Watch these two videos and you get a clear picture of why the bailout proposal which is officially titled "HR3997 Emergency Economic Stabilization Act of 2008" failed to pass the house on September 29, 2008:
http://www.youtube.com/watch?v=mbD62gNi9WE
http://www.youtube.com/watch?v=S27yitK32ds
Tuesday, September 30, 2008
I'm not convinced!
The Fed and the Treasury insist that the current solution, that is to say, the bailout that failed, "is the only solution". Furthermore, both Bernake and Paulson have thrown $100s of Billions at this problem. How do we know that the current proposal will work? How do we know that the $700B will be enough? What happens if it isn't?
I am not convinced. Here is the summary of an alternative proposed by Karl Denninger on his website.
http://market-ticker.denninger.net/archives/593-CONGRESS-STOP-AND-THINK!.html
(Also see http://stopthehousingbailout.com/)
"The solution is simple, it is elegant, and it will work.
I am not convinced. Here is the summary of an alternative proposed by Karl Denninger on his website.
http://market-ticker.denninger.net/archives/593-CONGRESS-STOP-AND-THINK!.html
(Also see http://stopthehousingbailout.com/)
"The solution is simple, it is elegant, and it will work.
- Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Do it now.
- Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy.
- Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly.
Once 1-3 are put in place then send in the OTS and OCC examiners and look at every financial institution in the United States. All who are insolvent and unable to raise private capital immediately are forced through receivership where the debt is converted to equity and existing equity is wiped out. With the CDS monster caged the systemic risk is removed, the bondholders provide the cushion for recapitalization (as it should be) and the restructured firm emerges with no debt while the former bondholders are now the owners (of the equity) in the resulting firm.
With a clean balance sheet the restructured firms remain in business and open the next morning able to raise and attract capital. "
Monday, September 29, 2008
"No Banker Left Behind" Bailout Fails
Just saw the news that the house voted down the $700B bailout plan "HR3997 Emergency Economic Stabilization Act of 2008".
Obviously, the electorate overwhelmed the Wall Street special interest groups.
Now it will get interesting!
Maybe we need a crises in our energy infrastructure and we'll finally get the electorate off their collective butts and stop taking what their local politician says for granted. What's next? We could actually get an energy program in this country and a real, viable, forward looking energy plan for the 21st century!
Obviously, the electorate overwhelmed the Wall Street special interest groups.
Now it will get interesting!
Maybe we need a crises in our energy infrastructure and we'll finally get the electorate off their collective butts and stop taking what their local politician says for granted. What's next? We could actually get an energy program in this country and a real, viable, forward looking energy plan for the 21st century!
It Started with the Rating Agencies
As for the current financial meltdown, there is more than enough blame to go around. There is no doubt that Fannie and Freddie Mac contributed to the problem by a lowering of standards, and that the Investment Bankers on Wall Street created the mess. But there is one fact about this which I think is a "smoking gun".
This failure is marked with something that I understand has never happened before. For the first time in history, bonds rated AAA defaulted while they were rated AAA. So the ratings agencies, who supposedly filter this stuff so we, the banks and others know what we are buying, either turned a blind eye, fell asleep at the switch, or were grossly incompetent. Or maybe all three!
These agencies should be fined and the executives who ran them, driven to the poor house!
This failure is marked with something that I understand has never happened before. For the first time in history, bonds rated AAA defaulted while they were rated AAA. So the ratings agencies, who supposedly filter this stuff so we, the banks and others know what we are buying, either turned a blind eye, fell asleep at the switch, or were grossly incompetent. Or maybe all three!
These agencies should be fined and the executives who ran them, driven to the poor house!
A Note to My Congressmen and Senators on the $700B "Bailout"
I mailed this note to my Congressment and Senators; unfortunately for me, Sen. Obama has been on the campaign trail so I assume he is too busy to read my letter.
"I have listened to the experts and it is apparent there are many concerns about the $700 Billion financial rescue plan. This is my concern.
Any deal providing a Wall Street company with cash for debt where the debt is risky will always include significant warrant coverage (an equity-based interest in the company). That is because for a certain portion of these deals the debt will not be repaid. You have to get very good returns, from the warrants, on the ones which pay off to make up for the ones which do not. Secretary Paulson, a top Wall Street guy, knows this like the back of his hand.
If we, as taxpayers, do not get "warrant coverage" from the financial institutions for taking over poor quality debt of very uncertain value, the Bailout proposal is in my opinion a scam on the taxpayer.
This should not and needs not be a transfer of wealth from the American taxpayer to the stock and bondholders of troubled financial institutions, but something that creates a financial system "timeout" and has the potential to cost the taxpayer very little."
"I have listened to the experts and it is apparent there are many concerns about the $700 Billion financial rescue plan. This is my concern.
Any deal providing a Wall Street company with cash for debt where the debt is risky will always include significant warrant coverage (an equity-based interest in the company). That is because for a certain portion of these deals the debt will not be repaid. You have to get very good returns, from the warrants, on the ones which pay off to make up for the ones which do not. Secretary Paulson, a top Wall Street guy, knows this like the back of his hand.
If we, as taxpayers, do not get "warrant coverage" from the financial institutions for taking over poor quality debt of very uncertain value, the Bailout proposal is in my opinion a scam on the taxpayer.
This should not and needs not be a transfer of wealth from the American taxpayer to the stock and bondholders of troubled financial institutions, but something that creates a financial system "timeout" and has the potential to cost the taxpayer very little."
Monday, September 22, 2008
The End of the "Service Economy" Experiment
Today the Government pressed hard for a $700 Billion bailout of Wall Street, that’s about $2300 for each man, woman and child in the USA. The Democrats, not to be outdone, pressed for their own bailouts for “Mainstreet”.
Meanwhile, it was reported in the WSJ on Thursday, September 23 that "Thousands of community banks, worried about the mounting volume of bad construction and land loans, are clamoring for a piece of the government's proposed $700 billion bailout plan."
http://online.wsj.com/article/SB122212518500765089.html
I don't think “Mainstreet” wants or needs a bailout. The politicians intend the “Mainstreet” bail out for those wall street wannabes who thought they would make a fast buck buying real estate and flipping it and then got caught with a ratcheting mortgage when the bottom dropped out. Or it’s for those other mini-wall streeters who thought they were entitled to a home at someone else’s expense.
Frankly, I would think that the average American would be insulted to be put into the pile with the likes of these people. So here’s a message to those in Congress: don’t insult me by telling me you are fighting to get me a piece of the bailout pie.
However, this is all quibbling, as I believe what we are seeing here is not the end of Capitalism, per se, but the end of that great political experiment called “the service economy”. That economy, as you will recall, was to be based on financial services, etc. and, for a short time, people did move from manufacturing to that industry. Manufacturing declined from 25 to 13% of gross domestic product and financial services increased from 11 to 21%. While this was going on, the politicians “sympathized” with the people in the rust belt, like Ohio, while at the same time taking $millions in donations from the financial services industry.
Note: For a list of donors for the Obama or McCain campaigns, or your Congressmen and Senators, go to this website: http://www.opensecrets.org/
So when I listen to the “crocodile tears” about the demise of “Main Street” I also check the list of donors. How disingenuous our politicians are!
So where do we go from here? Well, first, don’t vote for McCain or Obama. If you think they are going to be able or willing to correct this problem, you are wrong. McCain is a product of the system that created it, and Obama is the hand picked Democratic candidate with Senator Joe Biden, Jr. as his running mate. Senator Biden is also a product of the system that created this mess.
Neither of the Democrats is a reformer and probably cannot be counted on to address the myriad problems facing the United States as a result of this long term problem. Senator McCain is running as a reformer, but is really a question mark and probably cannot be counted on to address the problems.
If you think I am incorrect in this, then ask yourself this question: Where is our National Energy Policy? If your response to that question is the thought “What energy policy?” then you have realized the truth. These people are clueless.
Kevin Phillips, in his book “Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism” sums up the problem we are facing this way:
"My summation is that American financial capitalism, at a pivotal period in the nation's history, cavalierly ventured a multiple gamble: first, financializing a hitherto more diversified U.S. economy; second, using massive quantities of debt and leverage to do so; third, following up a stock market bubble with an even larger housing and mortgage credit bubble; fourth, roughly quadrupling U.S. credit-market debt between 1987 and 2007, a scale of excess that historically unwinds; and fifth, consummating these events with a mixed fireworks of dishonesty, incompetence and quantitative negligence."
Read that again a few times and let it sink in. In particular, the end of the last sentence. If you think this is about the Bush administration, you are only partially correct. Mr. Phillips has few kind words for the Democrats. I suggest you buy the book and read it. And vote for someone else besides a Democrat or a Republican. If you can spare a few of your precious minutes, write a letter to your congressmen and Senators and give them an ear full.
So here we are, with a failed political experiment, no energy policy, deficits and future deficits so great as to boggle the imagination, and 78 million baby boomers standing there with their hands out expecting a social security check. Can you spell “bankrupt”?
Meanwhile, it was reported in the WSJ on Thursday, September 23 that "Thousands of community banks, worried about the mounting volume of bad construction and land loans, are clamoring for a piece of the government's proposed $700 billion bailout plan."
http://online.wsj.com/article/SB122212518500765089.html
I don't think “Mainstreet” wants or needs a bailout. The politicians intend the “Mainstreet” bail out for those wall street wannabes who thought they would make a fast buck buying real estate and flipping it and then got caught with a ratcheting mortgage when the bottom dropped out. Or it’s for those other mini-wall streeters who thought they were entitled to a home at someone else’s expense.
Frankly, I would think that the average American would be insulted to be put into the pile with the likes of these people. So here’s a message to those in Congress: don’t insult me by telling me you are fighting to get me a piece of the bailout pie.
However, this is all quibbling, as I believe what we are seeing here is not the end of Capitalism, per se, but the end of that great political experiment called “the service economy”. That economy, as you will recall, was to be based on financial services, etc. and, for a short time, people did move from manufacturing to that industry. Manufacturing declined from 25 to 13% of gross domestic product and financial services increased from 11 to 21%. While this was going on, the politicians “sympathized” with the people in the rust belt, like Ohio, while at the same time taking $millions in donations from the financial services industry.
Note: For a list of donors for the Obama or McCain campaigns, or your Congressmen and Senators, go to this website: http://www.opensecrets.org/
So when I listen to the “crocodile tears” about the demise of “Main Street” I also check the list of donors. How disingenuous our politicians are!
So where do we go from here? Well, first, don’t vote for McCain or Obama. If you think they are going to be able or willing to correct this problem, you are wrong. McCain is a product of the system that created it, and Obama is the hand picked Democratic candidate with Senator Joe Biden, Jr. as his running mate. Senator Biden is also a product of the system that created this mess.
Neither of the Democrats is a reformer and probably cannot be counted on to address the myriad problems facing the United States as a result of this long term problem. Senator McCain is running as a reformer, but is really a question mark and probably cannot be counted on to address the problems.
If you think I am incorrect in this, then ask yourself this question: Where is our National Energy Policy? If your response to that question is the thought “What energy policy?” then you have realized the truth. These people are clueless.
Kevin Phillips, in his book “Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism” sums up the problem we are facing this way:
"My summation is that American financial capitalism, at a pivotal period in the nation's history, cavalierly ventured a multiple gamble: first, financializing a hitherto more diversified U.S. economy; second, using massive quantities of debt and leverage to do so; third, following up a stock market bubble with an even larger housing and mortgage credit bubble; fourth, roughly quadrupling U.S. credit-market debt between 1987 and 2007, a scale of excess that historically unwinds; and fifth, consummating these events with a mixed fireworks of dishonesty, incompetence and quantitative negligence."
Read that again a few times and let it sink in. In particular, the end of the last sentence. If you think this is about the Bush administration, you are only partially correct. Mr. Phillips has few kind words for the Democrats. I suggest you buy the book and read it. And vote for someone else besides a Democrat or a Republican. If you can spare a few of your precious minutes, write a letter to your congressmen and Senators and give them an ear full.
So here we are, with a failed political experiment, no energy policy, deficits and future deficits so great as to boggle the imagination, and 78 million baby boomers standing there with their hands out expecting a social security check. Can you spell “bankrupt”?
The Latest Political Blather
The presidential election is now less than 60 days away and I am inundated with political emails, much of which I put in the folder labelled "political foolishness". I get it, these people are really serious. Well meaning friends, associates and relatives send me stuff with the intention of “converting” or “saving” me or pointing out "the error of my ways", I suppose.
One of the triggers for this is the fact that I don't always or immediately fall in line with their respective political view. In one memorable dinner event, I was told that a specific politician was "my guy" because I didn't agree with the political statements made by that particular acquaintance. That's the way it is today. It's either all or nothing, you are either with me or against me.
Of course, it all simply falls into the way business is conducted by the two dominant political parties, the Democrats and the Republicans. The game as I have always viewed it, is to drive the voter toward one of the two viable voting booths. Somewhat like a cattle drive. It is the goal of one side to get me to move in their direction. That is accomplished by driving me away from the other direction or the other party.
I am inundated with emails which are forwarded to me, with the sole purpose of showing me the error of my ways, how screwed up “so and so” is, etc. As a consequence, I should get really angry and vote for “the other candidate”. It is my perspective that the people who send me all of this stuff are well meaning but are also being used by one political party or the other. Of course, some of this is from PACs and the political parties and we know what their agenda is.
At present, I am getting substantially more from the Democrats and their minions, than from the Republicans. This is in part my own fault. Some years ago, I subscribed to an organization formed to move the country beyond the impeachment process of President Clinton and “heal the country”. Supposedly a non-partisan organization. The organization took the catchy name of “MoveOn.org”. They have obviously sold or given my name to other political organizations and for that reason, I get more stuff than some of my friends, who are registered Democrats!
Let me say before proceeding, that I do not agree with MoveOn.org and have never sent them a nickel. But I think part of being an informed citizen is to know what the two major political parties are up to and are sending to the “party faithful”. It is a kind of “know thy enemy” philosophy and I consider the party faithful to be the enemy for the simple reason that it is “party first” with these people. Blind, unquestioning allegiance to the party, or to the “ideal”.
Much of the email I receive is party generated and some is very, very political and is not verified or checked. Some of the emails are received from multiple sources after a time delay, somewhat like a stone tossed into a quiet pond. The ripples make it to the shore and then bounce back. It is unfortunate that the "forward" button on most email software is so easy to use.
Here is a sampling of the stuff I have received in the past few weeks, with some of the headlines of the text. Most of the stuff from the parties or political action committees includes a request for money. I have received duplicate emails from multiple sources. These duplicates are, for the most part, not shown here:
The people you know - Vote for Change: Register to vote now <http://www.democrats.org/page/m/6692260df599b154/0umq1t/VEsH/> Think of all the people you know -- your friends, family, colleagues, and neighbors. What if every one of them voted on Election Day? - Jon Carson, BarackObama.com [democraticparty@democrats.org]
THE TABOO SUBJECT. [The Story the Media are Afraid to Print--or Even Ask Questions About.] - McCain and the POW Cover-Up.
Palin Protest in Alaska (largest in Alaska history) - Paliin GET THE PUCK PUCK OUT OF DC......
Solving our financial crisis - The economy hit a new low this week, and in every part of the country, people like you are feeling it.
The recent financial disasters -- from the collapse of Fannie Mae and Freddie Mac to the historic drop in the stock market -- are not just a string of bad luck. They are the result of years of bad decisions made in favor of big corporate special interests instead of America's working families. - Barack Obama [democraticparty@democrats.org]
Obama: Main Street before Wall Street - Turn on the TV and you'll be told that we're on the brink of imminent crisis and the only solution is for Congress to turn over vast power to the Bush administration and trust they'll use it wisely. Sound familiar? - Adam Green, MoveOn.org Political Action [moveon-help@list.moveon.org]
Midnight deadline - This week, we saw the stark differences between Barack Obama and John McCain on the economy. With Wall Street in crisis and families struggling......- David Plouffe, BarackObama.com [democraticparty@democrats.org]
New: Obama shirt - Peter Koechley, MoveOn.org Political Action
QUESTION: Does Screwing the Public Go in the Family--?- A Report on George W. Bush's Brother, Neil Bush--(Source: Wikipedia)
Party for Obama in Glen Ellyn on Sunday! – Looking for a way to make sure the McCain-Palin sleaze-o-rama doesn't derail Barack Obama's historic candidacy?
Lies to Nowhere - The McCain campaign has finally admitted that this election is about change. - David Plouffe. - BarackObama.com [democraticparty@democrats.org]
Obama + cake in Hanover Park- MoveOn for Obama Party - Adam Ruben, MoveOn.org Political Action [moveon-help@list.moveon.org]
Why You and I Are in This Mess. (Read whole article, Please.) - Wall Street's Just Deserts By Harold Meyerson Thursday, September 18, 2008 - The Washington POST
Who is the Champion of the American Worker? - Review (abridged), The New York Review of Books; Sept. 25, 2008 - Time for a New Deal By Jeff Madrick
Obama's going to need some help - Elections matter. We have a lot of work to do to get our country back on track. - Al Gore, MoveOn.org Political Action [moveon-help@list.moveon.org]
The Republican platform - Yesterday, John McCain's campaign manager told the Washington Post, "This election is not about issues." - Howard Dean [democraticparty@democrats.org]
Video: How we're going to win - Want a look inside our strategy to win the battleground states? - I recorded a video on my laptop yesterday to brief you on the plan -- including details that haven't been shared publicly before. - David Plouffe, BarackObama.com [democraticparty@democrats.org]
New Insights, Secrets of the White House and Implications for Your Next Vote for President. - BOOK REVIEW - "The War Within" by Bob Woodward
McCain Revealed - The Ugly New McCain By Richard Cohen -Washington POSTWednesday, September 17, 2008
WOMAN PLAYWRIGHT COMMENTS ON SARAH PALIN - [Eve Ensler, the American playwright, wrote the following about Sarah Palin.] - Drill, Drill, Drill
Karl Rove: McCain has gone 'too far' - John McCain is running the sleaziest and most negative presidential campaign we've ever seen -- his campaign is setting new lows with their lies and desperate personal attacks. - Howard Dean [democraticparty@democrats.org]
Karl Rove: McCain has gone "too far" - For weeks, John McCain has run one of the most dishonest campaigns in American history. Even Karl Rove had to admit McCain has gone too far.1 - Now it's time to strike back—to refocus voters on what we'll get if we elect McCain president. So today, we're launching a new ad that uses the facts to hit John McCain hard—reminding voters of his numerous ties to big oil companies and their lobbyists. - Noah T. Winer, MoveOn.org Political Action [moveon-help@list.moveon.org]
Here She Goes Again, Ms Misinformation - Palin Links Iraq to Sept. 11 In Talk to Troops in Alaska By Anne E. Kornblut - Washington Post Staff Writer -Friday, September 12, 2008
Help us plan for next week? - We can skip the clown. And the pony. But MoveOn is turning 10 years old next week, and there's no way we're skipping the party! - Adam Ruben, MoveOn.org Political Action [moveon-help@list.moveon.org]
Forward this email - You'd be surprised how many people you know aren't registered to vote. - Barack Obama [democraticparty@democrats.org]
Disgusting - Here's the situation: John McCain and Sarah Palin are repeatedly deceiving, manipulating, and flat-out lying. And polls are showing that some of those lies are convincing voters. - Nita Chaudhary, MoveOn.org Political Action [moveon-help@list.moveon.org]
Fed up? - Angry at John McCain and Sarah Palin? Frustrated with the media? Fed up with the absurd direction this campaign has taken? Don't sit and stew. Use that energy to put Obama over the top! - Adam Ruben, MoveOn.org Political Action [moveon-help@list.moveon.org]
"Crusader" Governor Cheated Alaska in Personal Family Expenses--Newest Scandal About Sarah Palin - Palin Billed State for Nights Spent at Home Taxpayers Also Funded Family's Travel By James V. Grimaldi and Karl Vick Washington Post Staff WritersTuesday, September 9, 2008
Your Obama shirt - Last week, more than 90,000 MoveOn members chipped in more than a million dollars to launch our youth-registration program—and each got a cool Obama shirt in the process. - Peter Koechley, MoveOn.org Political Action [moveon-help@list.moveon.org]
Your Opinion--Did G.O.P. Stifle Freedom of the Press? (See News Report Late Last Night below.) - MSNBC shake-up: Olbermann and Matthews no longer anchoring
Michael Calderone, YAHOO News Sunday, Sep 7, 2008 Midnight
Sarah Palin's List of Forbidden Books - Here is a list of books that "Little Miss Northern Lights" tried to have banned from the Wasilla Public Library, according to the officialminutes of the Library Board. When she was unsuccessful at having these books banned, she tried to have the librarian fired.
The Temper Tantrum Kid with Finger on Nuclear Trigger? - McCain's history of hot temper raises concerns. By David Lightman and Matt Stearns, McClatchy Newspapers Sunday Sep 7, 2008
The attacks - Why would the Republicans spend a whole night of their convention attacking ordinary people? - Barack Obama [democraticparty@democrats.org]
Sarah Palin – Did you watch Sarah Palin's speech last night? The speech told us a lot about her. It told us that she can distort the facts and deliver mean-spirited zingers with the best of them. It told us that if Rush Limbaugh or Ann Coulter ever need a stand-in, she'd be a great pick. - Nita Chaudhary, MoveOn.org Political Action [moveon-help@list.moveon.org]
Help Gulf Coast residents and first responders - Today, the thoughts and prayers of all Americans are with those in the path of Hurricane Gustav -- and many of you are asking what you can do to help. - Barack Obama [democraticparty@democrats.org]
How McCain, Palin Lied at Convention. (Charges vs. Facts )
Will You Let the Republicans Put God in the White House? - Palin: Iraq war 'a task that is from God.' By GENE JOHNSON Associated Press Writer
Deadline: Tomorrow - Over the last week this race has been transformed. - Make a donation of $15 or more before midnight tomorrow, and you'll receive a first edition Obama-Biden car magnet. - Democratic Party [democraticparty@democrats.org]
Neighbor of Sarah Palin Speaks Her Mind about the VP Candidate. - A Wasilla resident writes about Sarah Palin (which has the ring of truth...) Posted on MSNBC on September 3, 2008 by Pat from Huntington, NY
John McCain has Fought Sex-Education, Contraception for 20 Years. - McCain fought money on teen pregnancy programs. By SHARON THEIMER, Associated Press Writer Tue Sep 2, 3:28 AM ET
Women and McCain--The True Story. Now that McCain has chosen a woman for his VP, you may think he favors women and their rights. -Wrong.- Here is McCain's history with women (all of it documented in news stories)—
What you just saw - wasn't planning on sending you something tonight. But if you saw what I saw from the Republican convention, you know that it demands a response.I saw John McCain's attack squad of negative, cynical politicians. They lied about Barack Obama and Joe Biden, and they attacked you for being a part of this campaign. - David Plouffe [democraticparty@democrats.org]
Video: Barack's speech - On Thursday night, August 28th, Barack Obama accepted the Democratic nomination for President of the United States. - Democratic Party [democraticparty@democrats.org]
Little-Known Connection of McCain with Neoconservatives, Lobbyists for Wars in Iraq, Georgia, and Elsewhere...
What I saw last night - The first time I ever heard Barack speak was at a community meeting on the South Side of Chicago. - More than two million supporters already own a piece of this extraordinary campaign. Will you join them by making your first donation right now? - Michelle Obama [democraticparty@democrats.org]
Tragic Flaw in the McCain's? (John, You Didn't Teach Him Economics, Did You?) -
McCain's Son Sat on Troubled Bank's Board - Silver State Bancorp Is Facing Big Losses, Regulatory Scrutiny - By DAMIAN PALETTA, DAVID ENRICH and ELIZABETH HOLMES - August 15, 2008; WALL STREET JOURNAL
Front row - When Barack takes the stage tonight, he'll look out at delegates from every corner of the country and tens of thousands of ordinary people who are here to be part of this historic moment. - On this final day before Barack formally accepts the Democratic nomination, please celebrate the moment and lay the foundation for our victory in November by making a donation of $5 or more now. - David Plouffe, BarackObama.com [democraticparty@democrats.org]
50,000 Obama Shirts? - Since yesterday, 40,000 people have donated more than $550,000 to help register half a million young voters in the swing states that will decide the election. And they've each snagged a hip Obama T-shirt in the process. - Peter Koechley, MoveOn.org Political Action [moveon-help@list.moveon.org]
Your Obama shirt - This week, we're spinning up a massive program to register half a million young voters in swing states. This is the year of the young voter, and we all need to do everything we can to make sure every last young person votes on Election Day. - Peter Koechley, MoveOn.org Political Action [moveon-help@list.moveon.org]
Help Obama in Warrenville on Monday - "The change we need doesn't come from Washington. Change comes to Washington. Change happens because the American people demand it—because they rise up and insist on new ideas and new leadership, a new politics for a new time. America, this is one of those moments."—Barack Obama in last night's acceptance speech - Adam Ruben, MoveOn.org Political Action [moveon-help@list.moveon.org]
One of the triggers for this is the fact that I don't always or immediately fall in line with their respective political view. In one memorable dinner event, I was told that a specific politician was "my guy" because I didn't agree with the political statements made by that particular acquaintance. That's the way it is today. It's either all or nothing, you are either with me or against me.
Of course, it all simply falls into the way business is conducted by the two dominant political parties, the Democrats and the Republicans. The game as I have always viewed it, is to drive the voter toward one of the two viable voting booths. Somewhat like a cattle drive. It is the goal of one side to get me to move in their direction. That is accomplished by driving me away from the other direction or the other party.
I am inundated with emails which are forwarded to me, with the sole purpose of showing me the error of my ways, how screwed up “so and so” is, etc. As a consequence, I should get really angry and vote for “the other candidate”. It is my perspective that the people who send me all of this stuff are well meaning but are also being used by one political party or the other. Of course, some of this is from PACs and the political parties and we know what their agenda is.
At present, I am getting substantially more from the Democrats and their minions, than from the Republicans. This is in part my own fault. Some years ago, I subscribed to an organization formed to move the country beyond the impeachment process of President Clinton and “heal the country”. Supposedly a non-partisan organization. The organization took the catchy name of “MoveOn.org”. They have obviously sold or given my name to other political organizations and for that reason, I get more stuff than some of my friends, who are registered Democrats!
Let me say before proceeding, that I do not agree with MoveOn.org and have never sent them a nickel. But I think part of being an informed citizen is to know what the two major political parties are up to and are sending to the “party faithful”. It is a kind of “know thy enemy” philosophy and I consider the party faithful to be the enemy for the simple reason that it is “party first” with these people. Blind, unquestioning allegiance to the party, or to the “ideal”.
Much of the email I receive is party generated and some is very, very political and is not verified or checked. Some of the emails are received from multiple sources after a time delay, somewhat like a stone tossed into a quiet pond. The ripples make it to the shore and then bounce back. It is unfortunate that the "forward" button on most email software is so easy to use.
Here is a sampling of the stuff I have received in the past few weeks, with some of the headlines of the text. Most of the stuff from the parties or political action committees includes a request for money. I have received duplicate emails from multiple sources. These duplicates are, for the most part, not shown here:
The people you know - Vote for Change: Register to vote now <http://www.democrats.org/page/m/6692260df599b154/0umq1t/VEsH/> Think of all the people you know -- your friends, family, colleagues, and neighbors. What if every one of them voted on Election Day? - Jon Carson, BarackObama.com [democraticparty@democrats.org]
THE TABOO SUBJECT. [The Story the Media are Afraid to Print--or Even Ask Questions About.] - McCain and the POW Cover-Up.
Palin Protest in Alaska (largest in Alaska history) - Paliin GET THE PUCK PUCK OUT OF DC......
Solving our financial crisis - The economy hit a new low this week, and in every part of the country, people like you are feeling it.
The recent financial disasters -- from the collapse of Fannie Mae and Freddie Mac to the historic drop in the stock market -- are not just a string of bad luck. They are the result of years of bad decisions made in favor of big corporate special interests instead of America's working families. - Barack Obama [democraticparty@democrats.org]
Obama: Main Street before Wall Street - Turn on the TV and you'll be told that we're on the brink of imminent crisis and the only solution is for Congress to turn over vast power to the Bush administration and trust they'll use it wisely. Sound familiar? - Adam Green, MoveOn.org Political Action [moveon-help@list.moveon.org]
Midnight deadline - This week, we saw the stark differences between Barack Obama and John McCain on the economy. With Wall Street in crisis and families struggling......- David Plouffe, BarackObama.com [democraticparty@democrats.org]
New: Obama shirt - Peter Koechley, MoveOn.org Political Action
QUESTION: Does Screwing the Public Go in the Family--?- A Report on George W. Bush's Brother, Neil Bush--(Source: Wikipedia)
Party for Obama in Glen Ellyn on Sunday! – Looking for a way to make sure the McCain-Palin sleaze-o-rama doesn't derail Barack Obama's historic candidacy?
Lies to Nowhere - The McCain campaign has finally admitted that this election is about change. - David Plouffe. - BarackObama.com [democraticparty@democrats.org]
Obama + cake in Hanover Park- MoveOn for Obama Party - Adam Ruben, MoveOn.org Political Action [moveon-help@list.moveon.org]
Why You and I Are in This Mess. (Read whole article, Please.) - Wall Street's Just Deserts By Harold Meyerson Thursday, September 18, 2008 - The Washington POST
Who is the Champion of the American Worker? - Review (abridged), The New York Review of Books; Sept. 25, 2008 - Time for a New Deal By Jeff Madrick
Obama's going to need some help - Elections matter. We have a lot of work to do to get our country back on track. - Al Gore, MoveOn.org Political Action [moveon-help@list.moveon.org]
The Republican platform - Yesterday, John McCain's campaign manager told the Washington Post, "This election is not about issues." - Howard Dean [democraticparty@democrats.org]
Video: How we're going to win - Want a look inside our strategy to win the battleground states? - I recorded a video on my laptop yesterday to brief you on the plan -- including details that haven't been shared publicly before. - David Plouffe, BarackObama.com [democraticparty@democrats.org]
New Insights, Secrets of the White House and Implications for Your Next Vote for President. - BOOK REVIEW - "The War Within" by Bob Woodward
McCain Revealed - The Ugly New McCain By Richard Cohen -Washington POSTWednesday, September 17, 2008
WOMAN PLAYWRIGHT COMMENTS ON SARAH PALIN - [Eve Ensler, the American playwright, wrote the following about Sarah Palin.] - Drill, Drill, Drill
Karl Rove: McCain has gone 'too far' - John McCain is running the sleaziest and most negative presidential campaign we've ever seen -- his campaign is setting new lows with their lies and desperate personal attacks. - Howard Dean [democraticparty@democrats.org]
Karl Rove: McCain has gone "too far" - For weeks, John McCain has run one of the most dishonest campaigns in American history. Even Karl Rove had to admit McCain has gone too far.1 - Now it's time to strike back—to refocus voters on what we'll get if we elect McCain president. So today, we're launching a new ad that uses the facts to hit John McCain hard—reminding voters of his numerous ties to big oil companies and their lobbyists. - Noah T. Winer, MoveOn.org Political Action [moveon-help@list.moveon.org]
Here She Goes Again, Ms Misinformation - Palin Links Iraq to Sept. 11 In Talk to Troops in Alaska By Anne E. Kornblut - Washington Post Staff Writer -Friday, September 12, 2008
Help us plan for next week? - We can skip the clown. And the pony. But MoveOn is turning 10 years old next week, and there's no way we're skipping the party! - Adam Ruben, MoveOn.org Political Action [moveon-help@list.moveon.org]
Forward this email - You'd be surprised how many people you know aren't registered to vote. - Barack Obama [democraticparty@democrats.org]
Disgusting - Here's the situation: John McCain and Sarah Palin are repeatedly deceiving, manipulating, and flat-out lying. And polls are showing that some of those lies are convincing voters. - Nita Chaudhary, MoveOn.org Political Action [moveon-help@list.moveon.org]
Fed up? - Angry at John McCain and Sarah Palin? Frustrated with the media? Fed up with the absurd direction this campaign has taken? Don't sit and stew. Use that energy to put Obama over the top! - Adam Ruben, MoveOn.org Political Action [moveon-help@list.moveon.org]
"Crusader" Governor Cheated Alaska in Personal Family Expenses--Newest Scandal About Sarah Palin - Palin Billed State for Nights Spent at Home Taxpayers Also Funded Family's Travel By James V. Grimaldi and Karl Vick Washington Post Staff WritersTuesday, September 9, 2008
Your Obama shirt - Last week, more than 90,000 MoveOn members chipped in more than a million dollars to launch our youth-registration program—and each got a cool Obama shirt in the process. - Peter Koechley, MoveOn.org Political Action [moveon-help@list.moveon.org]
Your Opinion--Did G.O.P. Stifle Freedom of the Press? (See News Report Late Last Night below.) - MSNBC shake-up: Olbermann and Matthews no longer anchoring
Michael Calderone, YAHOO News Sunday, Sep 7, 2008 Midnight
Sarah Palin's List of Forbidden Books - Here is a list of books that "Little Miss Northern Lights" tried to have banned from the Wasilla Public Library, according to the officialminutes of the Library Board. When she was unsuccessful at having these books banned, she tried to have the librarian fired.
The Temper Tantrum Kid with Finger on Nuclear Trigger? - McCain's history of hot temper raises concerns. By David Lightman and Matt Stearns, McClatchy Newspapers Sunday Sep 7, 2008
The attacks - Why would the Republicans spend a whole night of their convention attacking ordinary people? - Barack Obama [democraticparty@democrats.org]
Sarah Palin – Did you watch Sarah Palin's speech last night? The speech told us a lot about her. It told us that she can distort the facts and deliver mean-spirited zingers with the best of them. It told us that if Rush Limbaugh or Ann Coulter ever need a stand-in, she'd be a great pick. - Nita Chaudhary, MoveOn.org Political Action [moveon-help@list.moveon.org]
Help Gulf Coast residents and first responders - Today, the thoughts and prayers of all Americans are with those in the path of Hurricane Gustav -- and many of you are asking what you can do to help. - Barack Obama [democraticparty@democrats.org]
How McCain, Palin Lied at Convention. (Charges vs. Facts )
Will You Let the Republicans Put God in the White House? - Palin: Iraq war 'a task that is from God.' By GENE JOHNSON Associated Press Writer
Deadline: Tomorrow - Over the last week this race has been transformed. - Make a donation of $15 or more before midnight tomorrow, and you'll receive a first edition Obama-Biden car magnet. - Democratic Party [democraticparty@democrats.org]
Neighbor of Sarah Palin Speaks Her Mind about the VP Candidate. - A Wasilla resident writes about Sarah Palin (which has the ring of truth...) Posted on MSNBC on September 3, 2008 by Pat from Huntington, NY
John McCain has Fought Sex-Education, Contraception for 20 Years. - McCain fought money on teen pregnancy programs. By SHARON THEIMER, Associated Press Writer Tue Sep 2, 3:28 AM ET
Women and McCain--The True Story. Now that McCain has chosen a woman for his VP, you may think he favors women and their rights. -Wrong.- Here is McCain's history with women (all of it documented in news stories)—
What you just saw - wasn't planning on sending you something tonight. But if you saw what I saw from the Republican convention, you know that it demands a response.I saw John McCain's attack squad of negative, cynical politicians. They lied about Barack Obama and Joe Biden, and they attacked you for being a part of this campaign. - David Plouffe [democraticparty@democrats.org]
Video: Barack's speech - On Thursday night, August 28th, Barack Obama accepted the Democratic nomination for President of the United States. - Democratic Party [democraticparty@democrats.org]
Little-Known Connection of McCain with Neoconservatives, Lobbyists for Wars in Iraq, Georgia, and Elsewhere...
What I saw last night - The first time I ever heard Barack speak was at a community meeting on the South Side of Chicago. - More than two million supporters already own a piece of this extraordinary campaign. Will you join them by making your first donation right now? - Michelle Obama [democraticparty@democrats.org]
Tragic Flaw in the McCain's? (John, You Didn't Teach Him Economics, Did You?) -
McCain's Son Sat on Troubled Bank's Board - Silver State Bancorp Is Facing Big Losses, Regulatory Scrutiny - By DAMIAN PALETTA, DAVID ENRICH and ELIZABETH HOLMES - August 15, 2008; WALL STREET JOURNAL
Front row - When Barack takes the stage tonight, he'll look out at delegates from every corner of the country and tens of thousands of ordinary people who are here to be part of this historic moment. - On this final day before Barack formally accepts the Democratic nomination, please celebrate the moment and lay the foundation for our victory in November by making a donation of $5 or more now. - David Plouffe, BarackObama.com [democraticparty@democrats.org]
50,000 Obama Shirts? - Since yesterday, 40,000 people have donated more than $550,000 to help register half a million young voters in the swing states that will decide the election. And they've each snagged a hip Obama T-shirt in the process. - Peter Koechley, MoveOn.org Political Action [moveon-help@list.moveon.org]
Your Obama shirt - This week, we're spinning up a massive program to register half a million young voters in swing states. This is the year of the young voter, and we all need to do everything we can to make sure every last young person votes on Election Day. - Peter Koechley, MoveOn.org Political Action [moveon-help@list.moveon.org]
Help Obama in Warrenville on Monday - "The change we need doesn't come from Washington. Change comes to Washington. Change happens because the American people demand it—because they rise up and insist on new ideas and new leadership, a new politics for a new time. America, this is one of those moments."—Barack Obama in last night's acceptance speech - Adam Ruben, MoveOn.org Political Action [moveon-help@list.moveon.org]
Friday, September 19, 2008
More on the Lehman Brothers Company Failure
Lehman Brothers who described themselves this way on their website, was allowed to fail, as in, no bailout by the Federal Reserve:
“Our Firm
Lehman Brothers, an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. We maintain leadership positions in equity and fixed income sales, trading and research, investment banking and investment management.”
It has been reported in the WSJ and elsewhere that Treasury Secretary Paulson did not come to the rescue of Lehman because, other “Wall Street executives” were negotiating to purchase the firm, thereby saving it from possible collapse. But there was a price. The Federal Reserve was to give these firms the same deal extended to JPMorgan Chase. That is, they, too, were to get the same benefits of the Bear Stearns deal. In that “deal”, the Federal Reserve backed the offer of JPMorgan Chase (another financial firm) to acquire Bear Stearns at the fire sale price of about $2 per share. The Federal Reserve agreed to fund $30 billion of Bear Stearns assets that would be difficult for JPMorgan Chase to sell quickly. This money puts taxpayers on the hook for the bailout.
So these “innovative” capitalists are willing to spend some of their ill-gotten gains from designing, promoting and passing along the methods for sub-prime notes, but only if we, the taxpayer protected them from “risk”! Of course, if the deals work well, these same companies stand to make $billions as they are purchasing companies for pennies on the dollar. For example, Bear Stearns at a purchase price of $2 per share, was down about 93% from its value a week before and in June 2007 was valued at about $145 per share. As far as I know, Bear Stearns had assets around the world, and so JPMorgan Chase got a really sweet deal. It was reported in the Associated Press that the "total initial costs" were about $3.44 billion, with costs of combining the two companies were expected to reach $6 billion over the next year. As I said, a really good deal. No wonder the rest of the capitalist "pigs" were lining up at the trough! I suppose I should not be surprised that these capitalists on Wall Street would attempt to put the government against the wall and make a few quick bucks at the price of someone else. That is the very nature of the blood that runs in their veins.
Today it was reported that Freddie Mac issued a securities filing yesterday in which it stated that Lehman had missed a repayment of short-term loans of $1.2 billion “plus interest”. Management control of Freddie Mac was taken over by the Federal Housing Finance Agency. Of course, with the government backing of Freddie Mac, we the taxpayer are on the hook for these loans. If you are not quite certain who exactly "Freddie Mac" is, then read the "business summary" on this website. You will then get the irony of the missed repayment and the guarantees to JPMorgan Chase:
http://finance.yahoo.com/q/pr?s=FRE
Were there not impassioned arguments, just a few short months ago, by these same brokerage houses, that "hedge funds" should be unregulated. In fact, hasn't it been the position of these same banks and brokerages that regulation is "bad"? Wasn't it their argument that these entities should be left unfettered so they could go about the business of "free trade" or something to that effect? Well, chumlies, you are "free" so go to it and save yourselves! Of course, now we'll hear a lot of dribble about how the ban on "short selling" is bad (that ban was put in place this morning by the SEC). Yep, another restriction of the broker's freedom to make lots of money at someone else's expense!
It seems "we the taxpayer" are expected to bail out New York City’s financial district to keep that town rolling but never get in the way of their opportunity to make a profit! That’s supposedly a good thing, because Wall Street and New York City, as the saying goes “are too big to fail”. Then there are the people who got loans with interest rates below market and now are supposed to be bailed out, also. I guess they are "too small" to fail! As for the rest of us, in the middle class, we can fail because we simply don't fit the politicians profile of those who matter in this country. So the rest of us can just pony up and send money in those directions.
Tell it to the people of the city of New Orleans and let’s see what they have to say about this turn of events. Believe me, I wouldn’t wish misfortune upon anyone, but I find this to be unbelievable! Wall Street lining up to get even more of our money!
“Our Firm
Lehman Brothers, an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. We maintain leadership positions in equity and fixed income sales, trading and research, investment banking and investment management.”
It has been reported in the WSJ and elsewhere that Treasury Secretary Paulson did not come to the rescue of Lehman because, other “Wall Street executives” were negotiating to purchase the firm, thereby saving it from possible collapse. But there was a price. The Federal Reserve was to give these firms the same deal extended to JPMorgan Chase. That is, they, too, were to get the same benefits of the Bear Stearns deal. In that “deal”, the Federal Reserve backed the offer of JPMorgan Chase (another financial firm) to acquire Bear Stearns at the fire sale price of about $2 per share. The Federal Reserve agreed to fund $30 billion of Bear Stearns assets that would be difficult for JPMorgan Chase to sell quickly. This money puts taxpayers on the hook for the bailout.
So these “innovative” capitalists are willing to spend some of their ill-gotten gains from designing, promoting and passing along the methods for sub-prime notes, but only if we, the taxpayer protected them from “risk”! Of course, if the deals work well, these same companies stand to make $billions as they are purchasing companies for pennies on the dollar. For example, Bear Stearns at a purchase price of $2 per share, was down about 93% from its value a week before and in June 2007 was valued at about $145 per share. As far as I know, Bear Stearns had assets around the world, and so JPMorgan Chase got a really sweet deal. It was reported in the Associated Press that the "total initial costs" were about $3.44 billion, with costs of combining the two companies were expected to reach $6 billion over the next year. As I said, a really good deal. No wonder the rest of the capitalist "pigs" were lining up at the trough! I suppose I should not be surprised that these capitalists on Wall Street would attempt to put the government against the wall and make a few quick bucks at the price of someone else. That is the very nature of the blood that runs in their veins.
Today it was reported that Freddie Mac issued a securities filing yesterday in which it stated that Lehman had missed a repayment of short-term loans of $1.2 billion “plus interest”. Management control of Freddie Mac was taken over by the Federal Housing Finance Agency. Of course, with the government backing of Freddie Mac, we the taxpayer are on the hook for these loans. If you are not quite certain who exactly "Freddie Mac" is, then read the "business summary" on this website. You will then get the irony of the missed repayment and the guarantees to JPMorgan Chase:
http://finance.yahoo.com/q/pr?s=FRE
Were there not impassioned arguments, just a few short months ago, by these same brokerage houses, that "hedge funds" should be unregulated. In fact, hasn't it been the position of these same banks and brokerages that regulation is "bad"? Wasn't it their argument that these entities should be left unfettered so they could go about the business of "free trade" or something to that effect? Well, chumlies, you are "free" so go to it and save yourselves! Of course, now we'll hear a lot of dribble about how the ban on "short selling" is bad (that ban was put in place this morning by the SEC). Yep, another restriction of the broker's freedom to make lots of money at someone else's expense!
It seems "we the taxpayer" are expected to bail out New York City’s financial district to keep that town rolling but never get in the way of their opportunity to make a profit! That’s supposedly a good thing, because Wall Street and New York City, as the saying goes “are too big to fail”. Then there are the people who got loans with interest rates below market and now are supposed to be bailed out, also. I guess they are "too small" to fail! As for the rest of us, in the middle class, we can fail because we simply don't fit the politicians profile of those who matter in this country. So the rest of us can just pony up and send money in those directions.
Tell it to the people of the city of New Orleans and let’s see what they have to say about this turn of events. Believe me, I wouldn’t wish misfortune upon anyone, but I find this to be unbelievable! Wall Street lining up to get even more of our money!
Free Market? Where are the Capitalists Now??
What amazing times!
My spouse was watching the financial news last night and I admonished her: “You don’t want to watch this!” I was concerned that her fragile stomach wouldn’t be able to handle what is going on “out there” in Wall Street.
Ever the cynic, I listened to efforts of Morgan Stanley’s Chief Executive John Mack, who is lobbying for political rule changes and intervention. Of course, he would want that. Short sellers and the stock market are pummeling the values of financial stocks and that not only reduces the value of the stock that Mr. Mack is holding in his company, it also makes the possibility of purchasing his company at “fire sale” prices a very real possibility.
So now darn near every one is clamoring for “market intervention” from the federal government. Politicians, trade unions still opposed to NAFTA and other “free market” tools, and even staunch capitalists such as Mr. Mack. What an ironic situation.
I heard an economist quoted who had referred to this country as the “USSR of A” and Fed Chairman Bernake as “Comrade”. The new name of this country is apparently “The United Socialist States Republic of America” .
I find all of this to be beyond amazing.
If the US government and taxpayer is going to bail out these staunchly capitalistic firms and their shareholders, then I think that a takeover such as occurred with AIG is warranted. These people have profited tremendously from the financial turmoil that has overrun the world. They designed the financial instruments which permitted banks, mortgage companies and so on to sell “subprime” loans to people who knowingly could not pay the loans back. They profited mightily from all of this and frankly, if the US taxpayer has to step in to bail them out, then these “titans” of the financial world should lose their shirts and their jobs. That’s the way it is in “capitalism”. These companies took the risk and for many years got the rewards, or so the argument goes. So now we are to simply “roll over” and rescue them and alter the rules? I think not!
We have absolutely no idea of the financial burden our government is taking on to bail out these financial entities. For years, certain people and even some of the political candidates have been arguing that “deficits are bad”. So here we are, printing money and taking on the burden of assuming the debts of private and semi-private companies in government “bailouts”. How much are we taking on? Probably hundreds of billions of dollars.
I’m sure the “Bushwhackers” will be emailing me next week about how the deficit has risen. But no matter, we can bail out New York City’s financial district to keep that town rolling! That’s a good thing!
My spouse was watching the financial news last night and I admonished her: “You don’t want to watch this!” I was concerned that her fragile stomach wouldn’t be able to handle what is going on “out there” in Wall Street.
Ever the cynic, I listened to efforts of Morgan Stanley’s Chief Executive John Mack, who is lobbying for political rule changes and intervention. Of course, he would want that. Short sellers and the stock market are pummeling the values of financial stocks and that not only reduces the value of the stock that Mr. Mack is holding in his company, it also makes the possibility of purchasing his company at “fire sale” prices a very real possibility.
So now darn near every one is clamoring for “market intervention” from the federal government. Politicians, trade unions still opposed to NAFTA and other “free market” tools, and even staunch capitalists such as Mr. Mack. What an ironic situation.
I heard an economist quoted who had referred to this country as the “USSR of A” and Fed Chairman Bernake as “Comrade”. The new name of this country is apparently “The United Socialist States Republic of America” .
I find all of this to be beyond amazing.
If the US government and taxpayer is going to bail out these staunchly capitalistic firms and their shareholders, then I think that a takeover such as occurred with AIG is warranted. These people have profited tremendously from the financial turmoil that has overrun the world. They designed the financial instruments which permitted banks, mortgage companies and so on to sell “subprime” loans to people who knowingly could not pay the loans back. They profited mightily from all of this and frankly, if the US taxpayer has to step in to bail them out, then these “titans” of the financial world should lose their shirts and their jobs. That’s the way it is in “capitalism”. These companies took the risk and for many years got the rewards, or so the argument goes. So now we are to simply “roll over” and rescue them and alter the rules? I think not!
We have absolutely no idea of the financial burden our government is taking on to bail out these financial entities. For years, certain people and even some of the political candidates have been arguing that “deficits are bad”. So here we are, printing money and taking on the burden of assuming the debts of private and semi-private companies in government “bailouts”. How much are we taking on? Probably hundreds of billions of dollars.
I’m sure the “Bushwhackers” will be emailing me next week about how the deficit has risen. But no matter, we can bail out New York City’s financial district to keep that town rolling! That’s a good thing!
Wednesday, September 17, 2008
Ouch! The Market is in Turmoil (Again? Yet?)
Well, AIG just about went under and was bailed by the Fed. But the price was high. 11% interest on an $85 billion loan and government control with ownership (I think that's the word) of 80% of the stock.
What we are experiencing, the experts say, is "deleveraging" or the unwinding of debt. It is definitely going to take a while for this process to run its course. It's going to take a few things to happen to reach the end of this process. The banks, brokerages and other financial institutions will have to admit their mistakes and sell or "write down" the value of the distressed assets that were purchased with borrowed money. Debt will have to be reduced by paying it off and that may require the sale of other assets. These financial institutions will also have to build up their reserves, or capital cushions, which have eroded by the losses on the distressed assets.
Come to think of it, these are exactly the same things that the American consumer needs to do; face up to the fact that that McMansion that was purchased with borrowed money isn't going to appreciate at 10% or more per year and is, in fact worth less than the value of the loans or mortgages outstanding. Then start paying down credit card, equity loans and other debt. Finally, stop spending so much and begin a savings program. I know, this will be very, very difficult. You won't be able to purchase that new car this year, or a new iphone, or that new model flat screen 120hz LCD TV. or a blue-ray disc burner, or a new digital camera, HDTV movie camera, that trip to the Mayan Riviera for Christmas or the latest Media PC . Gee, life sucks!
I was driving home tonight and listening to NPR and later to PBS. One of the commentators asked one of the experts if he had looked at his 401(K) lately. I decided I won't! I have the same dread I did only a few months ago, when I would open it up and discovered that it had jumped by a few percentage points. I could not see the "why for " these large increases. I wasn't aware of some fundamental shift that would cause profits and the value of these companies to simply go up and up. So I had a dread as my perspective was that once the people who were bidding these stocks up got cold feet, these same stocks would plummet. Well, they have more than cold feet. They've got the flu!
So today they said that people were rushing for gold, treasuries, etc. As a consequence gold went up by $90 and treasuries were yielding 1%.Home building at 1991 levels! said the headlines. Well, it seems that everyone who could afford a house had bought one and many who couldn't did the same, anyway. So I guess there are no more qualified buyers.
Wharton in the article "Will the Levee Break? An Ocean of Bad Debt Rises despite Fed Rescues" gives a pretty good summary of the current situation. Professor Joseph Gyourko made the statement regarding residential homes "The excess supply will wear off by the end of 2009, but not before.... The end of this debacle keeps getting put off and put off."
Here are a couple of interesting articles at Wharton:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2050http://knowledge.wharton.upenn.edu/article.cfm?articleid=2052
Daniel Gross had a September 8 Newsweek article entitled "Get Ready for the 'Pain of Paying'" and I think it summed the current personal credit situation pretty well. See:
http://www.newsweek.com/id/156342/output/print
[Note added September 18: Goldman Sachs Group, Inc. was quoted in the WSJ: "Residential mortgage losses alone could hit $636 billion by 2012...triggering widespread retrenchment in bank lending. That could shave 1.8 percentage points a year off economic growth in 2008 and 2009 -- the equivalent of $250 billion in lost goods and services each year."]
What we are experiencing, the experts say, is "deleveraging" or the unwinding of debt. It is definitely going to take a while for this process to run its course. It's going to take a few things to happen to reach the end of this process. The banks, brokerages and other financial institutions will have to admit their mistakes and sell or "write down" the value of the distressed assets that were purchased with borrowed money. Debt will have to be reduced by paying it off and that may require the sale of other assets. These financial institutions will also have to build up their reserves, or capital cushions, which have eroded by the losses on the distressed assets.
Come to think of it, these are exactly the same things that the American consumer needs to do; face up to the fact that that McMansion that was purchased with borrowed money isn't going to appreciate at 10% or more per year and is, in fact worth less than the value of the loans or mortgages outstanding. Then start paying down credit card, equity loans and other debt. Finally, stop spending so much and begin a savings program. I know, this will be very, very difficult. You won't be able to purchase that new car this year, or a new iphone, or that new model flat screen 120hz LCD TV. or a blue-ray disc burner, or a new digital camera, HDTV movie camera, that trip to the Mayan Riviera for Christmas or the latest Media PC . Gee, life sucks!
I was driving home tonight and listening to NPR and later to PBS. One of the commentators asked one of the experts if he had looked at his 401(K) lately. I decided I won't! I have the same dread I did only a few months ago, when I would open it up and discovered that it had jumped by a few percentage points. I could not see the "why for " these large increases. I wasn't aware of some fundamental shift that would cause profits and the value of these companies to simply go up and up. So I had a dread as my perspective was that once the people who were bidding these stocks up got cold feet, these same stocks would plummet. Well, they have more than cold feet. They've got the flu!
So today they said that people were rushing for gold, treasuries, etc. As a consequence gold went up by $90 and treasuries were yielding 1%.Home building at 1991 levels! said the headlines. Well, it seems that everyone who could afford a house had bought one and many who couldn't did the same, anyway. So I guess there are no more qualified buyers.
Wharton in the article "Will the Levee Break? An Ocean of Bad Debt Rises despite Fed Rescues" gives a pretty good summary of the current situation. Professor Joseph Gyourko made the statement regarding residential homes "The excess supply will wear off by the end of 2009, but not before.... The end of this debacle keeps getting put off and put off."
Here are a couple of interesting articles at Wharton:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2050http://knowledge.wharton.upenn.edu/article.cfm?articleid=2052
Daniel Gross had a September 8 Newsweek article entitled "Get Ready for the 'Pain of Paying'" and I think it summed the current personal credit situation pretty well. See:
http://www.newsweek.com/id/156342/output/print
[Note added September 18: Goldman Sachs Group, Inc. was quoted in the WSJ: "Residential mortgage losses alone could hit $636 billion by 2012...triggering widespread retrenchment in bank lending. That could shave 1.8 percentage points a year off economic growth in 2008 and 2009 -- the equivalent of $250 billion in lost goods and services each year."]
The Forbes 400
Forbes Magazine issued it's list of the 400 richest people. For the second year in a row, the price of admission to this list is $1.3 billion. "In this, the 27th edition of the list, the assembled net worth of America's wealthiest rose by $30 billion--only 2%--to $1.57 trillion."
http://www.forbes.com/lists/2008/54/400list08_The-400-Richest-Americans_Rank.html
I guess it was a tough year for the ultra rich. About 64 of these people are listed with a residence in New York City, which is pretty convenient for the displaced people in the financial services industry. I'm referring to a book recently published called "The Big Squeeze: Tough Times for the American Worker". The author is Steven Greenhouse, Publisher: Knopf, 365 pp., $25.95.
In the book, Greenhouse cites Northwest Airlines who gave a booklet to workers who had been laid off. The name of the booklet was "101 Ways to Save Money." One piece of advice was not to be shy about taking something you like from the trash.
The Forbes list should be helpful to the displaced, as the very rich should have the best trash around.
Note: Hat's off to Bill for forwarding the book review. Note that I can't comment on it's accuracy.
http://www.forbes.com/lists/2008/54/400list08_The-400-Richest-Americans_Rank.html
I guess it was a tough year for the ultra rich. About 64 of these people are listed with a residence in New York City, which is pretty convenient for the displaced people in the financial services industry. I'm referring to a book recently published called "The Big Squeeze: Tough Times for the American Worker". The author is Steven Greenhouse, Publisher: Knopf, 365 pp., $25.95.
In the book, Greenhouse cites Northwest Airlines who gave a booklet to workers who had been laid off. The name of the booklet was "101 Ways to Save Money." One piece of advice was not to be shy about taking something you like from the trash.
The Forbes list should be helpful to the displaced, as the very rich should have the best trash around.
Note: Hat's off to Bill for forwarding the book review. Note that I can't comment on it's accuracy.
The Perilous Price of Oil
George Soros, who happens to be number 28 on the Forbes 400 lists, gave testimony before the U.S. Senate Commerce Committee Oversight Hearing on June 3, 2008. Agree or disagree with Soros, he does have his insights.
Soros has written an article adapted from his testimony.
I read a part of his testimony shortly after it was given and I think Soros has some valid points on the markets, commodities and oil. Take a few minutes and read the article:
http://www.nybooks.com/articles/21792
Soros has written an article adapted from his testimony.
I read a part of his testimony shortly after it was given and I think Soros has some valid points on the markets, commodities and oil. Take a few minutes and read the article:
http://www.nybooks.com/articles/21792
Tuesday, September 16, 2008
GM Unveils the Chevy "Volt"
Today, GM unveiled the production version of the Chevrolet "Volt". This is an electric car, which includes a small gasoline engine to recharge the battery and extend mileage to beyond the 40 it would otherwise be limited to. The car is intended for sale sometime late 2010.
There should be more changes coming, but they will not be immediate. Consider the possibility of a very light weight automobile, possibly of carbon fiber laminate. Never rusts, never ages. Consider that it includes a "drop in" power plant. It could be gasoline or hybrid or electric or compressed natural gas or hydrogen.
A vehicle of this type could last for decades. Instead of taking it to the junker after 8 years, a new power plant could be installed. Perhaps we wouldn't own such a vehicle, perhaps we would "lease it" as GM did with the EV1, the controversial electric car that they produced from 1996 to 2003.
I'd love to get my hands on such a vehicle. The question is, who will be the one to produce it? Such a vehicle would require complete retooling of the automative factory. For that reason, I don't think it will happen from mainstream automotive manufacturers who have too much invested in their existing manufacturing technology. But I could be wrong.
I am of the opinion that someday such a vehicle will be produced, and in large numbers.
Reference article on the "EV1":
http://en.wikipedia.org/wiki/General_Motors_EV1
There should be more changes coming, but they will not be immediate. Consider the possibility of a very light weight automobile, possibly of carbon fiber laminate. Never rusts, never ages. Consider that it includes a "drop in" power plant. It could be gasoline or hybrid or electric or compressed natural gas or hydrogen.
A vehicle of this type could last for decades. Instead of taking it to the junker after 8 years, a new power plant could be installed. Perhaps we wouldn't own such a vehicle, perhaps we would "lease it" as GM did with the EV1, the controversial electric car that they produced from 1996 to 2003.
I'd love to get my hands on such a vehicle. The question is, who will be the one to produce it? Such a vehicle would require complete retooling of the automative factory. For that reason, I don't think it will happen from mainstream automotive manufacturers who have too much invested in their existing manufacturing technology. But I could be wrong.
I am of the opinion that someday such a vehicle will be produced, and in large numbers.
Reference article on the "EV1":
http://en.wikipedia.org/wiki/General_Motors_EV1
It's Getting Interesting
Well, if you were bored, recent events on the political trail, Wall Street, the political candidates and a few hurricanes and related floods should have gotten your attention.
More on "Change"
Well, we wanted "change" and it seems we are getting it. Just four years ago, Senator Kerry was out there stumping his candidacy and telling us that it "was the worst economy since the great depression". I guess he was a little early, or prescient. But by golly, he was correct. Or maybe if you make sufficient predictions, eventually they will all come true. Eventually, the world will end and if you flip a coin you will eventually get "heads".
NY Mayor Bloomberg was talking to the media and calming the waters. He said that "New York is as well prepared as ever to handle the financial emergency" or words to that effect. He has cause to worry. For every job lost on Wall Street about 2 or 3 dependent jobs are also lost. And as we know from the screaming headlines of the past few years, these were not "ordinary" jobs, as in "median income". These are high rollers, who spend a lot of money on toys, dining out and so on. The State Comptroller's office in New York has been quoted as stating that approximately 5% of the jobs in New York City's jobs are in financial services. However, those jobs account for about 25% of the city's wages. That was $60 billion in 2006.
I haven't heard a word from New York's Senator Clinton on all of this. But it could simply be that the media is so inundated with bad news that they simply won't give her any air time. The Senator has had a field day bashing the "oil companies" because of their excess profits. I have been waiting for her to bash Wall Street for it's inordinate greed, profiteering, etc. Since 2007 Americans have lost $2 trillion dollars as a result of the "sub prime" and "prime" meltdown. That makes a few billion in profits for the oil companies look like chump change.
http://letmethinkaboutthis.blogspot.com/2008/09/some-musings-on-economy.html
Besides, it isn't like I am getting nothing from the refiners. To the contrary, I fill up my gas tank whenever necessary and we as in "we Americans" send about $500 to $700 billion each year to legitimate and despotic governments all over the world, because we can't or won't stop our insatiable desire for oil.
Oh, and let's not forget, this is all a choice. We choose not to drill, we choose to drive SUV's and we choose to drive trillions of miles each year.
Wall Street, the banks and the politicians are in collusion to steal our money. Now we have low interest rates so as to prop up the banks on Wall Street (again) which means retirees are hard pressed to get a decent return on their money in CDs or bank accounts. To get a return, it seems, we are supposed to invest in unsafe, unregulated financial instruments. And who decided that? Thank you all, including Senator Clinton for your silence and lack of action. We know whose pocket you are in!
NY Mayor Bloomberg was talking to the media and calming the waters. He said that "New York is as well prepared as ever to handle the financial emergency" or words to that effect. He has cause to worry. For every job lost on Wall Street about 2 or 3 dependent jobs are also lost. And as we know from the screaming headlines of the past few years, these were not "ordinary" jobs, as in "median income". These are high rollers, who spend a lot of money on toys, dining out and so on. The State Comptroller's office in New York has been quoted as stating that approximately 5% of the jobs in New York City's jobs are in financial services. However, those jobs account for about 25% of the city's wages. That was $60 billion in 2006.
I haven't heard a word from New York's Senator Clinton on all of this. But it could simply be that the media is so inundated with bad news that they simply won't give her any air time. The Senator has had a field day bashing the "oil companies" because of their excess profits. I have been waiting for her to bash Wall Street for it's inordinate greed, profiteering, etc. Since 2007 Americans have lost $2 trillion dollars as a result of the "sub prime" and "prime" meltdown. That makes a few billion in profits for the oil companies look like chump change.
http://letmethinkaboutthis.blogspot.com/2008/09/some-musings-on-economy.html
Besides, it isn't like I am getting nothing from the refiners. To the contrary, I fill up my gas tank whenever necessary and we as in "we Americans" send about $500 to $700 billion each year to legitimate and despotic governments all over the world, because we can't or won't stop our insatiable desire for oil.
Oh, and let's not forget, this is all a choice. We choose not to drill, we choose to drive SUV's and we choose to drive trillions of miles each year.
Wall Street, the banks and the politicians are in collusion to steal our money. Now we have low interest rates so as to prop up the banks on Wall Street (again) which means retirees are hard pressed to get a decent return on their money in CDs or bank accounts. To get a return, it seems, we are supposed to invest in unsafe, unregulated financial instruments. And who decided that? Thank you all, including Senator Clinton for your silence and lack of action. We know whose pocket you are in!
The End of the "Greed is Good" Mantra
Well, if you believed that "Greed is Good" as in that famous speech in the movie "Wall Street" the current events may give you some pause.
So we have now definitely entered the "panic" phase of the current crisis. It's interesting as I was talking to a relative on Saturday or Sunday and oblivious to the current events on wall street, as the big topic was bailing from the 7 to 12 inches of rain we were receiving. I mentioned the banking panic of 1907 and soothed her with the statement "we have had banking crisis before, and about every 8 years or so we go through a recession" and so why should I think this time will be any different? We will have to "hunker down" but thank God we do have this resilient economy.
I do think we are testing the limits and we'll see how this unfolds. Personally, I have my eye on the longer term, 10 years out.
I do have some personal experience in these matters. I work in support of "heavy industry" and I am fully and painfully aware of the consequences of our mad dash to the "service economy". I have been at the effect of this economy since 1978 as we lurch from boom to bust, following the "greed and fear" cycle. At present, my business has taken a terrible hit, which leads me to extend a "thank you" to all those greedy fools who bought a house and couldn't afford one. But that is the way it is.
The Motley Fool has this nice article entitled "The Biggest Financial Story of the Past 50 Years" which tidily sums it up:
http://www.fool.com/investing/general/2008/09/15/the-biggest-financial-story-of-the-past-50-years.aspx?source=ihptclhpa0000001
So we have now definitely entered the "panic" phase of the current crisis. It's interesting as I was talking to a relative on Saturday or Sunday and oblivious to the current events on wall street, as the big topic was bailing from the 7 to 12 inches of rain we were receiving. I mentioned the banking panic of 1907 and soothed her with the statement "we have had banking crisis before, and about every 8 years or so we go through a recession" and so why should I think this time will be any different? We will have to "hunker down" but thank God we do have this resilient economy.
I do think we are testing the limits and we'll see how this unfolds. Personally, I have my eye on the longer term, 10 years out.
I do have some personal experience in these matters. I work in support of "heavy industry" and I am fully and painfully aware of the consequences of our mad dash to the "service economy". I have been at the effect of this economy since 1978 as we lurch from boom to bust, following the "greed and fear" cycle. At present, my business has taken a terrible hit, which leads me to extend a "thank you" to all those greedy fools who bought a house and couldn't afford one. But that is the way it is.
The Motley Fool has this nice article entitled "The Biggest Financial Story of the Past 50 Years" which tidily sums it up:
http://www.fool.com/investing/general/2008/09/15/the-biggest-financial-story-of-the-past-50-years.aspx?source=ihptclhpa0000001
Saturday, September 13, 2008
Some Musings on the Economy - Household Assets
While perusing the data published by the Fed, I came across a reference, and from it I constructed this table. It indicates that US national net worth has dropped by over $2 trillion in the two quarters ended last March. Here are the assets and liabilites:
I also made the following to show the changes in assets and liabilities. US households have assets of about $70 trillion and liabilites of about $14.5 trillion. As per the chart, the change in assets began to moderate about January 2003:
The actual data is from the following website, if you are interested. One problem with the data is it includes households and non-profits. I didn't make any attempt to seperate the two for these tables. So there is some inaccuracy.
I Can?
When I was a very young child, I had an experience which I remember to this day. While in kindergarten, my teacher once confronted all of us with the statement "you are Americans and you CAN".
Friday, September 5, 2008
Cost of Gasoline for my Subaru WRX
Another area of concern is the rising cost of gasoline, the cost of which has increased dramatically over the past few years.
I have kept detailed records for my Subaru. It is a 2005 Impreza WRX. Since February 2005 this is the cost per gallon for fuel for this vehicle:
I have kept detailed records for my Subaru. It is a 2005 Impreza WRX. Since February 2005 this is the cost per gallon for fuel for this vehicle:
Mileage varies per year. Here are the mileage stats:
2005 = 16,546
2006 = 15,532
2007 = 13,629
2008 = 12,413
You will note a mileage decrease each year. This is in part due to business decisions as I use my car for that purpose. However, changing my driving habits has also contributed. This was prompted by the increases in fuel prices as well as the desire to extend the life of the vehicle. The more I drive it, the faster I reach wear points and this increases the annual maintenance costs. I follow all manufacturer's recommendations at the designated mileage points.
Total fuel costs each year have been as follows:
2005 = $1,897.70
2006 = $1,783.12
2007 = $1,841.40
2008 = $1,790.42
2005 = 16,546
2006 = 15,532
2007 = 13,629
2008 = 12,413
You will note a mileage decrease each year. This is in part due to business decisions as I use my car for that purpose. However, changing my driving habits has also contributed. This was prompted by the increases in fuel prices as well as the desire to extend the life of the vehicle. The more I drive it, the faster I reach wear points and this increases the annual maintenance costs. I follow all manufacturer's recommendations at the designated mileage points.
Total fuel costs each year have been as follows:
2005 = $1,897.70
2006 = $1,783.12
2007 = $1,841.40
2008 = $1,790.42
A few general comments about the vehicle. This is the best handling vehicle I have ever owned. Here in the Midwest we get rain, sleet, ice and snow as well as dry pavement. Driving under all conditions has been exceptional. Combine the handling and the power and it is a lot of fun to drive. My spouse loves it!
I do not regret the decision to purchase this vehicle.
[This blog updated March 10, 2009]
I do not regret the decision to purchase this vehicle.
[This blog updated March 10, 2009]
Thursday, September 4, 2008
Cost of our Utilities over a period of 5 years
Returning to the immediate question, which is "how are we coping with the price increases". Here are the numbers for the actual out of pocket costs for utilities at our household:
2004 = $2,255.74, plus internet access = $2,821.19
2005 = $3,004.51
2006 = $3,270.98
2007 = $2,977.51
2008 = $2,060.22 for 8 months, probably $3,090.33 for the year.
Some notes about the above numbers. They include our household's definition of utilities, which include natural gas, electricity, water, sewer, telephone, basic cable TV and basic internet access via cable. 2004 did not include the cost of internet. So this should be adjusted to add the difference, which was $566.16 in 2005, to make a valid comparison with 2005. We do have central air conditioning and we use it. We did upgrade our hot water heater to a more efficient unit in 2006. We do annual preventative maintenance on our HVAC so it is in good condition and I change the filters quarterly. We also use a set-back thermometer. I've made no attempt to account for differences due to weather from year to year.
So what does this indicate? Here are the changes per year, expressed as a percentage, with 2004 as the base 100%. Years with utility costs higher than 2004 have a number greater than 100%. Years with utility costs less than 2004 have a number less than 100%:
2004 = 100.0%
2005 = 106.5%
2006 = 115.9%
2007 = 105.6%
2008 = 109.6%
Costs, while increasing, are not as great as I assumed. 2008 is on a trajectory to be about 10% higher than costs in 2004. That might seem like a lot, but consider inflation, which is historically expected to be in the range of 3.5 to 4.5% per year. Here is what my costs would be if my utility prices increased at the lower annual rate of inflation of 3.5%:
2004 = 100.0%
2005 = 103.5%
2006 = 107.12%
2007 = 110.87%
2008 = 114.75%
This compares fairly well to the actual costs over the past 5 years. Actual out of pocket "utilities" have cost my household $15,164.52 over the period 2004 through projected December 2008. Using the percentage increases based on a low inflation rate of 3.5% I would have spent $15,128.54 over that same period.
My conclusion? Surprise. Based upon what I have heard in the media, I expected my actual out of pocket costs to be higher than what they actually were. Over a period of 5 years, there had been continuous, but moderate increases. There are some spikes. 2006 was 15% higher then 2004 and about 9% higher than 2005. So it would seem that my budgeting needs to be tailored to accommodate large jumps from time to time. Other than that, I feel pretty good about the outcome. One caveat: to get a better handle on true "energy" costs, electricity and natural gas costs should be seperated from the other costs.
Looking toward the future, I expect that the next 5 years will have steeper increases than the previous 5 years. But who knows?
2004 = $2,255.74, plus internet access = $2,821.19
2005 = $3,004.51
2006 = $3,270.98
2007 = $2,977.51
2008 = $2,060.22 for 8 months, probably $3,090.33 for the year.
Some notes about the above numbers. They include our household's definition of utilities, which include natural gas, electricity, water, sewer, telephone, basic cable TV and basic internet access via cable. 2004 did not include the cost of internet. So this should be adjusted to add the difference, which was $566.16 in 2005, to make a valid comparison with 2005. We do have central air conditioning and we use it. We did upgrade our hot water heater to a more efficient unit in 2006. We do annual preventative maintenance on our HVAC so it is in good condition and I change the filters quarterly. We also use a set-back thermometer. I've made no attempt to account for differences due to weather from year to year.
So what does this indicate? Here are the changes per year, expressed as a percentage, with 2004 as the base 100%. Years with utility costs higher than 2004 have a number greater than 100%. Years with utility costs less than 2004 have a number less than 100%:
2004 = 100.0%
2005 = 106.5%
2006 = 115.9%
2007 = 105.6%
2008 = 109.6%
Costs, while increasing, are not as great as I assumed. 2008 is on a trajectory to be about 10% higher than costs in 2004. That might seem like a lot, but consider inflation, which is historically expected to be in the range of 3.5 to 4.5% per year. Here is what my costs would be if my utility prices increased at the lower annual rate of inflation of 3.5%:
2004 = 100.0%
2005 = 103.5%
2006 = 107.12%
2007 = 110.87%
2008 = 114.75%
This compares fairly well to the actual costs over the past 5 years. Actual out of pocket "utilities" have cost my household $15,164.52 over the period 2004 through projected December 2008. Using the percentage increases based on a low inflation rate of 3.5% I would have spent $15,128.54 over that same period.
My conclusion? Surprise. Based upon what I have heard in the media, I expected my actual out of pocket costs to be higher than what they actually were. Over a period of 5 years, there had been continuous, but moderate increases. There are some spikes. 2006 was 15% higher then 2004 and about 9% higher than 2005. So it would seem that my budgeting needs to be tailored to accommodate large jumps from time to time. Other than that, I feel pretty good about the outcome. One caveat: to get a better handle on true "energy" costs, electricity and natural gas costs should be seperated from the other costs.
Looking toward the future, I expect that the next 5 years will have steeper increases than the previous 5 years. But who knows?
Basic Utilities Only
I did an analysis on just the energy components of the utilities; that is, natural gas and electric. The year 2004 was unusually low. Possibly due to milder weather. So I have included the year 2003 to determine if 2004 was an anomoly, and I believe it was. Here are natural gas and electric costs only:
2003 = $1,056.13
2004 = $ 884.92
2005 = $1,120.17
2006 = $1,186.58
2007 = $1,109.69
2008 = $ 714.53 for eight months, probably $1,071.80 for the year.
Options for Decreasing Utility Costs
If at some point I decide that the costs are "intolerable" I have a few options. Internet access in our area has become more competitive and I could switch from my current provider to another. This would decrease the cost for one or two years. Something worth considering. Another possibility is changing our phone service. We use AT&T with a robust package which yields unlimited calling within the US. We could downgrade to a local service and an internet telephony service, or a local service and an upgraded cell phone service. Either approach would lower our annual costs. So we have some options and we can use them to control our costs. As for the future, who knows? Of course, cable TV and internet access are ultimately "discretionary" expenses and we could limit or eliminate them altogether.
I have tracked all of the gasoline consumed in one of my cars. I'll post that in the next installment.
Wednesday, September 3, 2008
Coping with the Onslaught of Price Increases – Part II
I assume the limits of my spending will be reached when I have spent all of our free cash flow (all of our income) and I can no longer tap our credit cards, etc. However, we can voluntarily pull back before we reach that cliff. If we don’t and we continue to spend, then we face the possibility of another financial meltdown.
Of course, as we approach that cliff, any unanticipated price increase or unexpected expense, will nudge us closer to the financial precipice or over it. I guess that is why the financial experts recommend a personal cash emergency fund. Assuming I had such a fund, I could dip into it, should unexpected things come up.
That leads me to the definition of “unexpected’ which is similar to a discussion about “accidents”. In our culture, we use very broad brush strokes with the word “accident”. I’m driving 30 in a 20mph zone and I have to swerve to avoid a child, a dog in the road or another driver. If damage is the result, we call this event an “accident” although I was driving 50% faster than the posted speed limit. Similarly, if I am living my life on the financial edge, and additional expenses rear their ugly head, be it a chipped tooth, broken automobile or whatever, we call this an “unexpected” expense. This flies in the face of the notion that human beings frequently experience illness, and automobiles, being machines, have wear parts and do on occasion break down.
The definitions appear to be subjective. An "unexpected" expense was just so, because I never expected this would happen. Is is truly "unexpected" or was it simply poor planning on my part? I need to be honest with myself and my spouse. This also applies to “discretionary expenses”. What are they? I have seen a broad definition as an expense beyond necessities. Unfortunately, one man’s necessities are another woman’s requirements (just trying to be fair to the sexes here).
For example, one could argue the merits of cable TV. If having a television is considered a necessity, then I suppose that includes “basic” cable. However, many people would probably argue that HBO or Cinemax, ESPN1 or ESPN2, Sci-Fi and similar “premium channels” are a necessity.
I disagree. I view necessities as those things that are necessary for survival. Anything after that is discretionary, and is negotiable. Looking good, or even maintaining a standard of living is not a necessity. Over the years, I’ve had this conversation with many people. My view seems to be in the minority. Once, my youngest son needed a new pair of gym shoes. What followed was such a conversation. I agreed to get him a pair of good quality shoes. He vigorously insisted on a pair of Nike Air Jordan’s. Ultimately, I agreed to the purchase but with a stipulation. I’d provide the $70 which was the equivalent price of the pair I was willing to purchase and he would provide the cash difference. In the money he received for his allowance, performing his chores, etc. I always insisted that a percentage be saved. I suggested he take the difference from his “nest egg” to fund this absolutely necessary purchase. I gave him the money we agreed upon and interestingly, he never did purchase the Air Jordan’s. He purchased a different pair, and he may actually have been able to pocket some of the cash by purchasing something for even less. Had he manipulated me or had he decided that the Jordan’s were not a necessity? I don’t know his motivation but I know the result.
So it is with many "necessities". We find we can live without some things and some things we cannot. My spouse needed a new purse. A quality, made in the USA leather purse she decided was a necessity. A Louis Vuitton was not.
And so it goes. I decide I need a new car. Why? Because the one I have has 60,000 miles, or because I am tired of it? Because the dealer offered me a good deal on a new one? Recently, I took my Subaru in to the dealer for scheduled maintenance. He pointed out that I was approaching the time when I would need new brakes and quoted me $550 to do the job. I declined but authorized only the immediately necessary work. I decided to do some comparative shopping for the brakes. Upon completion of the absolutely necessary work, I returned and picked up the car. There was a conspicuous tag on the rear view mirror offering me a deal. “This could be the last maintenance you need to do on this car” the sign said. It offered a guarantee of $15,000 for a trade-in on a new one! Looked tempting, but I did a few quick mental calculations and realized that I would be taking on about $10,000 in debt. I have learned to do some comparisons to a mental “want” list that I have. It keeps me from making rash financial decisions. In this case, I quickly calculated what I else I could buy with that $10,000. I could retire debt, or purchase a flat screen TV and eight years of $1,000 vacations. I could purchase new living room furniture and (3) or so $1,000 vacations. The list went on and on,. Then I thought about why I didn’t have that flat screen TV. It was because I had said to myself that “I couldn’t afford it”. So how on earth could I afford a new car? The obvious answer is, I can't. Or I can, but I would be compromising my integrity.
To Be Continued......
Of course, as we approach that cliff, any unanticipated price increase or unexpected expense, will nudge us closer to the financial precipice or over it. I guess that is why the financial experts recommend a personal cash emergency fund. Assuming I had such a fund, I could dip into it, should unexpected things come up.
That leads me to the definition of “unexpected’ which is similar to a discussion about “accidents”. In our culture, we use very broad brush strokes with the word “accident”. I’m driving 30 in a 20mph zone and I have to swerve to avoid a child, a dog in the road or another driver. If damage is the result, we call this event an “accident” although I was driving 50% faster than the posted speed limit. Similarly, if I am living my life on the financial edge, and additional expenses rear their ugly head, be it a chipped tooth, broken automobile or whatever, we call this an “unexpected” expense. This flies in the face of the notion that human beings frequently experience illness, and automobiles, being machines, have wear parts and do on occasion break down.
The definitions appear to be subjective. An "unexpected" expense was just so, because I never expected this would happen. Is is truly "unexpected" or was it simply poor planning on my part? I need to be honest with myself and my spouse. This also applies to “discretionary expenses”. What are they? I have seen a broad definition as an expense beyond necessities. Unfortunately, one man’s necessities are another woman’s requirements (just trying to be fair to the sexes here).
For example, one could argue the merits of cable TV. If having a television is considered a necessity, then I suppose that includes “basic” cable. However, many people would probably argue that HBO or Cinemax, ESPN1 or ESPN2, Sci-Fi and similar “premium channels” are a necessity.
I disagree. I view necessities as those things that are necessary for survival. Anything after that is discretionary, and is negotiable. Looking good, or even maintaining a standard of living is not a necessity. Over the years, I’ve had this conversation with many people. My view seems to be in the minority. Once, my youngest son needed a new pair of gym shoes. What followed was such a conversation. I agreed to get him a pair of good quality shoes. He vigorously insisted on a pair of Nike Air Jordan’s. Ultimately, I agreed to the purchase but with a stipulation. I’d provide the $70 which was the equivalent price of the pair I was willing to purchase and he would provide the cash difference. In the money he received for his allowance, performing his chores, etc. I always insisted that a percentage be saved. I suggested he take the difference from his “nest egg” to fund this absolutely necessary purchase. I gave him the money we agreed upon and interestingly, he never did purchase the Air Jordan’s. He purchased a different pair, and he may actually have been able to pocket some of the cash by purchasing something for even less. Had he manipulated me or had he decided that the Jordan’s were not a necessity? I don’t know his motivation but I know the result.
So it is with many "necessities". We find we can live without some things and some things we cannot. My spouse needed a new purse. A quality, made in the USA leather purse she decided was a necessity. A Louis Vuitton was not.
And so it goes. I decide I need a new car. Why? Because the one I have has 60,000 miles, or because I am tired of it? Because the dealer offered me a good deal on a new one? Recently, I took my Subaru in to the dealer for scheduled maintenance. He pointed out that I was approaching the time when I would need new brakes and quoted me $550 to do the job. I declined but authorized only the immediately necessary work. I decided to do some comparative shopping for the brakes. Upon completion of the absolutely necessary work, I returned and picked up the car. There was a conspicuous tag on the rear view mirror offering me a deal. “This could be the last maintenance you need to do on this car” the sign said. It offered a guarantee of $15,000 for a trade-in on a new one! Looked tempting, but I did a few quick mental calculations and realized that I would be taking on about $10,000 in debt. I have learned to do some comparisons to a mental “want” list that I have. It keeps me from making rash financial decisions. In this case, I quickly calculated what I else I could buy with that $10,000. I could retire debt, or purchase a flat screen TV and eight years of $1,000 vacations. I could purchase new living room furniture and (3) or so $1,000 vacations. The list went on and on,. Then I thought about why I didn’t have that flat screen TV. It was because I had said to myself that “I couldn’t afford it”. So how on earth could I afford a new car? The obvious answer is, I can't. Or I can, but I would be compromising my integrity.
To Be Continued......
Tuesday, September 2, 2008
Coping with the Onslaught of Price Increases – Part I
There has been a lot of bad news recently about how Americans are surviving by raiding their retirement plans, maxing out their credit cards, etc. For example, I read one such article which dwelled on this. According to it, more Americans are raiding their 401(k) savings plans. It quoted a July study, released by the Center for American Progress, which found that workers in 2004 had $31 billion in outstanding 401(k) loans, a fivefold increase from $6 billion in 1989. From 1998 to 2004, an average of 12 percent of families with 401(k) plans borrowed from them.
At first glance, I noticed one item about this article that caught my attention. It used data from 2004. That was odd, I thought! This spurred me to check further into the source, which is a "think tank”. So I decided to check the data further. I discovered another, more reputable and current article. In an August 19 article in “Financial Week” data was cited and financial sources named, which indicated that more workers are shunning 401(k) loans. According to that article, both the number of outstanding 401(k) loans and the number of workers initiating such loans is decreasing.
This got me to thinking. I know people are dealing with increasing energy prices, increasing food prices and so on. I keep records of our recurring bills. I have the hard evidence that the cost of living which includes our groceries, natural gas, electricity and so on has increased over the past two years. I have also read in the media that in real terms, “many” people are not earning more than they did last year. I am talking about ordinary workers; such as people who are earning the median wage in this country. I'm excluding high wage earners, billionaires, hedge fund managers, etc.
So how are these ordinary people, one of whom I consider myself to be, coping with the onslaught of price increases? If they are coping, then at what point will it be impossible for them to continue to cope. And, at that time, what will occur? Will the wheels of consumerism in this country simply grind to a halt?
I can’t speak for how others are coping, but I can speak for myself. First, I am spending more this year than I did last year. I define some of that spending as discretionary. For example, my spouse and I have taken three trips. Two were with family and extended family members. One was a week long getaway which also included a family visit. These trips were all discretionary. I assume other families are coping by monitoring discretionary spending and by adjusting that. Perhaps the definition of what is discretionary and what is not, is currently changing in America. My definition may not be that of the typical American.
At this point, I will have to go off topic. If I were asked “what do I know about discretionary spending” that would be an appropriate question. What follows is my answer, from the perspective of my personal spending.
I keep detailed financial records, including earning and expenses by category. These are presently in Quicken software. Prior to that, I used manually generated spreadsheets. I started doing this about 20 years ago. The information I gleaned from this exercise and the financial discipline it enforced is how I survived my divorce. How difficult was it? I should have gone bankrupt. In fact, when the divorce negotiations were complete, I told my lawyer there was no way I could survive. I had done the numbers. However, that was a Nietzschian moment and somehow I did survive, although 14 years later I was still cleaning it up. How can I in a few words describe my divorce? How about “Mortgaging Your Future in One Easy Lesson”? In truth, it was not the divorce that did it. It was the divorce and the 15 years that preceded it. From personal experience, I am clear that it is possible to dig a really deep financial hole over the span of only a few years.
Somehow I did not go bankrupt and I even honored all of my debts. I negotiated payment plans with all of my creditors, moved the debt around, and so on. It took over a decade to clean up. During that period I personally redefined the term “discretionary spending”. During the first few years I had a total of $75 per month budgeted for my food, clothing, household, toiletries, phone, internet and entertainment. Forget about vacations and dining out. Simultaneously I took on more debt to pay for the kids’ college. This gave me additional incentives to keep working. It also extended the time it would take to achieve "freedom from debt", assuming I stopped taking on any additional debt.
This terrible process was in some respects a godsend. I learned a lot about what discretionary spending really was. For a long time, going to Dunkin’ Donuts was a discretionary expense; don’t even think about Starbucks! My spread sheet was arranged with one month per column and with rows listing creditors first, then alimony, rent, electricity, water, health insurance, auto insurance, vehicle license, gasoline and a monthly savings amount to provide for projected auto maintenance (oil changes, pro-rata monthly cost of brakes, maintenance at 20,000 mile intervals, tires, licensing), medical, dental, taxes, college tuition, fees, dormitory expense, dependents’ travel expense for college, dependents’ health insurance, and finally entertainment. Then there were some rows for any additional items. The amount in each cell was updated weekly. Rows were added as different expense categories became apparent. Projected numbers in columns going out 5 years were updated as real data was acquired, insurance premiums changed, etc. This was banged against my net income each month, and savings (if any). At the bottom of the spread sheet was a single cell containing a number which represented my financial status. If it was a positive number my spending would be less than my income for the next 12 months. If negative, my spending would exceed my income.
Each day, I literally tracked every nickel in my pocket. It could have been worse. I could have been tracking grains of rice, as they do in many poor households in this world. The bad news was, the financial status number was always negative. So work more and spend less. Of course, I had built in so much debt, it didn’t matter if I stopped spending or not. I could and did stretch out as much debt as possible. At the time, I was extremely fortunate. Credit was readily available and cheap. So even though my net worth was a negative number and would continue to be, I could creatively stretch out debt.
As I retired debt, I had the option of moving the released funds to purchase “discretionary” items, or to save it. How did I survive? Well, it was a long, long road. But eventually, that cell in the spreadsheet containing my financial status number became consistently positive.
I did remarry and my spouse is a really good partner. She and I have discussed that question. Was it luck? Was it the “will of God”? I don’t know. I do know that if I had not been healthy I would not have survived financially. I took many risks, but good health permitted me to continue working, at times incredible hours (for example, 30 consecutive days averaging 12 hours per day). Good health permitted me to avoid our costly health care system; I had and still have a major medical policy which pays for very little. I consider it to be “catastrophic insurance”. So avoiding doctors keeps my bills to a minimum. For years I could not afford a dentist, medical checkup or even new prescription glasses. As I dug my way out of the pit I had constructed I paid off creditors. That released money for the eye exam, then the dentist, and finally 10 years later, a medical exam. During this entire period I kept my “nose to the grindstone”. At times I was ready to give up and nearly stopped, but I never did. My spouse tells me that when she first met me, she noticed that I was gaunt, a gray man wearing gray clothes with glasses held together with electrical tape. I was fading.
Even though I could say I had no choice in the matter that would be untrue. We did spend the money. In cleaning it up, I also decided to honor my debts. I decided to support my children in pursuing their college dreams.
In the end, a discussion about discretionary spending is really a discussion about choice. We choose many aspects of our lives. We choose where we live. We choose the electronics and entertainment we spend our money on. We choose the vehicles we drive and we choose the frequency we drive them and we choose how far to drive them. This is one example. If I choose to live 75 miles from my place of work, with that choice there are attendant lifestyle and budget choices. Driving 150 miles per day requires allocating substantial financial resources to the fuel, maintenance and replacement costs of an automobile. That is a choice predicated on some assumptions. The cost of gasoline will never go up or if it does, I’ll still be able to afford it. Driving my car 39,000 miles each year to and from work is an expense I can afford, and I can afford to replace that vehicle every three years, etc. etc.
When I was in New Orleans prior to Katrina, I was told by people I met that they loved that city and would never leave it. After Katrina many people did make the difficult choice not to return. That is the way it is with choice. We can choose how we are as we live our life, or we can have circumstances choose for us. Either way, it can be difficult.
Currently, what we may be experiencing is the reaching of the limits of spending for the American family. But if that is so, what might happen next? If I reach my limits and go beyond the threshold of pain, then what? And how will I deal with it?
Continued in Part II.
At first glance, I noticed one item about this article that caught my attention. It used data from 2004. That was odd, I thought! This spurred me to check further into the source, which is a "think tank”. So I decided to check the data further. I discovered another, more reputable and current article. In an August 19 article in “Financial Week” data was cited and financial sources named, which indicated that more workers are shunning 401(k) loans. According to that article, both the number of outstanding 401(k) loans and the number of workers initiating such loans is decreasing.
This got me to thinking. I know people are dealing with increasing energy prices, increasing food prices and so on. I keep records of our recurring bills. I have the hard evidence that the cost of living which includes our groceries, natural gas, electricity and so on has increased over the past two years. I have also read in the media that in real terms, “many” people are not earning more than they did last year. I am talking about ordinary workers; such as people who are earning the median wage in this country. I'm excluding high wage earners, billionaires, hedge fund managers, etc.
So how are these ordinary people, one of whom I consider myself to be, coping with the onslaught of price increases? If they are coping, then at what point will it be impossible for them to continue to cope. And, at that time, what will occur? Will the wheels of consumerism in this country simply grind to a halt?
I can’t speak for how others are coping, but I can speak for myself. First, I am spending more this year than I did last year. I define some of that spending as discretionary. For example, my spouse and I have taken three trips. Two were with family and extended family members. One was a week long getaway which also included a family visit. These trips were all discretionary. I assume other families are coping by monitoring discretionary spending and by adjusting that. Perhaps the definition of what is discretionary and what is not, is currently changing in America. My definition may not be that of the typical American.
At this point, I will have to go off topic. If I were asked “what do I know about discretionary spending” that would be an appropriate question. What follows is my answer, from the perspective of my personal spending.
I keep detailed financial records, including earning and expenses by category. These are presently in Quicken software. Prior to that, I used manually generated spreadsheets. I started doing this about 20 years ago. The information I gleaned from this exercise and the financial discipline it enforced is how I survived my divorce. How difficult was it? I should have gone bankrupt. In fact, when the divorce negotiations were complete, I told my lawyer there was no way I could survive. I had done the numbers. However, that was a Nietzschian moment and somehow I did survive, although 14 years later I was still cleaning it up. How can I in a few words describe my divorce? How about “Mortgaging Your Future in One Easy Lesson”? In truth, it was not the divorce that did it. It was the divorce and the 15 years that preceded it. From personal experience, I am clear that it is possible to dig a really deep financial hole over the span of only a few years.
Somehow I did not go bankrupt and I even honored all of my debts. I negotiated payment plans with all of my creditors, moved the debt around, and so on. It took over a decade to clean up. During that period I personally redefined the term “discretionary spending”. During the first few years I had a total of $75 per month budgeted for my food, clothing, household, toiletries, phone, internet and entertainment. Forget about vacations and dining out. Simultaneously I took on more debt to pay for the kids’ college. This gave me additional incentives to keep working. It also extended the time it would take to achieve "freedom from debt", assuming I stopped taking on any additional debt.
This terrible process was in some respects a godsend. I learned a lot about what discretionary spending really was. For a long time, going to Dunkin’ Donuts was a discretionary expense; don’t even think about Starbucks! My spread sheet was arranged with one month per column and with rows listing creditors first, then alimony, rent, electricity, water, health insurance, auto insurance, vehicle license, gasoline and a monthly savings amount to provide for projected auto maintenance (oil changes, pro-rata monthly cost of brakes, maintenance at 20,000 mile intervals, tires, licensing), medical, dental, taxes, college tuition, fees, dormitory expense, dependents’ travel expense for college, dependents’ health insurance, and finally entertainment. Then there were some rows for any additional items. The amount in each cell was updated weekly. Rows were added as different expense categories became apparent. Projected numbers in columns going out 5 years were updated as real data was acquired, insurance premiums changed, etc. This was banged against my net income each month, and savings (if any). At the bottom of the spread sheet was a single cell containing a number which represented my financial status. If it was a positive number my spending would be less than my income for the next 12 months. If negative, my spending would exceed my income.
Each day, I literally tracked every nickel in my pocket. It could have been worse. I could have been tracking grains of rice, as they do in many poor households in this world. The bad news was, the financial status number was always negative. So work more and spend less. Of course, I had built in so much debt, it didn’t matter if I stopped spending or not. I could and did stretch out as much debt as possible. At the time, I was extremely fortunate. Credit was readily available and cheap. So even though my net worth was a negative number and would continue to be, I could creatively stretch out debt.
As I retired debt, I had the option of moving the released funds to purchase “discretionary” items, or to save it. How did I survive? Well, it was a long, long road. But eventually, that cell in the spreadsheet containing my financial status number became consistently positive.
I did remarry and my spouse is a really good partner. She and I have discussed that question. Was it luck? Was it the “will of God”? I don’t know. I do know that if I had not been healthy I would not have survived financially. I took many risks, but good health permitted me to continue working, at times incredible hours (for example, 30 consecutive days averaging 12 hours per day). Good health permitted me to avoid our costly health care system; I had and still have a major medical policy which pays for very little. I consider it to be “catastrophic insurance”. So avoiding doctors keeps my bills to a minimum. For years I could not afford a dentist, medical checkup or even new prescription glasses. As I dug my way out of the pit I had constructed I paid off creditors. That released money for the eye exam, then the dentist, and finally 10 years later, a medical exam. During this entire period I kept my “nose to the grindstone”. At times I was ready to give up and nearly stopped, but I never did. My spouse tells me that when she first met me, she noticed that I was gaunt, a gray man wearing gray clothes with glasses held together with electrical tape. I was fading.
Even though I could say I had no choice in the matter that would be untrue. We did spend the money. In cleaning it up, I also decided to honor my debts. I decided to support my children in pursuing their college dreams.
In the end, a discussion about discretionary spending is really a discussion about choice. We choose many aspects of our lives. We choose where we live. We choose the electronics and entertainment we spend our money on. We choose the vehicles we drive and we choose the frequency we drive them and we choose how far to drive them. This is one example. If I choose to live 75 miles from my place of work, with that choice there are attendant lifestyle and budget choices. Driving 150 miles per day requires allocating substantial financial resources to the fuel, maintenance and replacement costs of an automobile. That is a choice predicated on some assumptions. The cost of gasoline will never go up or if it does, I’ll still be able to afford it. Driving my car 39,000 miles each year to and from work is an expense I can afford, and I can afford to replace that vehicle every three years, etc. etc.
When I was in New Orleans prior to Katrina, I was told by people I met that they loved that city and would never leave it. After Katrina many people did make the difficult choice not to return. That is the way it is with choice. We can choose how we are as we live our life, or we can have circumstances choose for us. Either way, it can be difficult.
Currently, what we may be experiencing is the reaching of the limits of spending for the American family. But if that is so, what might happen next? If I reach my limits and go beyond the threshold of pain, then what? And how will I deal with it?
Continued in Part II.
Monday, September 1, 2008
Hurricane!
Well, the media is having another feeding frenzy. This time it is hurricane Gustav. I hope and pray the people of the Gulf Coast are spared.
I heard Clarence Ray Nagin, Jr., the Mayor of New Orleans, extolling everyone to leave the city and describing the hurricane as “the storm of the century”. Good for him. As we used to say, "they can learn"! However, his incompetence a few years ago contributed greatly to that disaster. But they re-elected him, anyway!
I know a little of what I speak. I experienced the full force of a category 4 storm some years before Katrina. It was called “Hugo” and it slammed into the South Carolina coast, washing away parts of Charleston. At the time, the situation was similar to that I found myself in as Katrina approached New Orleans. I had been in the Charleston area conducting business. My client had told me not to worry about the hurricane and come on down, those things always veered away! So against my better judgment I caught a flight, and upon landing and as I was driving my rental car out of the Charleston Airport, I turned on the radio, tuning to the local news. The reporter was describing how the US Navy had just left Charleston harbor and was pulling out to the safety of the deep ocean. At that point the lights in my brain went on and I realized “I’m going the wrong way”!
Well, I’ll tell you, I certainly was, and the next few weeks were not good. Not good at all! The hurricane was a frightening thing and damage was extensive. My motel was spared the worst of it, but the electric, air conditioning and water were out. For several days after landfall I drank and used water with which I had previously filled the bathtub. (I had first scrubbed it and bleached it and then after filling with tap water had covered it with visqueen plastic, taped in place). The week after Hugo was anything but fun. However, I learned a good lesson from that “adventure”. First, the locals, who are frequently under threat of hurricanes and experience many near misses, cope with the situation with a denial mechanism. For this reason, they cannot be trusted to use good judgment when it comes to predicting hurricanes. Second, the politicians should not be trusted. For an idea of how politicians are, in my view, observe the mayor in the movie “Jaws”.
Prior to Hugo making landfall, I concluded that the governor of South Carolina was a dolt, as he was making pre-Katrina style speeches about preparation, etc. However, the mayor of Charleston was an incredible man. He was a little old guy and it was only after experiencing Hugo that I really understood him. He had been there and done that, and had not forgotten how it could be! I watched him being interviewed on a local TV station and he was telling the talking head that “everyone must leave Charleston NOW”! The reporter said something to the effect, with a sneer in his voice “Mayor, are you telling us that this is dangerous?” To which this mayor turned and looking into the camera, pointed at the viewers and forcefully said “I’m telling you that if you are here tomorrow, you will be dead, DEAD!” At this, the reporter stammered something more or less incoherent. I thought, man, now that’s telling it like it is! Under the mayor’s pressure, all lanes of I-26 were opened westbound and the exodus began. The people did leave!
Fast forward to Katrina, and in my view, the leadership from the Mayor of New Orleans was terrible. So the people stayed and we know how that turned out. But I wasn't one of them. Yes, I again was in the path of a hurricane, but I was older and wiser. So when I saw the force and breadth of Katrina as it was crossing Florida, I checked the temperature of the waters in the gulf. I knew it was going to be very, very bad. Trust your own experience and judgement, and let the politicians and talking heads be damned, I said!
I called my spouse and we discussed things, as usual. This time, that included the weather and I told her I did not like that hurricane “Katrina”, which was hammering Florida. She responded "that’s a long way from New Orleans, honey!” to which I gave her my concerns and told her I was watching its progress very closely.
As Katrina bore down on New Orleans, I shifted my plans to leave into high gear. I don’t think my client really understand my fuss. Two days before Katrina made landfall I completed my work and left for the airport. As the Avis bus took me to the terminal, I struck up a conversation with the driver, and asked him where he was going for cover. He said he was staying and would be fine! I reminded him of the anticipated magnitude of this hurricane and that it exceeded the strength of the levies surrounding New Orleans. He again repeated the mantra “things will be fine”! I told him he was taking a terrible risk, that I had experienced the full wrath of a category 4 hurricane and said “God be with you” as I departed the bus. Walking into the terminal, I had expected crowds and flights to be full, but no, the airport was pretty lazy and the flights were less than half full! Obviously, people just didn’t get it. An hour and a half later, the airplane with me in it, rose into the gray sky and I said a silent prayer for the people of New Orleans, and cursed the politicians.
We know the rest of that story, and it was indeed ugly. Some months later, I returned to my client in New Orleans to assist in getting that facility back into production. I saw firsthand the destruction in Chalmette, the Irish Bayou, and other coastal communities. Over the period of a month I had the opportunity to have a lot of conversations with these Katrina survivors. Many people did very brave things, had fed and cared for their neighbors for days and weeks after Katrina. But in the national media, you seldom heard about that. Instead, the focus was how terrible things were in the 9th ward of New Orleans. That’s politics for you! I asked Chuck, one of the employees of my client, what he would do if another Katrina were to come, and his response was “I’m moving to Idaho”!
+++++++++
If you are thinking I am being hard on the Mayor of New Orleans, let me say this. People in New Orleans and many communities rely heavily on their local leaders for clear, concise and truthful information, direction and guidance. No matter what the governor, senators or congressmen say on the boob tube, what the mayor says will carry inordinate weight for local matters. That is what I saw in Charleston and that is what I saw in New Orleans.
After the fact, it becomes politically expedient to pass the blame to the top, which is where the deep pockets are. But the failures begin at a local level. I saw statistics after Hugo and as I recall, in Charleston proper, there was more loss of life from accidents which occurred while felling trees after that hurricane, than there were during the hurricane. That, I think, tells it all! My hat is off to that Mayor of Charleston for having the political courage and the common sense to put the people of that city first, and get them out of harm's way. He didn't tell people what they wanted to hear. He told them what they needed to hear. That is why we elect our leaders, that is what he was paid to do and he did it.
Links:
http://www.csc.noaa.gov/crs/cohab/hurricane/hugo/hugo.htm
http://www.nhc.noaa.gov/1989hugo.html
I heard Clarence Ray Nagin, Jr., the Mayor of New Orleans, extolling everyone to leave the city and describing the hurricane as “the storm of the century”. Good for him. As we used to say, "they can learn"! However, his incompetence a few years ago contributed greatly to that disaster. But they re-elected him, anyway!
I know a little of what I speak. I experienced the full force of a category 4 storm some years before Katrina. It was called “Hugo” and it slammed into the South Carolina coast, washing away parts of Charleston. At the time, the situation was similar to that I found myself in as Katrina approached New Orleans. I had been in the Charleston area conducting business. My client had told me not to worry about the hurricane and come on down, those things always veered away! So against my better judgment I caught a flight, and upon landing and as I was driving my rental car out of the Charleston Airport, I turned on the radio, tuning to the local news. The reporter was describing how the US Navy had just left Charleston harbor and was pulling out to the safety of the deep ocean. At that point the lights in my brain went on and I realized “I’m going the wrong way”!
Well, I’ll tell you, I certainly was, and the next few weeks were not good. Not good at all! The hurricane was a frightening thing and damage was extensive. My motel was spared the worst of it, but the electric, air conditioning and water were out. For several days after landfall I drank and used water with which I had previously filled the bathtub. (I had first scrubbed it and bleached it and then after filling with tap water had covered it with visqueen plastic, taped in place). The week after Hugo was anything but fun. However, I learned a good lesson from that “adventure”. First, the locals, who are frequently under threat of hurricanes and experience many near misses, cope with the situation with a denial mechanism. For this reason, they cannot be trusted to use good judgment when it comes to predicting hurricanes. Second, the politicians should not be trusted. For an idea of how politicians are, in my view, observe the mayor in the movie “Jaws”.
Prior to Hugo making landfall, I concluded that the governor of South Carolina was a dolt, as he was making pre-Katrina style speeches about preparation, etc. However, the mayor of Charleston was an incredible man. He was a little old guy and it was only after experiencing Hugo that I really understood him. He had been there and done that, and had not forgotten how it could be! I watched him being interviewed on a local TV station and he was telling the talking head that “everyone must leave Charleston NOW”! The reporter said something to the effect, with a sneer in his voice “Mayor, are you telling us that this is dangerous?” To which this mayor turned and looking into the camera, pointed at the viewers and forcefully said “I’m telling you that if you are here tomorrow, you will be dead, DEAD!” At this, the reporter stammered something more or less incoherent. I thought, man, now that’s telling it like it is! Under the mayor’s pressure, all lanes of I-26 were opened westbound and the exodus began. The people did leave!
Fast forward to Katrina, and in my view, the leadership from the Mayor of New Orleans was terrible. So the people stayed and we know how that turned out. But I wasn't one of them. Yes, I again was in the path of a hurricane, but I was older and wiser. So when I saw the force and breadth of Katrina as it was crossing Florida, I checked the temperature of the waters in the gulf. I knew it was going to be very, very bad. Trust your own experience and judgement, and let the politicians and talking heads be damned, I said!
I called my spouse and we discussed things, as usual. This time, that included the weather and I told her I did not like that hurricane “Katrina”, which was hammering Florida. She responded "that’s a long way from New Orleans, honey!” to which I gave her my concerns and told her I was watching its progress very closely.
As Katrina bore down on New Orleans, I shifted my plans to leave into high gear. I don’t think my client really understand my fuss. Two days before Katrina made landfall I completed my work and left for the airport. As the Avis bus took me to the terminal, I struck up a conversation with the driver, and asked him where he was going for cover. He said he was staying and would be fine! I reminded him of the anticipated magnitude of this hurricane and that it exceeded the strength of the levies surrounding New Orleans. He again repeated the mantra “things will be fine”! I told him he was taking a terrible risk, that I had experienced the full wrath of a category 4 hurricane and said “God be with you” as I departed the bus. Walking into the terminal, I had expected crowds and flights to be full, but no, the airport was pretty lazy and the flights were less than half full! Obviously, people just didn’t get it. An hour and a half later, the airplane with me in it, rose into the gray sky and I said a silent prayer for the people of New Orleans, and cursed the politicians.
We know the rest of that story, and it was indeed ugly. Some months later, I returned to my client in New Orleans to assist in getting that facility back into production. I saw firsthand the destruction in Chalmette, the Irish Bayou, and other coastal communities. Over the period of a month I had the opportunity to have a lot of conversations with these Katrina survivors. Many people did very brave things, had fed and cared for their neighbors for days and weeks after Katrina. But in the national media, you seldom heard about that. Instead, the focus was how terrible things were in the 9th ward of New Orleans. That’s politics for you! I asked Chuck, one of the employees of my client, what he would do if another Katrina were to come, and his response was “I’m moving to Idaho”!
+++++++++
If you are thinking I am being hard on the Mayor of New Orleans, let me say this. People in New Orleans and many communities rely heavily on their local leaders for clear, concise and truthful information, direction and guidance. No matter what the governor, senators or congressmen say on the boob tube, what the mayor says will carry inordinate weight for local matters. That is what I saw in Charleston and that is what I saw in New Orleans.
After the fact, it becomes politically expedient to pass the blame to the top, which is where the deep pockets are. But the failures begin at a local level. I saw statistics after Hugo and as I recall, in Charleston proper, there was more loss of life from accidents which occurred while felling trees after that hurricane, than there were during the hurricane. That, I think, tells it all! My hat is off to that Mayor of Charleston for having the political courage and the common sense to put the people of that city first, and get them out of harm's way. He didn't tell people what they wanted to hear. He told them what they needed to hear. That is why we elect our leaders, that is what he was paid to do and he did it.
Links:
http://www.csc.noaa.gov/crs/cohab/hurricane/hugo/hugo.htm
http://www.nhc.noaa.gov/1989hugo.html
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