Tuesday, December 30, 2008

Recap and retread

Ok, let the review begin:

On February 1, 2008, I made the following predictions:

  1. The Republican Party is about to get exactly what it wants.
A moderate candidate! Who lost.

Predictions for 2008-2012:

1. The first recession in 26 years will last between 8 and 11 months and cause widespread dislocations specifically in housing

Recession is 2 consecutive quarters of negative GDP. Not there yet, but probably did start in the 4th quarter. We'll see. I consider this a hit

2. Ford will declare bankruptcy. As will Citigroup. Both will survive but neither will recover. Four of the top 20 banks will fail or be forced into mergers to survive.

Who could have foreseen a government bailout. Citigroup was all but bankrupty.

Here is the list:
1. Citigroup (New York, N.Y.) $2,199,848
2. Bank of America Corp. (Charlotte, N.C.) 1,743,478
3. J. P. Morgan Chase & Company (Columbus, Ohio) 1,642,862
4. Wachovia Corp. (Charlotte, N.C.) 808,575
5. Taunus Corp. (New York, N.Y.) 750,323
6. Wells Fargo & Company (San Fransisco, Calif.) 595,221
7. HSBC North America Inc. (Prospect Heights, Ill.) 493,010
8. U.S. Bancorp (Minneapolis, Minn.) 241,781
9. Bank of the New York Mellon Corp. (New York, N.Y.) 205,151
10. Suntrust, Inc. (Atlanta, Ga.) 178,986
11. Citizens Financial Group, Inc. (Providence, R.I.) 161,759
12. National City Bank (Cleveland, Ohio) 155,046
13. State Street Corp. (Boston, MA) 154,478
14. Capital One Financial Corp. (McLean, Va.) 150,608
15. Regions Financial Corp. (Birmingham, Ala.) 144,251
16. PNC Financial Services Group, Inc. (Pittsburg, Pa.) 140,026
17. BB&T Corp. (Winston-Salem, N.C.) $136,417
18. TD Bank North, INC. (Portland, Maine) 118,171
19. Fifth Third Bankcorp (Cincinatti, Ohio) 111,396
20. Keycorp (Cleveland, Ohio) 101,596

Pure banks, I lost. However, Washington Mutual and Indymac banks were big failures as were the almost complete loss of investment banks. In green, banks that received Treasury money - some forced upon them. Also, we have some new 'banks'. It was clear that the financial sector was going to get hammered. Again, too big to fail saved some. Mostly a hit, but I can't give myself credit for stating the obvious especially when it didn't play out cleanly.

3. Obama will be sworn in as President in Jan 2009. Hillary and Bill will be divorced in 2010.

Hit on the first, we'll see on the second.

4. A series of 'minor' attacks on American soil (single bombers in crowded places) will focus Obama on terrorism....unfortunately, we will find that several of the bombers were illegals that got visas as part of the comprehensive reform passed and signed in 2009. Obama will seal the border with an overstep that will violate virtually the entire Constitution with the complete support of the American people and Congress.

Still to be seen.

5. The military withdrawal from Iraq begins to resemble a retreat under fire.

Still to be seen.

6. A small nuclear denotation in Iran signals Iran's entry into the nuclear club in early 2011.

Still to be seen - but getting closer

7. Hezbolla attacks Israel from the West Bank, Gaza (with Hamas) and Lebannon using rockets, several of which will be chemical. Israeli government will fail and only the Iran nuclear threat prevents the US from doing anything to help. Assistance from a completely unexpected source keeps the country from falling.

Israel grew a few stones this year and is making Hamas pay, but Hezebolla is gaining strength in the north. I left this open ended so I still have time.

8. Bankruptcies in the US hit 1.5 million in 2009 along with 2.5 million foreclosures.

2007-2008 hit 1.04 million. I feel pretty confident about the bk. Estimates on foreclosures put them at 1.35 so far in 2008. I may miss the foreclosures by about .5 million - however, even 2 million foreclosures is going to hurt a lot. still some time left.

9. The Democrats get a functional majority in the Senate in 2009 (with the help of several RINOs) and complete the hat trick with a functional majority in the House in 2010.

Consider this a hit on the Senate and and still time on the House - however, governing tends to hurt chances for the party in power.

10. A major financial figure will expose one, maybe two flat out lies that the media had been reporting in financial matters that leads to a rout of the dollar on international markets. Only the complicity of the EU in the lie prevents the dollar from ouster as the currency of trade.

Not yet...

11. A chemical introduced into coca in South America spreads into the cocaine trade leading to thousands of deaths and tens of thousands of addicts having serious and permanent medical disabilities that WE will have to support.

Ok, a miss - but it could happen.

12. A version of nationalized Medicare will be expanded to 50 and overs and pre-school aged children.

They are going to give a try....still waiting though.

13. In 2011, after tax cuts that were put into place in 2003 expired, the Federal revenues decline for the first time in almost 40 years.

Time not up.

So, not too bad. How did you do?

Monday, December 29, 2008

Stupid is as stupid does

Someone came up to me to tell me about the horrible goings on in Palestine. I was pretty clear - "If you open your mouth to tell me about the horrible Israelis bombing the poor Palestinians, I will KNOW for a fact that you are a moron and incapable of intelligent and rational thought. So, before going any further, if you want to prove your stupidity, by all means tell me, or better yet, let me think you MIGHT be stupid and walk away now."

The response was stunned silence. I considered it a successful result.

I am tired of tolerating stupid people making stupid comments. Conservatives need to quit giving power to PCness.

Sunday, December 21, 2008

Twas the night before Christmas

Twas the night before Christmas and all through the Congress

Not a politician was stirring, not even the House Mistress

The earmarks were hung by the Congress with care

In hopes that Obama soon would be there.

The Conservatives were nestled all snug in their enclaves,

While visions of leadership danced in their dreams.

And McCain making mischief’ and Palin at home,

They had all just settled down for a long minority snap.

When out on the Rose Lawn there arose such a clatter,

I sprang from the bed to see what was the matter.

Away to Windows I flew like a flash

Tore open the Twitter and threw up the mash

The rage on the breast of the new-posted blog

Gave the illusion of normalcy to objects aglow,

When, what to my wondering eyes should appear,

But a miniature cabinet and eight tiny posers,

With a little bold driver, so lively and quick,

I knew in a moment it must be Daley’s young Schtick

More rapid than lobbyists his posers they came,

And he whistled and shouted and called them by name,

“Now Clinton! now, Richardson, now Daschle and a Chu

On Salazar! on Duncan! on, Solis and yes, Biden you too!

To the top of the House! To the top of the Congress!

Now shoe away, shoe away, shoe away all

As dry RINOs that before the principle fly,

When they meet with an obstacle, concede to the sky,

So up to the House-top the posers they flew,

With the black bag of tricks and Obama too.

And then, in a twinkling, I heard on the roof

The prancing and pawing of each little goof,

As I drew in my hand and was turning around,

Down the economy came with a bound,

He was dressed all in style, from his head to his toe,

And his clothes were all absent, nar a sash nor a bow,

A bundle of promises he had flung on his back,

And he looked like a peddler just opening his pack,

His eyes – how dark and deep, his ears wiggled how scary!

His cheeks were sunken, his nose all runny!

His droll little mouth was drawn up and flat

And the jut of his chin, sharp and taut, pointed this way and that,

The stump of a cig he held tight in his teeth

and the smoke it encircled his head like a wraith,

He had broad ears and a trim little body,

That rippled when he laughed, or so I am told but not by many

He was a thin and wry, a left loony absorbed old self,

And I laughed when I saw him, in spite of myself,

A glare from his face, a twist of his hand,

Soon gave me to know, I had everything to dread,

He spoke not a word, but went straight to his work

And filled all the promises, then turned like a jerk,

And laying his middle finger aside of his nose,

And giving a sneer, up the chimney he rose,

He sprang to the cabinet, to his team gave a shout,

And away they all flew, full of cheer and ill mirth

But I heard him exclaim, ere he drove out of sight,

It’s all mine now, to all the Conservatives, good night....

Saturday, December 13, 2008


It is human nature to assume that what happened yesterday will happen again today. The Sun rose yesterday, my spouse loved me yesterday, I had a job yesterday. Economists have made a living and science out of the belief that what happened yesterday, can be an indication of what will happen today and tomorrow. Statistical analysis is based on the concept. Trends tend til they don't.

If a car company sells exactly 100 cars every month for 10 years, statistics will tell you (as will human nature) that it will continue to see 100 cars a month into the future. Well trained and experienced economic analysts will delve deeper into the numbers and might tell you that the company can only produce 100 cars a month and that the demand for the vehicles is greater than 100 a month, suggesting a long and profitable (assuming it has been and is now) future. But if the demand ends? What part of the analysis takes that into consideration and gives everyone an idea of the real future? What if demand falls below 100 cars a month?

I read a story on California's budget woes. In it, it said that the shortfall was getting bigger because state revenues had come in significantly worse than expected. Expected, how?

AIG needed $20 billion, then $40 billion, then $85 billion and after $150 billion still might not survive. Why?

Lehman Brothers was liquid on Tuesday, bankrupt 6 days later. Why?

GM had enough money til mid 2009, now it needs money by the end of this month. Why?

These are all examples of following trend lines that fail. Many stock investors - chart types - closely watch a stock and how it behaves around trend lines. Many will note the change in a trend line, but then look for another trend line to follow. Are ALL analysts this blind? No. But most are, and they are in corporations and government (and of course teaching all the new economist in universities).

"Woe is me". Eeyore has a character flaw. Whatever can go wrong, will go wrong. Positive news just doesn't phase him much. Every event is a point on the downward trend. Those supporting the bailout of the automakers have the same character flaw. If GM declares bankruptcy, the end of the United States economy will occur. It doesn't matter that thousands of companies declared bankruptcy and SURVIVED for another day, week or decade. The trend line is down all the way to the bottom.

In all these cases, it should be noted that the trend lines changed because of events outside the analysis that established the trend lines. The Sun didn't come out. But, in many cases, looking back, we can see the break and if we are really careful, we can see why.

I believe the auto industry fall started the day car loans got extended to 30 years. Huh? You wonder what I am thinking. There are no 30 year car loans. Sure there are. When someone refinanced their home and used those extra funds to buy a car, cash, they were actually taking a 30 year loan out on the car. Everyone understands that most cars are not worth the loan the day they drive off the lot. That if they have a four or five year loan, that they will spend most of it, underwater. We accept that. But we also accept that at some point, the vehicle will be paid off and we can get a little for it. But a 30 year loan? Cars (generally) don't last 20 years, let alone 30 and therefore it will never be worth more than is owed. But, people don't see it that way. The actuality is buried in the mortgage. Others will, and have, loudly, that the legacy costs of all those retirees is what is killing GM, but it wasn't a problem when GM was profitable.

But, the issue is not the bailout or GM. It is the mindset that believes what happened yesterday will happen today - and they have the empirical evidence to prove it. Unfortunately for all concerned, reality can and often is different.

I also read today about how the decline of the US will give other countries the opportunity to take our place. China being a big candidate, but also countries with a lot of cash/funds to lend (read oil producers). I take issue with that point of view, not because I am partisan (I love my country) but because trends do not make reality. China pretends (sometimes better, sometimes worse) to be a capitalistic economy. It is not. It's ability to respond to events is limited. Oil producers will have considerably less funds if the world economy continues to fail (and they do not have a diverse economy to replace oil revenues).

I don't believe that the US can remain the source of reserve currency forever - that trend line is just like all the others - but regardless of what event occurs to change it, there has to be another currency available to take it's place - and right now, I can't see one that doesn't have the same, or worse problems than the dollar.

Where will our economy be in a year? The trend lines suggest like The War to End All Wars becoming WW1, the Great Depression will soon be known as the First Great Depression. It is possible because trends are trends, til they are not. What event or events could occur that will change the trend lines? I have two problems: I have a degree in Economics; I will only live 80 or so years. My experience and lifetime are both limited and I have no special insight into the future.

I can make some assumptions - you know, follow the trend lines - the economy is going to get a lot worse before it gets better. And better does not mean like it was before. The automakers, especially GM will never be the same. Could our financial system collapse (duh...already has) into oblivion, no, but what it will look like in the future?

Next time you hear ANYONE predict the future, make sure you know what trend lines they are using.

People have been talking to us and predicting our business (consumer bankruptcy) will be booming. It is not - growing, yes, but booming? Nope. First, people are just walking away. Second, they are hoping that Obama really WILL pay their mortgages.

You can be sure of one thing Obama said: change will happen. That is a trend line that has been unbroken from the beginning.

Friday, December 05, 2008


Every time a group of Moslems engage in a heinous act, we are told that the vast majority of Moslems are peace loving and not terrorists. Every time a group of Moslems slaughter innocents, we are told that American policies contributed to the environment that lead to the mindset of the murders.

I look at Moslem nations that treat women as property. I look at Moslem nations that do not honor or even consider individual freedoms and liberties.

I look at nations where large numbers of Moslems have remained separate from the society they live in; have asked for, or demanded, recognition of Sharia law even when it directly contradicts the law of the surrounding society.

Everywhere I look, Moslem communities are violent and self-segregated. Fathers and sons killing daughters and sisters. Mumbai was savage if you can believe the reports, and given the history of beheadings, acid throwing and hangings, it is EASY to believe.

Entire nations cheer the murders. Entire societies encourage the hate, the cruelty, the murder.

I am going to take a position my Christian friends espouse: hate Islam, not the Moslem.

Either 1.1 billion Moslems rise up and take their religion back from the murders, or I will support the marginalization - the isolation - of any 'infected' communities.