Peter Blane


Concepts

Posted in government by wusspett on August 27, 2009
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Not too long ago I was hanging out with a group of guys, and one of them was depicting how the internet works.  Basically describing that if you, for instance, live in Atlanta and are trying to connect to a website whose servers are in Canada, he was explaining the logic behind the fastest/most efficient way to connect.  This was way over my head.  He understood something I had no clue about.

So, you probably figure I am making a point – haha.  Well, as the guy was talking he made the comment (not to me specifically), “Dude, Microsoft is huge.  They have trillions of dollars worth of assets to help their connections.”  At that moment I realized that in less than a year, the concept of a trillion had been stuffed into a box and now could be used to describe anything.

Try this on for size.  A million seconds is 12 days, a billion seconds is 31 years, but a trillion seconds is 31,688 years. 31,688 YEARS.  That is PRE-HISTORY.  If you spent a $1,000,000 every day, you would have to spend it every day  for 2,740 years to get to a trillion!!

Now back to what that guy was saying about Microsoft.  Their market cap (assets) is $218 billion. Most fortune 500 companies hover around that figure, and even THAT figure is more than the GDP of some countries!  Correct, some companies make more than some countries do in a year – and that’s a quarter of ONE trillion. A quarter.  Are you seeing how big this is?

So, the U.S. national debt is over $11 trillion, or over $36,000 per person (given U.S. population is 300 million).  Bush increased our debt by $1 trillion (over 8 years). Obama is going to double that and MORE.  That means YOU (and me, of course) are responsible to pay this off – as long as we are U.S. citizens.  Of course, not everyone pays taxes, so more burden is shoved on you (and me).  Do you understand?  The government represents US – WE ARE the government – and WE have to pay this debt back.  Am I concerned when inflation rises, or spending increases, or when the dollar devalues?  You bet.  Are you?  Because “the government” is no some far-off, semi-imaginary thing that gives you a tax refund every year.  The government is real and they get their money from us; that’s why we have to pay taxes.  Let’s make it simple: if someone has a credit card with a balance, that person pays off that balance from the income they receive.  We are the government’s income, and they have a balance on their “credit card”.

It doesn’t matter what your political views are.  In my opinion, we should all be very concerned with how the government spends our money.  In fact, I think that is something we should all agree on.

The absent-minded U.S. Treasury Secretary

Posted in Finances by wusspett on August 26, 2009
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Ugh, are you serious?! If  you don’t already know who Timothy Geithner or Lawrence Summers are, you should.  They control(ed) the U.S. Treasury = controls the money supply.

Anyway, I have recently been searching Timothy Geithner’s location.  He seems to have all but vanished since earlier this year.  He goes from being in the headlines every day to making speeches at elementary schools in ity-bitty towns – like Berea, Ohio.  Maybe he’s in trouble with someone in washington, dc and they said, “no more TV appearances for you, mister!” – Got off on a rabbit trail…sorry

The article I read – written by Geithner and Summers by the way – is silly.  Granted they did follow the correct method for writing a paper in college, IT COULD HAVE BEEN WRITTEN BY SOMEONE IN COLLEGE.  They outline 5 major points they think are problems, and point out that “the administration” will fix these problems – not actually them (being Geithner and Summers).  While these are great opinions, not badly written either, they charge themselves with nothing except coming up with who should be in charge of making sure companies don’t get so big that they are too “big to fail”.  So, basically, they established that “the administration” will fix stuff and that they (Timmy and Larry) will find someone to put in charge to blame if this happens again.

They did say something beyond the ordinary though.  They said, and I quote, “the administration’s reforms will allow the financial system to play its most important function: transforming the earnings and savings of workers into the loans that help families buy homes and cars, help parents send kids to college, and help entrepreneurs build their businesses.”  You ever wonder what our country was run on?  Debt. They just said it.   Our system’s most important function is to give people debt.  Really?  Also, the context of “workers” reminds me of worker bees.  We, the citizens of the U.S. are not drones.  We are not surfs or paupers under a tyrannic ruler.  Should, perhaps, this read “…transforming the earnings and savings THAT WE EARN into the loans…”?  Don’t undermine me you pompous jerks.

your Bernanke and you

Posted in Consumer Confidence by wusspett on August 25, 2009
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*sigh* it looks like we are in for another session of the Bernanke.  It’s not that I am necessarily upset that he is still the Fed representative to the public.  I’m not even sure why people pay so much attention to him.  He and his chairmen set monetary policy.  I say just let them be an economic indicator, and let it end there.

It’s interesting to me that the market is “upbeat” about this (see the “Bernanke” link above).  (People are so interesting to me.)  What really seems to be driving the market right now is that “things aren’t as bad as we thought they would be by now, so things aren’t ever going to be worse” thought process.  This thought process is optimistic in a time where things still look bleak.  In essence, it is “prepare for the worst, hope for the best” that will allow for improvement.  Unemployment is still high, house prices are decreasing at a slower pace, and foreclosures are still a HUGE risk for the next few quarters: “Americans fell behind on mortgage payments at a record pace last quarter, the Mortgage Bankers Association reported Aug. 20. The inventory of homes in foreclosure rose to the most in three decades of data” (see the “thought process” link).

I think it would be foolish to have any long positions at this point – unless they are call options or treasuries.  For me, I agree with what Peter Schiff said about the broken window” fallacy of economics, which argues that economic activity can be stimulated by the need to replace something that has been destroyed.  He says, “Digging holes just to fill them up does employ workers, but the work offers no benefit to anyone not receiving the wage. Absent government incentives, such a job would create no profit and could only exist as a result of a subsidy from someone else.”  Now, he was talking about “cash for clunkers“, but that’s another note for another time.

Ever wonder if we are making progress with the mortgages?

Time for a mortgage crisis update! *lightning flashes and thunder rolls*

Sounds like what I mentioned about consumer confidence (CPI), unemployment, the uptick in construction, and the double dip recession camp I’m currently in is being proven.  This article mentions that since government aid is set to run out soon for people purchasing homes, and, therefore, will cause the already high foreclosure rate to increase.  So, since the dollar is now backed by toxic assets and the government is cracking down on credit card companies, get ready for another dip in the stock market and for a “frost” to set in on credit.

H.R. 1

Posted in government by wusspett on August 20, 2009

Did you know that H.R. 1 was passed earlier this year? (signed by the president february 17th 2009)

Well, the American Recovery and Reinvestment Act of 2009 was passed to “specify appropriations for a wide range of federal programs and would increase or extend certain benefits payable under the Medicaid, unemployment compensation, and nutrition assistance programs.”

The congressional budget office (CBO) estimates this will “increase federal budget deficits by $169 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion in 2011, and by $816 billion over the 2009-2019 period.” (see link above).

The government is doing a great job at spending, but still can’t seem to pass a bill that is going to DECREASE the deficit.

Foreign Influence

Posted in Consumer Confidence by wusspett on August 20, 2009
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The Dow Jones  is up 2.71% (from January 5th to today).  For that same time period:

Shanghai’s  SSE Composite Index is up 59.91%
Japan’s NIKKEI 225 is up 14.82%
China’s HANG SENG INDEX is up 35.14%
Britain’s FTSE 100 is up 3.72%
the French CAC 40 is up 7.74%
India’s BSE SENSEX is up 55.61%

Now, I know that the U.S. is the richest country, but, generally, I’m starting to wonder why so many other large, developed countries are outperforming us.  What that should say to those in authority in the U.S. is that confidence in the U.S.’s “business model” is low.  If a company has a decreaing stock value (the dollar), they need to increase confidence by increasing their return on equity or “profit” (adds value) to pay dividends (pay down debt).  A company can look at where they can cut costs, but, in politics, this will not happen.  Politicians and government in general is too much of a moral compass.  Cutting their unnecessary costs means “they don’t care”.  The juggling act they have to do is one I am not jealous of.  Take the autoworkers union, for example.  The government HAD to bail out these companies because of the moral obligation to keep the families of those workers supported.  A company should be concerned with its survival, in my opinion – not being concerned with its workers.  People should help people.

Bubbles

It seems, recently, the headlines have had 2 different themes about CPI and the housing industry.  1) That CPI is down, people are saving money, and cutting back, and 2) that home construction and building permits are “up”.

Look at consumer credit.  The federal reserve’s statistical release (August 7th 2009) for June reported “Revolving credit decreased at an annual rate of  8-1/4 percent, and nonrevolving credit decreased at an annual rate of 3-1/2 percent.”  (revolving credit would be like credit cards, nonrevolving credit would be like a mortgage).

So, you have people, on average, NOT taking on new debt,  BUT we have increased construction.   Let’s look at unemployment.  The Bureau of Labor Statistics, on August 7th 2009, released the unemployment rate of 9.4% – noting little change for the past couple months.

We have a pretty historically low CPI, a historically high unemployment rate, shrinking personal debt, and a historically high savings rate.  It doesn’t sound like people are ready to start buying homes again.  Yet, construction is increasing?  Something isn’t adding up.  Unless this is a result of the Emergency Economic Stabilization Act of 2008 (TARP).  If these numbers are a result of TARP funds being pumped into “the system”, perhaps this will result in an attempt to “re-inflate the bubble”.  So, you could say I fall in the “double dip recession” group.

Progress

Posted in Consumer Confidence by wusspett on August 17, 2009
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This year, for the first time in a long time, U.S. citizens, on average, began saving the money they earned at a positive rate. References:

Why are the citizens of the U.S. saving their money so vigorously?  Why is their government spending their citizens’ money so vigorously?  It seems they have differences in how to solve our collective “problems”.  As Peter Schiff said, “But rather than accepting the market’s medicine, our government is overriding its own citizens’ responsible behavior. To do so, it has put borrowed money into consumers’ pockets, and then conjured various incentives for them to go out and spend it. This process requires more government bureaucracy, more debt, and more regulation at a time when we can’t afford any of it.”

In my opinion, citizens are setting the example for how the government needs to be behaving.  It seems the government’s solution is doing the opposite of what I think a good solution is: save money.  OK, government, your citizens have started acting more responsible with their money. Your turn.