful the economy can recover but we have a long way to go. What's disappointing about the recent upbeat economic news (which I believe is more political than economical) is that we haven't addressed the underlying issues of this recession.

Historically, recessions can be a good time to re-tool, re-educate, and re-direct capital towards new business opportunities and growth. Recessions have a way of purging old business models that have failed and encourage new successful ones to take their place. I don't see any of this happening and all of Washington's promises on job creation (green jobs) have failed.

Friday, October 2, 2009

Olympic Fail

After an impassioned campaign, Team Obama/Oprah failed to deliver the 2016 Olympic Games to Chicago and the games will be hosted in Brazil.

Americans are in shock over this (primarily European) rejection. We thought the world loved us for electing Barack Obama. Were we wrong?

Long before the name Barack Obama was dropped Europe frequently reminded us that we consumed too much. Enjoyed too much individual freedom. We were told we were too wealthy and needed to transfer that wealth to various global government agencies for crisis x or problem y. Americans instead continued living the lifestyles we wanted, continued growing our economy, and used charity (choice rather than tax) to address world needs. This further angered the Europeans and put leadership at great risk; how does one justify sky high taxes in Europe while the Yanks enjoy lower taxes, better lives, and end up doing more good for the world? Impossible!

The world never wanted a competent, strong, moral President to run the United States. They wanted someone who believed as they do and could be manipulated into subjecting the US to the same kind of group-think that has destroyed Europe. They found that in Barack Obama. Yes, they love America for being stupid enough to elect a socialist, but that love isn't going to translate into progress or achievement.

Many conservatives are giddy today, happy with the news that Obama has been shown the door. I believe the 2016 Olympic games would have been good for Chicago and America and losing that opportunity isn't something to be celebrating given our economic situation.

The silver lining is that Americans get to see what European love is really worth. And that should be celebrated!