The Great Recession - post mortem

[GrantDawg]

I think for a number of states lemon laws would get in the way of eliminating warranties, but I'm not sure.


Not for a company that doesn't exist.

[SirFozzie]

Former head of Nasdaq arrested and charged with conning folks out of $50 BILLION.

BBC NEWS | Business | Top investors 'hit by $50bn con' (http://news.bbc.co.uk/1/hi/business/7781086.stm)

[JPhillips]

Not for a company that doesn't exist.

I was replying to RA's suggestion for the big 3 to sell without warranty.

[flere-imsaho]

NPR had a story on him on Friday with a great quote from last year where he said "What ordinary people don't understand is that we're so heavily regulated (in the hedge fund industry) that it's simply not possible for anyone to do anything illegal and get away with it."

I love the condescension followed by the lie followed by the chutzpah. What a tool.

[Edward64]

Similar to my post in the Atlanta courthouse shooting/verdict ...

There are just some people that deserve to die.

Sure they may have had a horrific childhood, chemical imbalance, whatnot etc. but some people just deserve to die.

Jeffrey Dahmer, the BTK serial killer etc.

* * * *

If he really did lose/cheat $50B from people, he deserves to die.

[Balldog]

Thanks. It is tough right now. I'm sure the easy answer is to move and find a job, but that's easier said than done sometimes. That being said, unless they go out of business entirely, all four million jobs aren't going to be lost either.

I know the warranties would go away if the company were to close, but aren't we making a huge leap to say that bankruptcy will definitely lead to companies closing?

Yeah, I could probably try to sell my house but who is buying? Then I could just walk away but then I'm out $50k.

[Balldog]

I do love how all the governor's who are being very vocal about rejecting any financial assistance for US automakers just happen to have foreign automakers in their states. Foreign automakers who have been provided financial support by their respective countries.

[JonInMiddleGA]

Media Life Magazine - Detroit papers will cut home delivery (http://www.medialifemagazine.com/artman2/publish/Newspapers_24/Detroit_papers_will_cut_home_delivery.asp)

Detroit is one of the last major two-newspaper cities, and soon it will become the first to stop home delivery on all but a handful of days and shift some of its focus to the web, in a major overhaul that highlights just how dire things have become for the nation’s major metropolitan papers.

In a move expected to be announced tomorrow, the Detroit Free Press and Detroit News will eliminate home delivery on all but their most lucrative days, presumably Sunday, Thursday and Friday.

Print issues will still be available at newsstands on other days, but they will be trimmed back from their current size, and the papers will encourage readers instead to check out daily digital editions available on their web sites.

The two papers, which are run through a joint operating agreement, are looking to save money on print and delivery costs, which have shot up over the past year with the rise in ink and gas prices.

At the same time, circulation and advertising have dried up nationwide, and that’s been especially true in Detroit, home of the Big Three automakers who are seeking a federal bailout to continue operation in the midst of a devastating recession.

The Free Press, which is owned by Gannett, and the News, which is owned by MediaNews Group, have already bought out dozens of workers over the past two years. Circulation at the papers has plummeted by double-digit percentages since 2003.

This next step is a drastic one, and it’s unclear whether it will work. After all, the internet has been one of the main culprits in the decline of American newspapers, who they have not yet figured out how to leverage new media advertising in an effective manner.

Forcing readers online to get the paper thus could turn out to be a foolish strategy.

Plus, one of the advantages of paid newspapers has always been home delivery, a fact the free Examiner chain has recognized and used to its great advantage, giving it the ability to sell a more upscale demographic to its advertisers.

Too, some see the print retreat as a defeat that could alienate older readers, a key demographic for newspapers who are unlikely to go online or even to the local newsstand to get their daily read.

But others think Detroit will be just the first in a long line of newspapers to go partly or entirely online. Earlier this year, the Christian Science Monitor became the most prominent paper to say it would pull back from daily to weekly print editions and instead concentrate on the web.

A handful of smaller newspapers across the country, including the suburban Phoenix East Valley Tribune and Madison, Wis., Capital Times, have also cut back their daily print editions to focus on the web.

The Detroit papers are already insisting that the print edition will not be entirely eliminated, and few of the anticipated job cuts from the move will affect editorial. Most will be made in production.

Details on the changes, including the impact on circulation and when the new plan will begin, will be filled in with tomorrow's announcement.

[Honolulu_Blue]

Media Life Magazine - Detroit papers will cut home delivery (http://www.medialifemagazine.com/artman2/publish/Newspapers_24/Detroit_papers_will_cut_home_delivery.asp)

Detroit is one of the last major two-newspaper cities, and soon it will become the first to stop home delivery on all but a handful of days and shift some of its focus to the web, in a major overhaul that highlights just how dire things have become for the nation’s major metropolitan papers.

Yeah, this rumor has been swirling around here for the last week or so. I get the Free Press delivered every day. I read it more often than not. It will be sad not have that option everyday, especially when something of interest is going on, e.g., an election, the Kilpatrick stuff, the NHL playoffs, etc.

It's not surprising, but kind of depressing.

[Mizzou B-ball fan]

More signs of a rough retail season. Best Buy offers buyouts to 4,000 employees at its corporate headquarters......

http://www.twincities.com/allheadlines/ci_11238481

[lighthousekeeper]

i've never understood buyouts or severance packages - if an employee is no longer needed by the company, why not just fire them? what is the financial benefit that i'm not aware of?

[BrianD]

Firing employees leads to unemployment payments and higher unemployment insurance? It also leads to a decrease in goodwill. At some point Best Buy is going to want to hire back for most of these positions and they don't want a bad reputation on employee relations.

Keep in mind that these are corporate positions...

[Raiders Army]

I think Jan was pissed Michael fired someone who was about to quit.

[Flasch186]

BF's brother was just informed that it looks like his salary will be restructured or he'll be laid off. He'll find out the wizard's decision imminently :( sucks.

[Fidatelo]

Any thoughts on the rate cut to 0.25%?

Personally, I'm getting really, really worried, and really, really angry/upset. Angry/upset because, as a taxpayer, it seems like I'm being stolen from left and right between bailouts and now what is essentially free loans to businesses.

I'm worried because I just can't understand how making it easier to borrow money fixes a problem that was caused by institutions (and people) borrowing too much money. We need to be paying down debts, not racking them up even further. I just don't see this fixing, or even really helping, things, and I honestly don't see any way out.

[Eaglesfan27]

Casinos in AC have layed off thousands of employees over the past month including my mother. Despite great sales in the videogame industry, several companies are having major layoffs including Midway, Factor 5, and Turbine:

Midway trims fat, cuts to the bone - News at GameSpot (http://www.gamespot.com/news/6202368.html?tag=latestheadlines;title;2)

[SportsDino]

I'm highly concerned. It seems despite all the burning going on recently, people still are dancing around the fire instead of shaping up and putting it out. The dancers being big money that sees this as another extraction opportunity in different form.

All I can say is don't trust Wall Street, by all I can see they are out to screw us over again on the way down. I'm paniced enough I liquidated most of my long term portfolio (which I had just started to build). My personal wealth is back on the rise, which is bad for the overall health of the economy (easier to feed off panic than to predict brilliance, especially with these dimwits in charge of the companies).

[sterlingice]

Any thoughts on the rate cut to 0.25%?

Personally, I'm getting really, really worried, and really, really angry/upset. Angry/upset because, as a taxpayer, it seems like I'm being stolen from left and right between bailouts and now what is essentially free loans to businesses.

I'm worried because I just can't understand how making it easier to borrow money fixes a problem that was caused by institutions (and people) borrowing too much money. We need to be paying down debts, not racking them up even further. I just don't see this fixing, or even really helping, things, and I honestly don't see any way out.

I'm highly concerned. It seems despite all the burning going on recently, people still are dancing around the fire instead of shaping up and putting it out. The dancers being big money that sees this as another extraction opportunity in different form.

All I can say is don't trust Wall Street, by all I can see they are out to screw us over again on the way down. I'm paniced enough I liquidated most of my long term portfolio (which I had just started to build). My personal wealth is back on the rise, which is bad for the overall health of the economy (easier to feed off panic than to predict brilliance, especially with these dimwits in charge of the companies).

Are you really that surprised? The same people who were trying to do anything they could to screw people out of money are... still trying to screw people out of money even when things are bad. I know I'm disappointed a little myself, but not all that unsurprised, unfortunately :(

SI

[SportsDino]

Was hoping the scrutiny would be high enough that they'd at least slow down, instead they seem to be getting bolder. Although some of the crooks cheating the crooks are starting to get caught at the edges... maybe the media will realize corruption stories are worth tracking.

[Fighter of Foo]

Any thoughts on the rate cut to 0.25%?

Personally, I'm getting really, really worried, and really, really angry/upset. Angry/upset because, as a taxpayer, it seems like I'm being stolen from left and right between bailouts and now what is essentially free loans to businesses.

I'm worried because I just can't understand how making it easier to borrow money fixes a problem that was caused by institutions (and people) borrowing too much money. We need to be paying down debts, not racking them up even further. I just don't see this fixing, or even really helping, things, and I honestly don't see any way out.

The rate cut is just an official acknowledgment of what's been happening the last few months. Deflation is in full swing.

Yes, you're being stolen from and it's been going on for quite some time. It's much more blatant now as crisis = opportunity. The question you have to ask yourself is what, if anything, are you going to do about it?

[Fighter of Foo]

Was hoping the scrutiny would be high enough that they'd at least slow down, instead they seem to be getting bolder. Although some of the crooks cheating the crooks are starting to get caught at the edges... maybe the media will realize corruption stories are worth tracking.

The coverage on the Illinois governor has been quite thorough.

[digamma]

Any thoughts on the rate cut to 0.25%?

Personally, I'm getting really, really worried, and really, really angry/upset. Angry/upset because, as a taxpayer, it seems like I'm being stolen from left and right between bailouts and now what is essentially free loans to businesses.

I'm worried because I just can't understand how making it easier to borrow money fixes a problem that was caused by institutions (and people) borrowing too much money. We need to be paying down debts, not racking them up even further. I just don't see this fixing, or even really helping, things, and I honestly don't see any way out.

The idea here is to make bank to bank lending rates so low that they have to seek other higher yield lending options to generate revenues. Banks are finding the task of pricing risk incredibly difficult right now, so they aren't lending. In normal times, the overnight lending market can be quite robust and profitable. Not now. You're seeing almost no activity because banks are making nothing off of the deal. So by continuing to lower interest rates, the fed is hoping to force banks hands into actually pricing risk and stimulate lending (with falling rates hopefully trickling down to consumers).

Of course, the other elephant in the room is liquidity. Balance sheets are still incredibly tight, so banks are forcing lenders to pay a premium to reserve balance sheet and get loans. The two forces aren't aligned.

[miked]

I think I was reading that actual fed rates have been negative...meaning banks are putting in the government treasury even if it loses money to avoid exposing themselves to risk. The rate cut therefore really doesn't matter.

[Flasch186]

which is why I believe January will see a retest of market lows and the spring home selling season will be critical to creating a floor and recovery in 2010. If the deflationary scare carries us into a poor home market through '09 we may push recovery off another painful painful year. Im not saying housing due to my job but housing due to all of the multipliers attached to the home prices nationwide. CDO, MBS, etc.

[Fidatelo]

The rate cut is just an official acknowledgment of what's been happening the last few months. Deflation is in full swing.

Yes, you're being stolen from and it's been going on for quite some time. It's much more blatant now as crisis = opportunity. The question you have to ask yourself is what, if anything, are you going to do about it?

I don't know, what can I do about it? There don't seem to be any options besides going to work every day and hoping things will work out ok in the long run.

[Fidatelo]

The idea here is to make bank to bank lending rates so low that they have to seek other higher yield lending options to generate revenues. Banks are finding the task of pricing risk incredibly difficult right now, so they aren't lending. In normal times, the overnight lending market can be quite robust and profitable. Not now. You're seeing almost no activity because banks are making nothing off of the deal. So by continuing to lower interest rates, the fed is hoping to force banks hands into actually pricing risk and stimulate lending (with falling rates hopefully trickling down to consumers).

Of course, the other elephant in the room is liquidity. Balance sheets are still incredibly tight, so banks are forcing lenders to pay a premium to reserve balance sheet and get loans. The two forces aren't aligned.

I guess I just don't get how we are going to spend our way out of this mess, when spending is the cause of the mess to begin with. To me it feels like the entire economy is a giant Jenga game, and no matter how good you are at Jenga there is only one eventual outcome.

[gstelmack]

I'll agree with you Fidatelo. We keep being told that household debt is crushing our economy, but as soon as people start saving and drop their debt (it dropped for the first time since they started tracking it just recently) everyone screams about how bad things are.

We're finally getting rid of the house of cards that's been building since the '90s, and everyone wants to prop it back up? I don't get it. We're going to print money hand over fist and that will make things better? I don't get it.

[Flasch186]

theyre not saving though, it's simply like you put $1,000 in a box at the back end of the closet and then opened it a week later to find that the Tens were actually ones.

[Fidatelo]

theyre not saving though, it's simply like you put $1,000 in a box at the back end of the closet and then opened it a week later to find that the Tens were actually ones.

Can you explain that please? Is this a reference to inflation or something? :confused:

[Flasch186]

it's a reference to deleveraging. The $1000 was never really $1,000. Sorry if I wasnt clear....not unusual for me. During the process of deleveraging, all balance sheets are seeing numbers that 'truly' dont exist.

[Fidatelo]

it's a reference to deleveraging. The $1000 was never really $1,000. Sorry if I wasnt clear....not unusual for me. During the process of deleveraging, all balance sheets are seeing numbers that 'truly' dont exist.

I still don't get it or how this relates to gstelmack's point?

[Flasch186]

i got the feeling that G was saying that we havnt been saving and have caused this problem because we levered up. Now when we start saving we start telling people that if you save it's going to cause problems. My point is that saving has turned out to not be saving because the money is deleveraging around you so $1,000 turns into much much less while you've done nothing to cause this. This is not only on an individual level but clear all the way to the biggest corp and until this stops no one knows the true value of money, risk, or savings. So the only way to avoid the deflationary effects of this is to reinflate and hope that you reinflate as a counterbalance and not overshoot.

[gstelmack]

No, what I'm saying is that no matter what happens with the economy, the experts say it's wrong. "Everyone has too much credit!" "No one can get credit!" "Inflation is bad!" "Deflation is bad!" "Stock market needs a correction!" "Everyone's wealth was just wiped out!" "People should save money!" "People aren't spending enough at retail!"

The economy is finally correcting from its inflated position due to way too much borrowing, and everyone is all upset about it. Let it correct for crying out loud, most people would be much better with keeping our tax dollars and letting some companies go out of business so others that know how to run themselves can step in.

We had a major collapse of internet-related networking jobs in this area about 5-8 years ago, and all it did was lead to a bunch of startups and we're weathering the current "recession" just fine in this area.

I've got a friend who is a handyman, and his business is booming thanks to people keeping and fixing their homes rather than selling.

Just let it ride already...

[Flasch186]

unfortunately IMO, "Let It Ride" equals something equivalent to, if not worse than, the great depression and I, for one, do not want to experience it if we do not have to.

[Fidatelo]

unfortunately IMO, "Let It Ride" equals something equivalent to, if not worse than, the great depression and I, for one, do not want to experience it if we do not have to.

So explain to me how printing money to bail out corporations and allowing consumers to borrow more money will fix the problem? I think we are screwed at this point and the sooner we realise that and deal with it, the less harsh it will be (although it's going to be harsh no matter what, at this point).

All of these band-aids are doing nothing to fix the underlying, fundamental issues, and in fact are likely making things worse long term.

[Flasch186]

Im hopeful for a counterbalance to make the way down less drastic, stark, and damaging while this inevitable deleveraging occurs.

[Fidatelo]

Im hopeful for a counterbalance to make the way down less drastic, stark, and damaging while this inevitable deleveraging occurs.

Umm, ok then.

[SportsDino]

Whoa, whoa, whoa, hold the boat.

Deflation:
http://dictionary.reference.com/browse/deflation

You put $1000 in a box, it ends up buying $10000 worth of junk when you open the box. That is deflation (ultra-simplified).

INFLATION is when you put $1000 in a box, open it, and you can only buy $100 worth of junk.

I try not to be a vocab-nazi, as I mangle things all the time, but your screwing up fundamental forces of the economy here.

What all this really means is that for years we have more money in relation to the amount of goods than there should have been, so prices should be HIGHER than they are supposed to be.

If you have 1000 goods in the economy, and 10000 dollars in the economy, each good should be priced at 10 dollars. If you leverage that 10000 dollars to 100,000 dollars, each good should be priced at 100 dollars. If you subsequently screw the economy, and deleverage down to 10000 dollars, the price of goods should be at 10 dollars.

The key to understanding what is going on is that prices have been in fairy tail land ever since the money went bonzo. They have stayed relatively fixed during this massive levering up and are actually behaving quite weirdly as we are levering down. Where the vacuum exists is in corporate balance sheets, that is where the leverage money has been going... not into real assets, so now that the lever is being kicked out from under them they are all collapsing.

They are trying to save their corrupted balances through 're-inflation' but what they are actually doing is taking real goods and trying to multiply them up to a level relative to their fantasy world. The end result would be inflation, and as far as I am concerned even three times leverage would be hyperinflation right now. It could potentially bankrupt everyone as the price of everything triples (ignore gas prices that anomaly is going to hurt bad at some point).

All right, I know I'm not making sense at the moment, there is so much going on I don't know where to start and I'm flustered. If we avoid trying to actively inflate things we will be all right, a lot of bastards are going to be out of business and a lot of good peoples savings hurt, but overall there will still be something to come home to. If they somehow convince the government to inflate further though, well we'll save some billionaires chances at staying billionaires, but they'll only be worth 100 milionaires in real dollars, and everyone else will be broke.

Note, if you don't mind playing on misery and panic, make some money now. My indirect oil short alone (yes I was a buyer as recently as the election and still know it will go up long term) made 40% one month, two gold transactions (my inflation fears cause me to avoid storing dollars) combine for 30% one month. Playing off this stupid auto bailout my GM short alone is 50% this quarter. Bah its endless.

[SportsDino]

Gah, the short story, its real goods that ultimately drive the economy. There is nothing about the U.S. that says our standard of living needs to fall through the floor, all the assets and goods are there. Our valuation of them is screwed. A lot of poor people are going to go through hell because people who didn't need any more money cooked the books to the boiling point.

[JonInMiddleGA]

No, what I'm saying is that no matter what happens with the economy, the experts say it's wrong. "Everyone has too much credit!" "No one can get credit!" "Inflation is bad!" "Deflation is bad!" "Stock market needs a correction!" "Everyone's wealth was just wiped out!" "People should save money!" "People aren't spending enough at retail!"

LOL, a big +1.

It's all "wrong" because the situation is FUBAR, and the likely reality is that there isn't any "fix" that will actually fix anything, only delay what has become inevitable.

[JonInMiddleGA]

A lot of poor people are going to go through hell because people who didn't need any more money cooked the books to the boiling point.

Bzzt.

There is virtually no such thing as "didn't need any more money".

[SportsDino]

I don't know when to shut up, but I wanted to mention I agree with gstelmack's latest post. Let it Ride is the capitalist force we actually need right now, just need to curb the excessive correction anyway we can. All that the greedy corp cows are doing right now is trying to make a pork cushion for their personal fall at everyone's expense.

[SportsDino]

Bzzt.

There is virtually no such thing as "didn't need any more money".

There is a marginal return on the value of money, but not on the glee of acquiring it. If you have a billion dollars, another billion is not going to improve your standard of living, other than the impact on your pride and related ego benefits (feeling happy you are even richer than yesterday).

Unfortunately, your next billion needs to come from somewhere. You either personally create a billion dollars worth of new goods, or design/manage the system that creates such goods and charge a big fee for your intelligence... or you find creative ways to extract the billion dollars from somewhere else.

An economy can only support so many billionaires, in real value, obviously Wiemar Germany had quite a few of them.

Did a CEO need to sell credit-swaps they couldn't back in order to build their portfolio up another few billion... well yes if they wanted to get their bonus. But is it the same as someone needing their job to feed their family, well not in the way I measure value.

I don't want to debate the basic fundamentals of how 'greed is good', I know how capitalism works. Saying that such knowledge means I can't make value judgments on what I consider rude, bad, and ultimately short sighted behavior is just silly though. We judge people over stuff that has no bearing on our lives like their sexual or even fashion choices, I'm not going to hold back on judging people for widespread economic damage. Hell, I feel an asshat for feeding off the downward panic myself (and no I have no charitable intentions for the money, unless you count starting my own business someday).

[GrantDawg]

Chrysler shutting down for a month. Will they reopen?

Chrysler shuts down all production - Dec. 17, 2008 (http://money.cnn.com/2008/12/17/autos/chrysler_shutdown/index.htm?postversion=2008121717)

[Raiders Army]

I wonder if the US automakers have a contingency plan in case they don't get a bail-out. Perhaps shutting down for a month is their plan?

[Mustang]

Chrysler shutting down for a month. Will they reopen?

Just 2 extra weeks since they are normally down for Christmas. Of course, sounds worse if you say a month. Of course, they say don't expect to come back before Jan 19th... hmm.. I wonder why the 19th? Seems like something is going on Jan 20th, but just can't remember what....

[Flasch186]

Whoa, whoa, whoa, hold the boat.

Deflation:
http://dictionary.reference.com/browse/deflation

You put $1000 in a box, it ends up buying $10000 worth of junk when you open the box. That is deflation (ultra-simplified).

INFLATION is when you put $1000 in a box, open it, and you can only buy $100 worth of junk.

I try not to be a vocab-nazi, as I mangle things all the time, but your screwing up fundamental forces of the economy here.

What all this really means is that for years we have more money in relation to the amount of goods than there should have been, so prices should be HIGHER than they are supposed to be.

If you have 1000 goods in the economy, and 10000 dollars in the economy, each good should be priced at 10 dollars. If you leverage that 10000 dollars to 100,000 dollars, each good should be priced at 100 dollars. If you subsequently screw the economy, and deleverage down to 10000 dollars, the price of goods should be at 10 dollars.

The key to understanding what is going on is that prices have been in fairy tail land ever since the money went bonzo. They have stayed relatively fixed during this massive levering up and are actually behaving quite weirdly as we are levering down. Where the vacuum exists is in corporate balance sheets, that is where the leverage money has been going... not into real assets, so now that the lever is being kicked out from under them they are all collapsing.

They are trying to save their corrupted balances through 're-inflation' but what they are actually doing is taking real goods and trying to multiply them up to a level relative to their fantasy world. The end result would be inflation, and as far as I am concerned even three times leverage would be hyperinflation right now. It could potentially bankrupt everyone as the price of everything triples (ignore gas prices that anomaly is going to hurt bad at some point).

All right, I know I'm not making sense at the moment, there is so much going on I don't know where to start and I'm flustered. If we avoid trying to actively inflate things we will be all right, a lot of bastards are going to be out of business and a lot of good peoples savings hurt, but overall there will still be something to come home to. If they somehow convince the government to inflate further though, well we'll save some billionaires chances at staying billionaires, but they'll only be worth 100 milionaires in real dollars, and everyone else will be broke.

Note, if you don't mind playing on misery and panic, make some money now. My indirect oil short alone (yes I was a buyer as recently as the election and still know it will go up long term) made 40% one month, two gold transactions (my inflation fears cause me to avoid storing dollars) combine for 30% one month. Playing off this stupid auto bailout my GM short alone is 50% this quarter. Bah its endless.

ah, I see where you misinterpreted what I said. Im not saying the value went down per se. Im saying that because the balance sheets are in essence, 'lies', so when you went into the box of a $1,000 bill you looked in and saw 5 or 10 Tens. Not that the value changed due to its comparison to what it can buy but that it actually just vanished.

[Grammaticus]

Stating they have willing customers but cannot close the deal due to lack of financing seems to be a ploy to get in on the TARP money. Their sales dropped like a rock in 2007 and 2008 regardless of whether or not financing was readily available.

[Mizzou B-ball fan]

I noticed that there are reports that Obama is considering extending the Bush tax cuts rather than letting them expire. The thought is that since the Fed Loan rate is nearly 0%, the only way to further ease the burden on U.S. citizens would be to keep Bush's tax cuts in place. Allowing them to expire could very well be seen as a tax increase by the general public and could create more worries for the average citizen.

[flere-imsaho]

It would appear that for every scandal, there was at least one person (if not several) who thought something was fishy long before the shit hit the fan.

Today's installment comes from Erin Arvedlund who, in the spring of 2001, wrote an article in Barron's that questioned exactly how Madoff made his money. I heard her interviewed on NPR this morning, but since their transcript isn't up yet, I'll link to her article on portfolio.com (http://www.portfolio.com/news-markets/top-5/2008/12/17/madoff-barrons) from yesterday.

In the spring of 2001, I was working at Barron’s covering the asset management business, and even though the dotcom bubble had burst and short-circuited the stock market, it was still a time of innocence.

It was before the 9/11 attacks on the World Trade Center, and sometimes I ate lunch sitting on the edge of its silver plaza fountain, in the sunshine between the two skyscrapers.

The Barron’s offices occupied half of one floor in the southern-most World Financial Center building in lower Manhattan, where Dow Jones published the magazine and the Wall Street Journal. One of Barron’s long-serving copy editors still smoked in her office (or at least, she and I got away with it until the cleaning lady sniffed us out). Staffers took turns supplying the weekly bottles of dry wine to those closing Friday evenings.

My first year at Barron’s I covered options—a beat not unlike covering horse racing. Buy a call option on a stock, and you are betting your "horse" will be a winner and cross the finish line at a certain price sometime in the future. I liked visiting the dimly lit American Stock Exchange on Church Street, behind Trinity Church, because the traders there still ducked in and out of little booths to scream orders into a crowd.

Electronic trading still felt new, even in 2001. Big broker-dealers like Susquehanna and Madoff were using computer programs, not people, to match buy-and-sell orders, but the dinosaurs on the trading floor scoffed, lit another cigarette, and puffed, "It'll never work."

During my second year at Barron’s, during which I began covering asset managers and hedge funds, that options background paid off. Hedge funds and options share certain lottery ticket-like appeal: Both offer plenty of upside, and staggering downside potential.

The hedge funds industry blossomed in earnest. In 1996, the top 50 hedge funds accounted for just $55 billion in assets; within seven years that number had grown to $150 billion. (The industry as a whole would top nearly $2 trillion by 2007).

Over cocktails at downtown bars such as the Blarney Stone, P.J. Clarke's, and the 14 Wall Street rooftop bar, I started asking options guys—typically quirky mathematical types with a nose for nonsense—about hedge funds.

It was one of these option traders who brought up Madoff. A strategist at a major investment bank and trading firm, he insisted we talk in person. On an April morning in his company's cafeteria, he told me he'd been asked to run some figures on behalf of a client who was thinking of investing with Madoff.

"The numbers don't make sense," he said. "I've been replicating this strategy six ways to Sunday and I can't make the returns come out right."

This was Madoff's hedge fund strategy, dubbed a "split-strike conversion." I took the train back home and resolved to find someone who could explain it to me.

I got a hold of offering documents for Fairfield Sentry, one of the feeder funds funneling money into Madoff. I then took the offering documents to several individuals whom I respected for their ability to formulate and implement complex option trades.

Not one of them could replicate it; nor could they come up with the source of Madoff's returns. Options were just not making that much money in 2001, especially with electronic trading pressing profit margins down to just pennies.

Other oddities: Our Barron's photographer couldn't locate a picture of Bernard Madoff any later than one taken in 1999. It was as if the guy didn't exist in the 21st century. But Madoff had rabid, religious fans. Individual investors who admitted they were "lucky" enough to get into Madoff's funds revered him. One man put his kids through college from the money earned in Madoff's funds.

A source at Merrill Lynch said he couldn't make sense of the returns and withdrew client funds that his predecessor had invested with Madoff.

Every reporter encounters a big story that feels risky—that carries the risk of offending someone important, someone big, someone savvy, someone smarter than you, or just someone who makes claims that can't be proved or disproved. But feelings aren't facts.

So I went with the facts: Nobody, but nobody, on Wall Street traded options the way Madoff did and made the money that he made. Years later, a hedge fund manager whom I had known since the late 1990s said simply: "Nobody traded options that successfully. That should have been a big red flag."

I worked for months compiling details about Madoff. I easily questioned more than 100 people as to whether they knew Madoff or knew anyone who had ever invested with him. Most either had heard of Madoff or knew of his firm. I could count on one hand the number of people who had actually met the man.

I was beginning to think I'd never be one of the lucky few, even after finishing my profile of him.

Suddenly, though, Madoff was made available to me just as the story was about to be printed. Over a scratchy international telephone line, Madoff told me he was traveling on a boat in Switzerland. "I can't really go into the details," he said of his strategy. He wasn't angry or upset. He sounded more than friendly. He just didn't tell me anything of note.

My article ran, with the headline "Don't Ask, Don't Tell," questioning why Madoff gave up hundreds of millions of dollars in fees (his firm didn't charge the typical two-and-20 hedge fund fees—2 percent of all money invested and 20 percent of any profit earned), as well as why he pressured investors to never reveal they had money with him, and why no one could understand how he made money.

Then there was nothing, silence. Over the ensuing years, fund-of-funds managers I spoke to repeated the rumors about Madoff. He remained a hot commodity in the hedge fund world, but no one had successfully been able to disprove his claims.

By the next bull market, Madoff ranked with Julian Robertson and George Soros—the godfathers of asset management, the founding fathers of Wall Street hedge funds. Madoff was running $17 billion in client funds and had houses in Manhattan; Montauk, New York; and Palm Beach, Florida. The facts were on his side.

Today, the innocence is gone. That Madoff mythology has evaporated, and in its wake even the most smug hedge fund investors are worried.

"There will be a lot more Madoffs discovered," says Edward Seidle, founder of Benchmark Financial Services, which specializes in investigations of pension fraud and money management abuses. "It will no longer be impolite to ask for the documents, sit down, and figure out whether the manager is for real."


Once upon a time, it was fashionable for free market conservatives to mock "liberals" for professing a certain skepticism as to whether all the dealings on Wall Street were necessarily above board. I sincerely hope that one of the lasting results of this whole mess will be greater oversight and an acknowledgement that unbelievable returns may not necessarily be the result of financial wizardry, but in fact the result of illegal or at least highly risky behavior.

[JonInMiddleGA]

Once upon a time, it was fashionable for free market conservatives to mock "liberals" for professing a certain skepticism as to whether all the dealings on Wall Street were necessarily above board. I sincerely hope that one of the lasting results of this whole mess will be greater oversight and an acknowledgement that unbelievable returns may not necessarily be the result of financial wizardry, but in fact the result of illegal or at least highly risky behavior.

I wonder if all those skeptical liberals will give back the contributions Madoff made to them (http://www.opensecrets.org/indivs/search.php?name=madoff&state=NY&zip=&employ=&cand=&c2008=Y&c2006=Y&c2004=Y&sort=N&capcode=wvxn8&submit=Submit)?

[flere-imsaho]

I wonder if all those skeptical liberals will give back the contributions Madoff made to them (http://www.opensecrets.org/indivs/search.php?name=madoff&state=NY&zip=&employ=&cand=&c2008=Y&c2006=Y&c2004=Y&sort=N&capcode=wvxn8&submit=Submit)?

I'm not surprised that you've missed my point.

[SportsDino]

Savings in current investments are evaporating, because the companies are falling apart. However, if you opened the box, took out the money, and stuffed it in gold... your 1000 is still 1000 (or if you got lucky 1300 in one month return...).

[JonInMiddleGA]

I'm not surprised that you've missed my point.

I'm not surprised that you had little point to begin with. It was just the usual left-wing b.s., which I felt like deserved a little reality check.

[Flasch186]

Savings in current investments are evaporating, because the companies are falling apart. However, if you opened the box, took out the money, and stuffed it in gold... your 1000 is still 1000 (or if you got lucky 1300 in one month return...).

not everyone and I'd venture to guess a very very small sector of the entire populous has access to gold, it's investments, or any investments for that matter so that's bunk.

[SportsDino]

Isn't the idea of all these various investment instruments based on offering choice to their clients. If your future is tied to assets that are volatile (like stocks) and you have no mechanism for liquidating them before they lose 90% of their value, then I'm sorry.

Your talking about a box full of hundreds turning into ten dollar bills, first you put a story on how its deflation (its not) and then you say the answer is 're-inflation' (which will blow the economy up entirely in my opinion). The real situation is if you have a box full of Bear Sterns shares that was worth $1000, and you left them there without selling them during the entire downward spiral, well now it is worth $100. An entirely different problem than deflation or inflation... the banks are begging for inflation (bailouts) to try and fix their stock's spot price, and that is just bad economics.

Gold is just an example of a real asset that is an alternative for your investing dollars than a company stock (and not always a good one, its volatile too, but slightly resistant to inflation). No one says you have to ride the corporate down-bubble all the way to financial ruin, even if you have liquidity barriers at some point the fee for early withdrawl can be outweighed by loss of your principle value. It is not impossible to have savings, heck, given the lobbying for capital gains CUTS its not impossible to have GAINS in this environment. Price fixing stocks and corporate balance sheets to indirectly prop investors is stupid, and easily gamed by the same CEOs/CFOs who created the situation.

And big corporate corruption is not a red or blue issue, screw the politics, transparency and rooting out fraud are important to all of us. It is obvious wall street has been playing games, mocking anyone who exposes it has been a big past time of both big Democrats and Republicans.

[Flasch186]

i have a feeling that it doesnt matter what's said. What I said is....

I want a balance inflation to counter the deflation (hopefully short term) that is occurring so that we can avoid the cataclysm that I foresee. You disagree with the numbers on the picture....so the argument is silly to have. I believe the numbers on the painting, when painted, complete a dire picture of terrible consequences. You dont.

We are suffering through what I hope is a short period of deflation. On the other end hopefully we'll have a short term of inflation and eventually the see-saw will come to rest.

A $1000 bill isn't a $1000 bill because it was built on a house of cards and when the box was open and re-evaluated to it's true value, on a Tuesday, was that the 1,000 was actually different denominations. Not caused by inflation or deflation but bad (inaccurate) balance sheets (and a whole lot more). The results are the same though that most people, with very good intentions, that trusted a littany of people that they were supposed to, got fucked.

You argue about the instruments being offered as choice but the choices were a deck of lying cards, what choice is that? At some point those with a license have some responsibility to their clients no matter the industry (im sure you feel it's personal responsibility so no need to comment here).

[Fidatelo]

I need a flere diagram to explain all this nonsense about shoeboxes full of ever-fluctuating denominations of money.

[Flasch186]

I just heard a CNBC contributor talk about it in terms of the "Bogadollar". A dollar valuation that is simply bogus so perhaps that helps tell you what im thinking since I agree with his description.

[flere-imsaho]

I'm not surprised that you had little point to begin with. It was just the usual left-wing b.s., which I felt like deserved a little reality check.

I'm not surprised that your lack of understanding didn't stop you from getting on your high horse to give me a "reality check".


Feels like we're back in August, Jon.

;)

[SportsDino]

I disagree that we need the government to induce inflation. I think the see-saw game is what causes depressions, and price fixing of anything is always easily gamed.

If you see the buying power of your dollars increasing, then we have deflation, if you see it decreasing, we have inflation. Ignore the 'experts' that think monetary policy solves all problems, that is how you get 0% rates and it still doesn't impact the economy.

To save some of these bad companies balance sheets through inflation alone it would need to be a triple digit inflation rate. There is simply not enough inflation to handle leverage, every attempt in history to do so has led to economic collapse that makes what we are going through look like a sunny day. The only thing that handles leverage is failure of the entities, the old default risk which is supposed to be the basis of debt pricing.

I am getting pissed that companies are claiming they don't know how to price risk. The fact is they forgot the way this system works. As long as they keep throwing out that line I fear for the safety of our economy being in the hands of these madmen. That is why I want these bad eggs to be crushed, at best they are totally incompetent, at worst they are actively destroying our society.

I wish it could be solved by printing a whole bunch of money. It won't though, it will just make good companies have to share the fate of all the bad ones.

[Galaxy]

So the rate cut looks like it could have an impact on the housing market with 30-year fixed rates at their lowest rates in decades.

[Balldog]

I'm so p'd off a GM today...they've asked us to buyout a supplier in chapter 11 and have had us running through hoops to buy this company that was about to go under. We've been negotiating with them for weeks, really heavy the last 2 days. We were probably only a hour or so from an agreement, they show up at the plant and start taking all their tools.

All these people that thought their jobs were going to be ok because we were buying the plant start balling because they know its over.

Then come to find out, they are moving the tools to another supplier that is already in chapter 11 and they made the decision earlier this week. We've had people working 18-20 hour days on this.

I guess the thinking internally is its only a matter of time before the new supplier goes under so they'll come back begging us in a few months. I doubt I'll make it through the next wave of layoffs though.

[Flasch186]

almost time to go up to the dealership and offer to buy one of their cars off of 'em for cheap.

[BishopMVP]

The key to understanding what is going on is that prices have been in fairy tail land ever since the money went bonzo. They have stayed relatively fixed during this massive levering up and are actually behaving quite weirdly as we are levering down.I don't understand the pricing right now - we've only had 1 item in the store come down in price recently (1% Milk was bumped up to 3.09 a month ago and just came back down to 2.99). Everything else is staying static or being bumped up - in the case of gum/tic-tacs 0.10 each, which is about 7-9%. Everything went up when gas went up for "transport and processing costs", but nothing's going back down.Note, if you don't mind playing on misery and panic, make some money now. My indirect oil short alone (yes I was a buyer as recently as the election and still know it will go up long term) made 40% one month, two gold transactions (my inflation fears cause me to avoid storing dollars) combine for 30% one month. Playing off this stupid auto bailout my GM short alone is 50% this quarter. Bah its endless.Of course. Any decent financial broker will tell you they personally make twice as much themselves when the market is going down. (As for oil, of course it will go up long-term, probably not to the $180/b highs, but that market is flooded right now - half the reason OPEC slashed things so drastically is that they're running out of tankers to float and store excess oil in. It's also unbelievable to me that oil has cyclically risen every year in the summer, fallen every year in winter almost like clockwork and most people haven't realized this.) It can't go down any lower - it's to the point where individual people and firms are buying and storing oil, then locking in futures contracts and making guaranteed money. If only I had a few million in excess capital...Once upon a time, it was fashionable for free market conservatives to mock "liberals" for professing a certain skepticism as to whether all the dealings on Wall Street were necessarily above board. I sincerely hope that one of the lasting results of this whole mess will be greater oversight and an acknowledgement that unbelievable returns may not necessarily be the result of financial wizardry, but in fact the result of illegal or at least highly risky behavior.What does this have to do with ideology? The man ran a Ponzi scheme and committed fraud. It's a rather damning indictment of the SEC and private risk/asset management companies that didn't call him on it earlier, but no "free market conservative" advocates for people to give their money to people doing things they don't understand. If anything, it bolsters my argument that these current regulations (and any new proposed ones) aren't working and only serve to give the masses a false sense of security.

85-90% of people in the finance industry aren't much/any better than the average guy from the street, and due to a number of factors (chief among them a populace that hadn't experienced a large downside event) highly risky behavior was being rewarded, but that's quite different than outright fraud.not everyone and I'd venture to guess a very very small sector of the entire populous has access to gold, it's investments, or any investments for that matter so that's bunk.The majority of the US population has access to investments through 401(k)'s, etc, if not owning stock outright. And if you want gold*, I'd recommend an ETF over an individual stock - Gold exchange-traded fund - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Gold_exchange-traded_fund) . Nobody physically goes out and buys/sells gold bars.

*I wouldn'tGold is just an example of a real asset that is an alternative for your investing dollars than a company stock (and not always a good one, its volatile too, but slightly resistant to inflation).This I strongly disagree with. Gold is no more a "real asset" than US dollars or tulips - it has no intrinsic value and is merely a placeholder for skittish investors. It's also been much more volatile than the dollar historically and has a huge catastrophic downside risk. Gold could easily collapse 50-90% overnight and you lose that much in straight purchasing power. If you have your money in dollars and the dollar collapses overnight, it will still buy just as many goods (ok, slightly less, but the amount we import is actually fairly miniscule compared to the hyperbole around our trade deficit.)I want a balance inflation to counter the deflation (hopefully short term) that is occurring so that we can avoid the cataclysm that I foresee. You disagree with the numbers on the picture....so the argument is silly to have. I believe the numbers on the painting, when painted, complete a dire picture of terrible consequences. You dont.We've "balanced the deflation" multiple times since the late 1980's and had no companies failing. Badly run companies fail, the good ones survive and new, hopefully better ones are started up, and then it happens again a cycle later. Call it creative destruction, call it survival of the fittest, but it is an essential part of any free market system. By "balancing the deflation" you're not solving the problem - you're just going to push it farther down the road and probably exacerbate it.We are suffering through what I hope is a short period of deflation. On the other end hopefully we'll have a short term of inflation and eventually the see-saw will come to rest.The see-saw will never come to rest. Risk is a part of life. I just watched Batman again and I don't want to sound like the Joker, but things never go according to plan, it's time to accept that and factor it into your daily life and future financial planning.

You're bringing up Madoff, who was clearly cooking the books because he produced small but consistent gains every year in a fairly small, controlled environment he presumably knew very well, yet you're advocating the government do that for an economy at large that is orders of magnitude more complex and diverse. Do you see the dichotomy there? Do you see why it's impossible for the government to do that if you want to have any sort of dynamism and entrepreneurship?I am getting pissed that companies are claiming they don't know how to price risk. The fact is they forgot the way this system works. As long as they keep throwing out that line I fear for the safety of our economy being in the hands of these madmen. That is why I want these bad eggs to be crushed, at best they are totally incompetent, at worst they are actively destroying our society.They haven't "forgotten". They've made the calculated decision that if they play chicken, the government will come in and bail them all out by paying more than the assets are likely worth. And that clearly appears to have been the correct decision for most companies/industries. If the government had held the line early, you would have liquidity by now - it might be greatly deflated liquidity, but the risk would have been priced in and the larger banks would have been lending between each other again. The $600b+ of bailout money sitting there is allowing them to put off making the tough decisions because they all think there is a chance they'll be able to recoup all the mistakes they made.I wish it could be solved by printing a whole bunch of money. It won't though, it will just make good companies have to share the fate of all the bad ones.Amen (along with costing me and those in my+my siblings generation tens of thousands of dollars later on.)

[BishopMVP]

It's a rather damning indictment of the SEC and private risk/asset management companies that didn't call him on it earlier, but no "free market conservative" advocates for people to give their money to people doing things they don't understand. If anything, it bolsters my argument that these current regulations (and any new proposed ones) aren't working and only serve to give the masses a false sense of security.Or actively prevent the system from working correctly - Madoff Madness | The Big Money (http://www.thebigmoney.com/articles/news/2008/12/16/madoff-madness?page=full)
Much of the money that Madoff managed came from people who'd written a check not to Madoff directly but to so-called "funds-of-funds": hedge funds that had raised money from investors. A few of these funds-of-funds, such as Fairfield Sentry and Tremont Group's Rye Investment, had billions of dollars invested with Madoff and teams of auditors to track it. These companies should have wised up to what was going on much earlier.
Thanks to the Bayou court decisions, however, the moment Madoff was revealed as a fraud, any money that these funds-of-funds would have managed to take back would become gains that have to be given back to be redistributed among all the losers in the Madoff scheme. Now, this sounds bad enough, but ... again, there's more. There's no time limit on the gains they'd have to give back, so any fund that outed Madoff could be on the hook for any profits it had gained from its Madoff investments for years back. So, as my fund-manager friend puts it, "The question people have to ask is not, 'Do I have money in a fund that has exposure to Madoff now?' but, 'Do I have money in a fund that that has ever invested with Madoff?' "Perfect.

[Fidatelo]

I was reading the newspaper last night (I always read it after work, so I'm basically 24 hours behind on news) and saw that the stadium deal that's been in the works here for a few years is basically being fast-tracked by all levels of government because it's an infrastructure project that can get 'shovels in the ground fast'. Apparently that is the new criteria for getting your project approved now. It's not important if the project makes sense, is financially sound, or has all the details worked out. Can you get to work on it quick? Alright then, have some cash and hire some people!

I also saw that Canada's finance minister has finally decided that our economy might not be in great shape (this guy is a fucking genius!), and that we are going to run deficits for the next 2-3 years at least. From the sounds of it, they will be to the tune of 5-15 billion each year, and I'd bet my house that it will be closer to the high end than the low one. I can't seem to find any charts, but I'm guessing that in the next 5 years we will undo all of the surplus budgets that Canada posted over the last decade. What a joke.

[Mizzou B-ball fan]

Has OPEC become a joke at this point? They've made two big cuts in supply over the past couple of months and no one seems to flinch. At some point, they're going to have to work as a group and actually cut when they say they're going to cut. Until then, I'm not sure that they have nearly the control that they think they do over the world market.

It may get worse rather than better, mostly due to Chavez. That country is hurting in a bad way financially and relies on that oil revenue. He's preaching from a hilltop how supply needs to be cut, and then failing to do so himself.

[flere-imsaho]

Bishop: I think you've somewhat misunderstood my point. For years we've been told by free-marketers that the industry could be self-regulating and there were mechanisms in place to avoid this kind of large-scale fraud. Evidence would suggest, as you point out, that this is clearly not the case.

Now I'm not advocating the implementation of draconian regulations. I just think that this would be a good time to take a look at the illegal (or just downright stupid) activities that led to this mess, derive some lessons learned, and put in place some regulatory tools and mechanisms to help prevent this kind of thing in the future.

[flere-imsaho]

I'm going to post this at the risk of sounding really partisan, safe in the knowledge that most of you consider me pretty partisan anyway. :D

And big corporate corruption is not a red or blue issue, screw the politics, transparency and rooting out fraud are important to all of us. It is obvious wall street has been playing games, mocking anyone who exposes it has been a big past time of both big Democrats and Republicans.

I'm not sure that's 100% true.

Since Reagan "the left" has consistently argued that deregulation has been taken too far and "the right" has told "the left" that they're a bunch of idiots who don't understand economics and the free market.


To go off on a tangent for a moment, I've always thought the critical flaw in traditional Socialism is that it fails to take into account human nature - specifically the forces of ambition and greed. Socialism tends to provide no real outlet for these traits, so in any real-world implementation, they found other outlets and eventually bring the system down.

Ironically, however, based on recent history, perhaps one could say the same thing about unfettered capitalism. Responding to the call of ambition and greed, actors within the system behaved in a manner that put the entire system into jeopardy.


Where does this leave us, then? I think we need to finally kill this myth "the right" continues to propagate that the economic system will be totally fine if left completely unfettered. While we're at it, let's kill another myth that "the left" are only interested in a return to quasi-planned economies. No serious Democratic politician believes in that anymore, and the President-Elect certainly doesn't.

I think the bottom line is that we need to take a step back, survey the carnage, and implement, for the first time in a long time, perhaps ever, better regulation for the financial industry and leave aside the mistaken assumption that in so doing, we'll somehow be killing this industry off altogether.

[Fidatelo]

I think transparency is the key to everything. Mark Cuban had a post (http://blogmaverick.com/2008/12/16/the-sec-madoff-and-xbrl/) about making everyone use an XML reporting format called XBRL. Stuff like that would be a great start.

[JonInMiddleGA]

Talk about your law of unintended consequences

My Way News - NY will lose $178M from 6 Goldman bonuses alone (http://apnews.myway.com//article/20081220/D956486O1.html)

ALBANY, N.Y. (AP) - Gov. David Paterson said Friday that the loss of tax revenue from just six Goldman Sachs' executives will cost New York $178 million.

The executives complied with the urging of New York Attorney General Andrew Cuomo and others who said in November that major Wall Street companies benefiting from federal bailouts shouldn't pay out the usual huge bonuses to executives.

Paterson says it is the right thing to do, but the result is a further hit to the fiscal crisis of state government.

"Things could go even more south in a big hurry," Paterson told reporters.

He said Wall Street firms receiving federal bailout did the right thing by forgoing bonuses to their executives, but that has had a devastating effect on New York's fiscal crisis because Wall Street taxes accounted for 30 percent of state revenue in the last fiscal quarter.

"I think it was the right urge," he said, but "the state lost $178 million in that moment."

[Marc Vaughan]

Has OPEC become a joke at this point? They've made two big cuts in supply over the past couple of months and no one seems to flinch. At some point, they're going to have to work as a group and actually cut when they say they're going to cut. Until then, I'm not sure that they have nearly the control that they think they do over the world market.

It may get worse rather than better, mostly due to Chavez. That country is hurting in a bad way financially and relies on that oil revenue. He's preaching from a hilltop how supply needs to be cut, and then failing to do so himself.

I think with oil prices the countries and speculators involved got greedy - now they're scared that their consumers are on the verge of making a real commitment to alternative energies ... until that fear passes (give it 6 months) I don't see oil prices being resurgent to a huge extent.

Once its known 100% which way the cookie will crumble with regards to alternative energy (esp. in the US) I think oil prices will normalise to something more sensible - most likely around $70/barrel (which appears to have been the expert 'consensus' for the price for ages).

[SportsDino]

Agree with Bishop's earlier post pretty much across the board (I made a longer post a few days ago that got ate up by a browser crash).

Oil prices are behaving oddly, when you start seeing people preparing to create oil warehouses you know its an anomaly set to burst. Right now I consider oil to be one of the big 'negative bubbles' right now, speculation causing a price that is not sustainable in the real world. I almost wish I had a bunch of giant empty tanks and capital, or a refinery.

Alternative energy to me is hardly a variable, the tech is still not there, not enough supply, and despite current pricing concerns the demand is too much. It is high oil prices that increase the push towards alt energies, if you could buy oil cheap versus extensive R&D and equipment expenses, what would you do? Current prices are a reaction to everyone thinking the economy is going to explode... and I would be surprised if anyone is actually selling real oil at this price. At some point it doesn't even make sense to load the ship, you just leave it at your oil field in Saudi Arabia and wait for the shorts to fail.

[Anthony]

fact: there IS going to be alternative fuel in the future. some would prefer near future, others speculate at some point in the horizon. but it's coming. oil prices were bound to decrease within the next 5 years once "the next big thing" comes out. people know what $4.50-$5 per gallon gas feels like and no one wants to go back. too late for OPEC to do anything. they basically have fast forwarded their own demise.

i don't know why everyone is up in arms, this was the whole point behind investing in alternative fuels here in the US: to stop putting money in the pockets of Sheiks and Middle Eastern countries. you live by the sword, you die by it. these Middle Eastern countries that don't produce anything other than a finite good (a finite good that will one day be obsolete, mind you). while America may have to curb our dependence on Middle Eastern oil, those countries will have to learn how to produce other goods/services to compensate for the decreased global demand.

[Marc Vaughan]

Alternative energy to me is hardly a variable, the tech is still not there, not enough supply, and despite current pricing concerns the demand is too much. It is high oil prices that increase the push towards alt energies, if you could buy oil cheap versus extensive R&D and equipment expenses, what would you do? Current prices are a reaction to everyone thinking the economy is going to explode... and I would be surprised if anyone is actually selling real oil at this price. At some point it doesn't even make sense to load the ship, you just leave it at your oil field in Saudi Arabia and wait for the shorts to fail.

I partially agree with this - BUT don't think this will come down to simple economics.

Politically America doesn't want to be reliant upon the middle east for Oil and that will most likely cause the administration to force alternative energy ahead through subsidies and suchlike, this will force the price for alternatives cheaper than Oil and thus encourage consumers to utilise it.

The last time I remember this happening was moving from 'leaded' petrol to 'unleaded' ... there was no real benefit to the consumer (outside of health which wasn't immediately visible) however in the UK the goverment priced unleaded petrol more cheaply and over the course of a handful of years this and consumer demand phased out leaded petrol being available (accompanied at the end by legal requirements to run unleaded in cars - by this point most people already did so there wasn't a huge outcry).

I expect the same thing to happen with alternative fuel - most likely hydrogen based (as the conversion to use hydrogen on a "normal" car is fairly minor I believe).

[Marc Vaughan]

fact: there IS going to be alternative fuel in the future. some would prefer near future, others speculate at some point in the horizon. but it's coming. oil prices were bound to decrease within the next 5 years once "the next big thing" comes out. people know what $4.50-$5 per gallon gas feels like and no one wants to go back. too late for OPEC to do anything. they basically have fast forwarded their own demise.

Agreed wholeheartedly ...

[Anthony]

exactly Marc. but let's not make the mistake of thinking once the next official alternative fuel source hits the mainstream that oil/gas all of a sudden ceases to exist or is going to magically disappear overnight. i'm just seeing a time where oil export won't be enough to subsidize the lifestyle's of the Middle Eastern sheiks. put it this way - broadband didn't make dialup modems obsolete overnight, but the adaptation of a far superior and gradually more affordable broadband just sped up the demise of the dialup modem. but even today with everyone seemingly having broadband there are always going to be those small niche's that continue to rely on dialup. its just if you're a company that makes dialup modems you may want to consider branching out into something else. same goes for the Middle East.

but don't think any of this happens if there isn't a global recession. India/China curtailing their gas consumption is why gas is under $2 a gallon. not because of America. the global recession had its positive aspects.

[Mizzou B-ball fan]

India/China curtailing their gas consumption is why gas is under $2 a gallon. not because of America.

I'd be EXTREMELY interested to see your source stating that the demand decline in America had no relevant effect on the price of gasoline. Thanks in advance for the link.

[SportsDino]

I agree in the long term about alternative fuels, should have specified that I do not believe alternative energy is causing the current oil pricing situation. The current situation of low oil prices is demand driven, although I think it is being pushed by speculation just like the incredibly high prices were being driven by speculation (there was no valid supply excuse for $150 and there is none for $40).

Alternative fuels will eventually impact the price of oil, hopefully soon, but the tech and the supply is not there yet. I hope despite the economy we continue the investment... of course I'm one of those fools that think the U.S. needs to 'tech it up' to come back as an economic superpower. High tech fuel efficient cars can drive a part of our economy if the fools at the top of the chain were not concerned with meaningless power plays and corruption. I think other countries automakers realized this years ago, they are hoping to get the first viable, low-cost, alternative fuel (or hybrid) cars out in the market so that they can take the entire market... not just playing the 'oh lets build another SUV' game that GM/Ford were content to do for decades.

[Anthony]

I'd be EXTREMELY interested to see your source stating that the demand decline in America had no relevant effect on the price of gasoline. Thanks in advance for the link.

i don't know, is there a link for common sense?

we had plenty of help in driving the cost of gas down. global recession is why. Europe and Japan declining their consumption i should've added.

do the math:

you think gas shot up to $5 a gallon because of America alone? in the span of a year we increased our demand so significantly that the price that the price of a barrel of oil had no other option but to increase up to $145? of course not, you aren't that silly to think that. by the same token you can't then think America buying more Prius' all of a sudden caused a barrel of oil to decline to $35 (and dropping).

[flere-imsaho]

I too doubt that the demand decline in American had no relevant effect on the price of gas.

[Mizzou B-ball fan]

i don't know, is there a link for common sense?

we had plenty of help in driving the cost of gas down. global recession is why. Europe and Japan declining their consumption i should've added.

do the math:

you think gas shot up to $5 a gallon because of America alone? in the span of a year we increased our demand so significantly that the price that the price of a barrel of oil had no other option but to increase up to $145? of course not, you aren't that silly to think that. by the same token you can't then think America buying more Prius' all of a sudden caused a barrel of oil to decline to $35 (and dropping).

Interesting.......that link doesn't work for me. Try reposting it.

[Edward64]

Here is to a damn good 2009.

Happy New Years everyone and damn good riddance to 2008.

[Warhammer]

Since Reagan "the left" has consistently argued that deregulation has been taken too far and "the right" has told "the left" that they're a bunch of idiots who don't understand economics and the free market.


To go off on a tangent for a moment, I've always thought the critical flaw in traditional Socialism is that it fails to take into account human nature - specifically the forces of ambition and greed. Socialism tends to provide no real outlet for these traits, so in any real-world implementation, they found other outlets and eventually bring the system down.

Ironically, however, based on recent history, perhaps one could say the same thing about unfettered capitalism. Responding to the call of ambition and greed, actors within the system behaved in a manner that put the entire system into jeopardy.


Where does this leave us, then? I think we need to finally kill this myth "the right" continues to propagate that the economic system will be totally fine if left completely unfettered. While we're at it, let's kill another myth that "the left" are only interested in a return to quasi-planned economies. No serious Democratic politician believes in that anymore, and the President-Elect certainly doesn't.

I think the bottom line is that we need to take a step back, survey the carnage, and implement, for the first time in a long time, perhaps ever, better regulation for the financial industry and leave aside the mistaken assumption that in so doing, we'll somehow be killing this industry off altogether.

I would argue that the problem is not that we had an unfettered capitalist society, I would argue that we tried to find a dangerous middle-ground. I use power as an example. When California deregulated, there were some screwy laws in place that commodities could not be bought on the spot market. That meant unless people knew what they needed 3 months out they were hosed. I look at all the small natural gas peaking plants that were built down in my neck of the woods about 10-15 years ago because nat. gas was cheap, and now they are never running because they are not profitable because of the increased demand for nat. gas since all the plants were completed.

On the flip side, I think we all know why over-regulation does not work either. I think the medium is to realize that certain industries do need to be regulated, I think power is a great example. Cheap power is great for industry. It is great for growth, but in a deregulated environment, what incentive is there to provide additional power plants?

Just my .02.

[SportsDino]

The regulation should be to make all corporate finances as public as possible. Right now studying balance sheets and other filings is an arcane art, and to really get access to important data you need to buy it (like sales figures by product that are not published). Given all the games you can play to rearrange financials, even excluding Enron style shadow companies, it is very hard to adequately evaluate an investment.

I think we need to go a new direction, although it is touchy where the line is drawn (too much information may lead to mass overhead, or if the sheep investors are in panic mood, they might use the increased information to fuel more panic and volatility).

Regulate that everything that can be made public, is public. I would go so far as to breakdowns of accounts to what they are holding (say a massive bank should have to say by percentage how much is in credit swaps for instance versus standard 30 year mortgages). For utilities, break down revenues, supply costs (and what supplies), etc...

More information is better. Heck, you can give computer geeks like me jobs to sort and process it all even. Secrecy has no value in a public company doing public business... even areas with secrets like R&D, trade secrets, and so on, they can provide breakdowns of what money is in those areas without revealing specific distributions (the point being that a company abusing the protection would be obvious because they would have really high percentage in secret accounts).

So regulate that information is released and is accurate. Then its up to the investors to make informed decisions with it, if they actively ignore companies building up massive sub-prime portfolios, well then we are screwed (I managed to detect the shenanigans without access to such detailed information, but it was not easy and involved guesswork to find sources for anomalies in the reports... although any idiot could have seen super leverage at Freddie Mac for instance).

The economy can not be 'controlled' and perform well, most of the controls I have seen over the last decade of paying attention have been anti-business in my opinion (they boost big business at the expense of gimping new entry). If we increase controls what you will see is the value of government lobbying and crony politics INCREASES, and performance will decrease yet further. The government itself is corrupt as all hell, we openly admit that its campaign dollars that swing policies, not ideals... so how can you not expect billions in pork tacked onto 'emergency bills', and fights over auto bailouts based on self-interest lines (south likes foreign autos they vote against, north is auto puppet, they vote for), and so on.

We need vicious money making driven investors who do not have the incentive to loot the corporations. Right now our economic structure is all about the CEO/BoD buddy system, and the weaknesses of it are becoming increasingly obvious. It is simply too easy to loot your own business for bonuses and stock options, manipulate short term price, and bail with a golden parachute... far easier than to come up with creative ideas for growing your business. This is why we had the generation of CEOs evaluated as good for how well they cut jobs when a company is in the crapper, or the megabonuses for creating a one year gain at the expense of a three times loss two years later, or periods of removing the 'old guard' like at Ford before you can do anything. We don't have leaders in the businesses, and they don't have accountability to the shareholders who mostly seem to behave like sheep. Vicious investors that demand competence from companies is critical, the incentives need to be realigned so that your CEO bonus and survival depends on increasing the economic health of the company both in the short and long terms.

We need people when they hear about a CEO leading the company into a gutter to actually expect his ass to get thrown on the street, and not 'oh he should be able to keep his job too, lets all sing kumbayah'. We seem driven to mediocrity and status quo, even though in reality this happy little period of the modern world is only about 100 years out of thousands of human existence. Any time the masses get content and don't want to rock the boat, the boat usually ends up sinking in dramatic fashion.

[Edward64]

Well ... its definitely getting worse, eh?

I would like to pose a stock picking question though and maybe get us thinking ahead and get us out of this damn funk.

Are there any high quality companies (GE, P&G, Walmart, JP Morgan etc.) which I should consider buy stocks now with a time horizon of 15-20 years? I'm thinking I should stock up on some of these in my Brokerage 401k in place of other mutual funds.

[DaddyTorgo]

Intel. Intel is trading at it's cheapest P/E in YEARS and their annual research budget is equal to AMD's annual REVENUES

[st.cronin]

I would definitely say the tech sector in general. That's the industry that will likely lead us out of a recession.

[SportsDino]

I am trying to avoid giving advice, especially because as Bishop pointed out earlier, you can never oversimplify a situation (for instance he knocked me good on gold, I wrote probably ten paragraphs agreeing with him and explaining trends in gold and currencies, but thankfully it got destroyed by a browser crash and the world was saved from boredom)....

But ya, research your stocks. Look at their revenues and earnings, I'm a big fan of the dividend as I'm a hardcore for the traditional intent of a stock... but dividend like earnings is an indicator of cash value of that piece of paper. Realize that they are not fixed though, nothing guarantees they won't cut dividends or estimates of future conditions especially in this climate.

I like tech sector and I agree the U.S. needs to 'tech it up' to hold onto the economic superpower title (if we keep on the path to mediocrity expect to be outpaced by foreign business, actually I made a killing my first year favoring international growth... but situation is different now). Buy tech with a business model you understand though.

Financials in my opinion still have some of the worst downside risk. Heavilly research, although I think there are some diamonds in among the rough (as always happens when an entire sector is crapping out, sometimes some future winners get roughed up, and sometimes solid ones just become more affordable).

I do think it makes sense to have a long portfolio (not saying the market has a bottom now, but that moving on good companies has to happen before the upturn if you want to get 'lucky'). Just please attack the books as best you can, break down any funds you own to see what is in them and how they are distributing after the bloodbath... if you play stocks directly, I really think its best to look at companies reports during recessions... yes the numbers might look bleak, but this is probably the closest you'll come to real truth about what a company looks like. Any company looks good in fat years, its at the skin and bones stage where you can see how they survive. For instance, I learned loads about the CURRENT financial disaster by doing a college project a few years ago now about the S&L years.

Okay I needs to be shutting up.

[Flasch186]

If only I wouldve shorted Oil when I said I would (or was thinking about it), dang.

[flere-imsaho]

GE and good, established pharmas are, like everything else, beaten down at the moment from where the market will usually price them and are, I think, very safe to continue to do well, economically.

I think all financials are high risk, high reward. The only three I'd consider investing in are JP Morgan Chase, Citibank & Bank of America, and even one off those three could go under (or get taken over by the government).

[SportsDino]

Read up on recent history on Bank of America (I can't comment on other two)... I'm a bit paranoid and wary about them at the moment. They've made acquisitions that at least a few people have lightly criticized, also while it may not be explosive bad collapse scenario I think they will need to either estimate low or they will miss it.

My paranoia should not prevent you from doing your own research, I have been madly wrong before (say about buying oil for instance). Also if it is any indication about the strength of my thoughts, I have no position in regards to BoA, either buy or short... I'm mostly researching for indirect stuff and more examples (in particular more data on what I'll randomly call 'merger cannibals' I guess ;) ).

[SportsDino]

Another heart-warming tale of how our current economy works:

The Highest Paid Man on Wall Street - The Daily Beast (http://www.thedailybeast.com/blogs-and-stories/2009-01-09/the-highest-paid-man-on-wall-street)

Just more evidence of the massive looting incentives that have been the modus operandi of the top level corporate thieves for a while. Even after the company is busto there are ways to corrupt large sums of money into your hands at the expense of others, its just terrible if you ask me.

[Tekneek]

Even after the company is busto there are ways to corrupt large sums of money into your hands at the expense of others, its just terrible if you ask me.

Or free market capitalism at its best, depending on who you ask. I'm sure this can be twisted into somehow being the fault of government intervention in the market.

[SportsDino]

This happens in free market capitalism when the incentives are screwed up (as I mentioned before). If corporations were functioning correctly, they would not let worthless executives sell assets below value in order to earn a third party paycheck to said worthless executive.

Corporations are not built just to provide looting for the top CEOs, we have the executives of this generation looting the efforts of the past few. I'll be more than happy to show how that is not free market capitalism, but a system guaranteed to collapse.

[Grammaticus]

GE and good, established pharmas are, like everything else, beaten down at the moment from where the market will usually price them and are, I think, very safe to continue to do well, economically.

I think all financials are high risk, high reward. The only three I'd consider investing in are JP Morgan Chase, Citibank & Bank of America, and even one off those three could go under (or get taken over by the government).

US Bank is the strongest of the big banks. They are very conservative and do not have a large portion of their capitol in the mortgage market. Also, the don't touch sub prime lending.

[flere-imsaho]

US Bank is the strongest of the big banks. They are very conservative and do not have a large portion of their capitol in the mortgage market. Also, the don't touch sub prime lending.

Yeah, that's a good point, and I'll admit my post was pretty rushed. Another bank that seems to be in good shape is Wells Fargo, for similar reasons.

[Edward64]

Not a good week for economic news, Obama seems to be raising red flags every. Another foreclosure report caught my eye ...
Flood of foreclosures: It's worse than you think
Banks are moving slowly to list repossessed homes for sale, which could mean that housing inventory is even more bloated than current statistics indicate.
Flood of foreclosures: It's worse than you think - Jan. 23, 2009 (http://money.cnn.com/2009/01/21/real_estate/ghost_inventory/index.htm?postversion=2009012316)

On the hand, my company did end up in the Fortune 100 best companies to work for which I thought was pretty cool. Its not for everyone but I do think it is one of the better companies.
100 Best Companies to Work For 2009: NetApp - NTAP - from FORTUNE (http://money.cnn.com/magazines/fortune/bestcompanies/2009/snapshots/1.html)

[Flasch186]

Deed in lieu of's are also on the rise and those dont even show up...plus you have to add that my home should be on the market in a few weeks so +1 :)

[Northwood_DK]

Its a slow day at work so i found the testimony from the guy who testified before the House about the Madoff fraud.

I don't claim to understand all he is saying but i still found it to be fascinating stuff.

http://media.ft.com/cms/5dc7a512-f2f6-11dd-abe6-0000779fd2ac.pdf (http://media.ft.com/cms/5dc7a512-f2f6-11dd-abe6-0000779fd2ac.pdf)

[SportsDino]

Finally got around to reading this article (well started anyway)... fascinating read. Yes I know I must live a very boring and sad life if this is how I'm spending my Saturday (I'm under orders not to post on this board for a week starting tommorrow :( ).

Anyhoo, relevant to my recent blathering, page 48, read the little blurb on cost of capital and DOD contracts. That is exactly what I'm getting at with the giant database of doom. You can datamine out so much obvious corruption in the federal budget if you put enough math and figures together.

I also need to see if I can get my hands on a Bloomberg machine to further my evil plots.

[Galaxy]

Yeah, that's a good point, and I'll admit my post was pretty rushed. Another bank that seems to be in good shape is Wells Fargo, for similar reasons.

What pisses me off is the "all banks are bads" spin by the media and the government. The government forced the Bank of America/Merrill Lynch merger (which made the company even worst) and they forced nine banks to take bailout money (including Wells Fargo). They then paint Wells Fargo as an "evil" bank for spending "taxpayer" money for a junket to Vegas. Wells Fargo is healthy, they didn't need the money, and shouldn't have to answer to taxpayers (after not wanting to taxpayer money) when they were a responsible bank from the start.

Does this mean that the the irresponsible banks and execs shouldn't be dragged and hung? Of course not.

Drama Behind a $250 Billion Banking Deal - NYTimes.com (http://www.nytimes.com/2008/10/15/business/economy/15bailout.html?_r=1)

[JonInMiddleGA]

Speaking of Vegas, I quite enjoyed the mayor there taking Obama to task for his criticism of people deciding to do business in Vegas. His complaint in general was spot on, there are far less reasonable locations that could be chosen for a meeting.

Kind of made me wonder what would draw fire next? Being located in NYC or California since overhead there is so much higher?

[Buccaneer]

Considering the recent article and promotion about Vegas deals, I think it is one of the cheapest resort destinations out there.

[JonInMiddleGA]

Considering the recent article and promotion about Vegas deals, I think it is one of the cheapest resort destinations out there.

Goodman (I think that's the mayor's name) was upset that the city's suitability for business purposes was cast as suspect and I'd say that's a very fair complaint. I'm familiar with business only trips to Orlando so I know such a thing is possible in what is primarily a tourist/resort/vacation spot.

[Anthony]

quite frankly, in this current economic climate whether you needed bailout money or not - anything more than a conference room in a local Marriott is wasteful and looks bad.

[Galaxy]

When can banks re-pay the money?

[Anthony]

banks would prefer asap.

[SportsDino]

Banks forced to take bailout money, lol... they've got some good spin doctors.

[sterlingice]

Yay! Good news day!

-Retail sales rise 1% in January (http://news.yahoo.com/s/ap/20090212/ap_on_bi_go_ec_fi/retail_sales). Sure, not much, but better than the expected loss. Biggest increase in 14 months and 1st gain in 6 months

-Jobless claims drop slightly (http://news.yahoo.com/s/ap/20090212/ap_on_bi_go_ec_fi/economy;_ylt=AkNt7DXK0Jk6KYeCcCTTlAB34T0D). Still, a big number and higher than analyst expectations so this isn't exactly good news- just slightly better bad news

Any silver lining, I suppose

SI

[Raiders Army]

Speaking of Vegas, I quite enjoyed the mayor there taking Obama to task for his criticism of people deciding to do business in Vegas. His complaint in general was spot on, there are far less reasonable locations that could be chosen for a meeting.

Kind of made me wonder what would draw fire next? Being located in NYC or California since overhead there is so much higher?

Take it from Obama's point of view: it's the perception, not the actual effect that's important. He is all about perception and not any real affect on society.

[JonInMiddleGA]

My Way News - Midway Games files for bankruptcy protection (http://apnews.myway.com/article/20090212/D96A53AG0.html)

CHICAGO (AP) - Midway Games Inc. (MWY) (MWY), best known for its "Mortal Kombat" video games, said Thursday that it filed for Chapter 11 bankruptcy protection.

Midway said the filing stemmed from a change in ownership in late 2008 that led to accelerated buyback requirements related to two classes of debt that the company did not think it could fulfill.

In December, media mogul Sumner Redstone sold his majority stake in Midway - an interest of about 87.2 percent - to a company led by private investor Mark Thomas.

In a statement, Midway Chief Executive and President Matt Booty called the bankruptcy filing a "difficult but necessary decision."

"We have been focused on realigning our operations and improving our execution, and this filing will relieve the immediate pressure from our creditors and provide us time for an orderly exploration of our strategic alternatives," he said.

Midway said that it and its U.S. subsidiaries filed voluntary petitions in U.S. Bankruptcy Court for the District of Delaware.

Midway said the filing does not include its operations outside the U.S., and that they will continue to operate as normal.

The company is seeking several first-day motions so it can continue to operate normally.

Midway shares fell 10 cents, or 40 percent, to 15 cents in morning trading.

[Marc Vaughan]

The midway things been coming for ages - not exactly a great surprise imho and not really linked to the recesion per-se ..

[JonInMiddleGA]

The midway things been coming for ages - not exactly a great surprise imho and not really linked to the recesion per-se ..

Eh, I didn't figure it was worth its own thread but wanted to give it a brief mention, this seemed like as likely a place as any other.

[SteveMax58]

While we're on the subject of bankruptcies that were inevitable regardless of the recession.

Charter Communications to file for Chapter 11 - Feb. 12, 2009 (http://money.cnn.com/2009/02/12/news/companies/charter_communications/index.htm)

NEW YORK (CNNMoney.com) -- Charter Communications, a provider of cable TV, Internet and other broadband services, said on Thursday that it will file for bankruptcy, as part of a "financial restructuring."
The St. Louis-based company said it planned to reduce its debt by $8 billion as a result of a Chapter 11 filing. The company added it intended to file on or before April 1.
"The purpose of Charter's financial restructuring is to strengthen its balance sheet in order to fully support the company's operations and service its debt," said the company, in a press release.
Chief Executive Neil Smit said in the same release that the company "will be even better positioned to deliver the products and services our customers demand now and in the future" as a result of the filing.
The company described its operations as "strong," and said it had $800 million in cash to help meet its needs to continue operating. The company said in its press release that service should "continue as usual."
One analyst said the news was not a surprise and that it could be beneficial for the company.
"This is expected, and this is a fairly traditional style of bankruptcy," said Chris Roberts, analyst for Tejas Securities Group. "By cutting interest expense, they'll generate more cash flow to help invest in the business."
Charter's largest shareholder is its chairman, Paul Allen, a co-founder of Microsoft (MSFT (http://money.cnn.com/quote/quote.html?symb=MSFT&source=story_quote_link), Fortune 500 (http://money.cnn.com/magazines/fortune/fortune500/2008/snapshots/3063.html?source=story_f500_link)).
Charter, which has about 5.5 million customers across the country, is the nation's third largest publicly traded cable company, behind Comcast (CMCSA (http://money.cnn.com/quote/quote.html?symb=CMCSA&source=story_quote_link), Fortune 500 (http://money.cnn.com/magazines/fortune/fortune500/2008/snapshots/5035.html?source=story_f500_link)) and Time Warner Cable (TWC (http://money.cnn.com/quote/quote.html?symb=TWC&source=story_quote_link)). (Time Warner Cable is a subsidiary of Time Warner, which also owns CNNMoney.com. Time Warner (TWX (http://money.cnn.com/quote/quote.html?symb=TWX&source=story_quote_link), Fortune 500 (http://money.cnn.com/magazines/fortune/fortune500/2008/snapshots/10472.html?source=story_f500_link)) plans to spin off Time Warner Cable later this year.)
Charter's (CHTR (http://money.cnn.com/quote/quote.html?symb=CHTR&source=story_quote_link), Fortune 500 (http://money.cnn.com/magazines/fortune/fortune500/2008/snapshots/10875.html?source=story_f500_link)) stock plummeted nearly 50% on the news, to about 3 cents a share. Because of its low stock price, it is vulnerable to large fluctuations.

[Edward64]

Okay, finally the stimulus bill has passed. I really don't know if it will do the job ... may be too small (Fri NYTimes talked about the Japanese lost decade and that their advice was more $ stimulus and transparency in the banking system i.e. don't hide the losses).

In reading the plan below, it seemed alot of 'citizen relief' rather than 'business stimulus'. Not sure if that is a fair characterization and I understand the 'relief' portion will allow us to spend more for 'business stimulus' ... but I would have preferred a more targeted package.

Wouldn't this plan have been better just focusing on houses, foreclosure prevention/relief/mitigation, banking reform/nationalization (temporary) etc.? Maybe its swung to the other extreme from Paulson.

Stimulus measures that may help your wallet - Feb. 13, 2009 (http://money.cnn.com/2009/02/13/news/economy/stimulus_individuals/index.htm?postversion=2009021319)

NEW YORK (CNNMoney.com) -- The final topline price of the economic recovery package: $787 billion. That's below both the $820 billion House-passed version and the $838 billion Senate-passed version.

The compromises that the House, Senate and White House struck to finalize legislation changed the scope of a number of provisions, including those affecting individuals directly. In some cases, they either reduced or expanded a benefit relative to what appeared in the Senate or House versions of the bill.

Here's a look at some of the provisions that will have a direct effect on individuals in their paychecks, on their tax returns, and with regard to their unemployment benefits and health insurance if they've lost a job.

Making Work Pay Credit: The bill provides a $400 credit per worker and a $800 credit per dual-earner couple. The full credit would be paid to people making $75,000 or less ($150,000 per dual-earner couple). A partial credit would be paid to those making above those amounts but no more than $100,000 ($200,000 for couples).

The credit would also be refundable, which means that even very low-income families who don't make enough to owe income tax would be able to claim it.

For most working individuals, the credit will be paid over time at roughly $15 per period, assuming 26 pay periods in a year. Estimated cost: $116 billion.

One-time payments to those who don't work: For retirees, disabled individuals and others who don't work, the bill provides a one-time $250 payment. Estimated cost: $14.2 billion.

Break for higher income families: The bill includes a one-year provision to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax. The AMT was intended primarily for high-income taxpayers but has in recent years threatened to engulf those lower down the income scale. Estimated cost: $70 billion.

Temporary deduction for car buyers: The bill would let those who buy a new car, light vehicle, recreational vehicle or motorcycle in 2009 deduct state and local sales taxes as well as any excise tax charged in the purchase. The deduction would be available to those earning less than $125,000 ($250,000 for joint filers). It will be an above-the-line deduction, meaning even taxpayers who don't itemize may take it in addition to the standard deduction. Estimated cost: $1.7 billion.

Temporary credit for home buyers: The bill increases the size of an existing temporary and refundable first-time home buyer credit to $8,000, up from $7,500. It also removes the requirement under current law that the credit be paid back if the buyer stays in the home for at least three years. And it would extend the credit's expiration date to Dec. 1, 2009, from July 1. Those eligible for this credit must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009.

The full credit is available to those making $75,000 or less ($150,000 for joint filers). Estimated cost: $6.6 billion.

New temporary college credit: The bill introduces the American Opportunity Tax Credit, which would be in effect for 2009 and 2010. It expands the existing Hope Scholarship tax credit and would be worth as much as $2,500 for higher education expenses, up from $1,800 currently.

The full credit would be available to those making less than $80,000 ($160,000 for joint filers). Those making between those amounts and $90,000 ($180,000 for joint filers) would get a partial credit. And the break would also be partially refundable, meaning lower income families with little or no tax liability could now claim some of the credit. Estimated cost: $13.9 billion.

Temporary Pell Grant increase: The bill increases the maximum Pell Grant by $500 to $5,350 in 2009 and $5,550 in 2010. Estimated cost: $15.6 billion.

Temporary expansion of child tax credit: The bill increases eligibility for the child tax credit by lowering the income threshold that must be met for the credit to be refundable. The threshold would be lowered to $3,000 for this year and next. That will allow lower income families to claim more of the credit than under current law. Estimated cost: $14.8 billion.

Temporary increase in earned income tax credit: The credit will be temporarily increased to 45% from 40% of qualifying earnings for low-income families with three or more children. It also includes a marriage penalty relief provision for couples who qualify for at least a portion of the credit. Estimated cost: $4.6 billion.

Direct lifeline benefits
Health insurance help for the jobless: The bill includes provisions to help eligible jobless workers pay for health insurance under Cobra. Cobra coverage allows newly unemployed workers to keep health insurance provided by their former employers for a period of time.

For workers who have been laid off between Sept. 1, 2008, and Dec. 31, 2009, the government will subsidize 65% of their premiums under Cobra for up to 9 months.

Those people laid off between Sept. 1, 2008, and the day the stimulus law goes into effect, and who did not sign up for Cobra, will get an additional 60 days to do so and receive the subsidy.

The subsidy will be limited to those whose income for the year is $125,000 or less ($250,000 for couples filing jointly). Estimated cost: $24.7 billion.

Another provision provides states funding to help pay for expanded Medicaid rolls for workers who've lost their jobs and can't afford health care on their own or can't get Cobra coverage because their former employer doesn't offer a health care plan. Estimated cost: $87 billion.

Unemployment benefits: The bill provides jobless workers with an additional 20 weeks in unemployment benefits, and 13 weeks on top of that if they live in what's deemed a high unemployment state, of which there are now about 30. Estimated cost: $27 billion.

In addition, the weekly unemployment benefit will temporarily increase by $25 on top of the roughly $300 jobless workers currently receive. Estimated cost: $8.8 billion.

Plus, the first $2,400 of benefits in 2009 would be exempt from federal income taxes. Estimated cost: $4.7 billion.

Food stamp payments: The bill includes a provision would increase food stamp payments by 13.6%, so a family of four would see an additional $80 on top of the $588 per month they receive currently. Estimated cost: $19.9 billion.

The bill also provides assistance to help local groups providing food and shelter, elderly nutrition services such as Meals on Wheels, and a program to help food banks re-stock their shelves. Estimated cost: $350 million.

Other help for needy families: The bill provides funding to states to create a contingency fund through 2010 for the welfare program called Temporary Assistance for Needy Families, which provides cash assistance to the needy. Estimated cost: $2.4 billion.

[Edward64]

Found the Japanese 'lost decade' article.

In Japan’s Stagnant Decade, Cautionary Tales for America - Companies * US * News * Story - CNBC.com (http://www.cnbc.com/id/29179715)
The Obama administration is committing huge sums of money to rescuing banks, but the veterans of Japan’s banking crisis have three words for the Americans: more money, faster.

The Japanese have been here before. They endured a “lost decade” of economic stagnation in the 1990s as their banks labored under crippling debt, and successive governments wasted trillions of yen on half-measures.

Only in 2003 did the government finally take the actions that helped lead to a recovery: forcing major banks to submit to merciless audits and declare bad debts; spending two trillion yen to effectively nationalize a major bank, wiping out its shareholders; and allowing weaker banks to fail.

[Galaxy]

Am the only one who finds this package pathetic (and a reminder of last summer's $300 credit)?

[Mac Howard]

Wouldn't this plan have been better just focusing on houses, foreclosure prevention/relief/mitigation, banking reform/nationalization (temporary) etc.? Maybe its swung to the other extreme from Paulson.

While that is certainly worthwhile (and presumably the purpose of the remaining $350 billion TARP money) it would only deal with the initial (and one continuing) cause of the problem but not with the acceleration of the downturn that's now being caused by unemployment. The downward spiral that comes with unemployment has to be addressed as well and that's where the spending - replacing the lost demand - comes in.

What isn't being said by those who object to the demand package is that the usual supply side answer to recession - reducing interest rates - has run out of steam with rates now being near zero. The same happened in Japan in the 1990s.

You need to replace the demand lost by unemployment. Tax cuts and handouts are one answer but in the current circumstances not an efficient stimulus because people save too much of it (the Australian government gave $1400 to all pensioners in December and monitored the use of the money - only 20% was spent, 80% was saved, paid off credit cards etc).

Only government spending the money directly can ensure it is indeed spent and therefore an efficient stimulus - assuming there's adequate monitoring of the spending.

[Edward64]

While that is certainly worthwhile (and presumably the purpose of the remaining $350 billion TARP money) it would only deal with the initial (and one continuing) cause of the problem but not with the acceleration of the downturn that's now being caused by unemployment. The downward spiral that comes with unemployment has to be addressed as well and that's where the spending - replacing the lost demand - comes in.
I have read that this package is estimated to bring 3-3.5M back into the workforce which is your point above (not sure how those estimates are done). Thanks for your perspective.

[sterlingice]

Am the only one who finds this package pathetic (and a reminder of last summer's $300 credit)?

I find the tax cut part useless. If that $300B would have been infrastructure spending (re: jobs and long term benefit), I'd have been downright giddy.

SI

[Buccaneer]

I find the tax cut part useless. If that $300B would have been infrastructure spending (re: jobs and long term benefit), I'd have been downright giddy.

SI

That would have just added more to the backlog, pushing project starts to 2011 and beyond. Not only does it takes time to plan/bid/award/negotiate large construction projects, but there is only so much that can be done at the same time. Don't get me started on utilities infrastructure where very little of it will actually happen in the near future (due to current backlogs and lack of qualified field crews).

[SportsDino]

A key part of the Japan lost decade comparisons that gets lost behind the 'more money, faster' tagline, is actually ripping the banks apart (in audits) and wiping out shareholders if necessary. The banks in Japan did not want that and held on until something had to be done, and the banks in the US are going to do the exact same thing.

Making the banks fail if that must be the case is a critical requirement of recapitalizing them. Default and get it over with, hell most of the equity in the banks is evaporating anyway with several major players less than half or in some cases 5-10% of previous size! (by share value).

[Flasch186]

which is what theyre 'saying' theyll do via the Geithner 'stress test'. I mean if the opposition just simply doesnt believe the words coming out of their mouths than arguing about the bill is pointless because you could say it's all BS anyways.

[SportsDino]

Lets say I doubt how stressful that stress test is going to be. I start doubting the government when it shows obvious incompetence and corruption time and again.

[Flasch186]

so than there really is no point in debating the merits or lack thereof of said stimulus or packages or tarp tauf whatever because you dont believe that it is what we think it is anyways.

[Galaxy]

I find the tax cut part useless. If that $300B would have been infrastructure spending (re: jobs and long term benefit), I'd have been downright giddy.

SI

I'm against any plan in general. Throwing hundreds of billions of debt on top of trillions of debt isn't the answer. What happen to the Dems promise to bring back the "spend-as-you-go" policy?

[Flasch186]

we ran into this little thing called a deflationary spiral.

[Mac Howard]

I'm against any plan in general. Throwing hundreds of billions of debt on top of trillions of debt isn't the answer. What happen to the Dems promise to bring back the "spend-as-you-go" policy?

If you do nothing then the recession will continue to deepen. Tax revenue will fall (corporation taxes, income taxes and sales taxes) and government unemployment responsibilities will rise - the deficit will snowball.

There is no way out of this that will protect the deficit.

[Galaxy]

If you do nothing then the recession will continue to deepen. Tax revenue will fall (corporation taxes, income taxes and sales taxes) and government unemployment responsibilities will rise - the deficit will snowball.

There is no way out of this that will protect the deficit.

I would support a plan that actually worked, not full of pork, wasteful spending, and attack the problem.

[Flasch186]

one person's pork is another person's job, etc. etc. etc. not everyone is going to be happy unless it works which is years away from knowing.....I believe it will AND believe that what we're debating is accurate to the intent, if you dont, than Im not sure what there is to debate, since we could be debating anything really.

[sterlingice]

If you do nothing then the recession will continue to deepen. Tax revenue will fall (corporation taxes, income taxes and sales taxes) and government unemployment responsibilities will rise - the deficit will snowball.

There is no way out of this that will protect the deficit.

Actually, Hoover thought the answer was to balance the budget in bad economic times. That... didn't work out so well.

SI

[Mac Howard]

I would support a plan that actually worked, not full of pork, wasteful spending, and attack the problem.

Calling it "pork" does not rob it of its stimulative action. We may approve of some projects more than others but whether you put your money into bibles or condoms the stimulation to employment in both manufacture and retail is pretty much the same - just in different sections of society (or maybe not ;) )

[Mac Howard]

Actually, Hoover thought the answer was to balance the budget in bad economic times. That... didn't work out so well.

SI

I seem to recall, I think it was the 1987 recession, that it was decided that you needed to balance the budget over the full economic cycle. You go into deficit in bad times and surplus in good and achieve overall balance. Because tax revenues are lower in the former and higher in the latter, that seems to make sense.

[SportsDino]

When I see good things in legislation I'll try and announce it, when I see crap I'm gonna call it and not hide behind panic politics. Following the calls of panic leads to wonderfully terrible things, history has shown plenty of that.

And where you see a deflationary spiral, I see necessary deleveraging. We only are printing money to obfuscate bad debt from bad decisions by bad leaders at bad banks. I've already argued before that we never saw the sort of inflated prices to match that massive leverage (did your loaf of bread cost ten times the price of 1990?), so the real result of printing money is going to be an increase in prices (now that everyone knows the wizard of oz is just some fool behind a curtain).

To even start to match all that super leveraged debt to avoid what they are terming deflation, you would need to quintiple prices, at least.

I won't even start to go down the similarities to the Japan situation, which was a massive period of stagnation caused by throwing misguided fiscal policy to save face for morons.

We need to take the hits, and if they look to severe to survive, we need to close the banks and force a controlled reset.

[SteveMax58]

+1 to SportsDino's post.

[Flasch186]

but unfortunately I dont have any idea what SD is talking about above because he doesnt trust in the actual verbiage of the bill. So SD, to make the debate even sided you should write exactly what you think this bill will effect, i mean what pork will be unfunded, what will happen, who will do what, etc. and we can debate that.

Im being sarcastic but in multiple threads some people (not only yourself) are saying we're against the bill because we dont believe the gov't will do XYZ eventhough the bill states XYZ so what does a supporter of the bill do with that?

I guess a supporter would just have to say, "welp, youre wrong." which means nothing.

[sterlingice]

I seem to recall, I think it was the 1987 recession, that it was decided that you needed to balance the budget over the full economic cycle. You go into deficit in bad times and surplus in good and achieve overall balance. Because tax revenues are lower in the former and higher in the latter, that seems to make sense.

Isn't that how it should work? When times are bad, you might come up a little short but then definitely pay it back and get ahead in the good times so you don't have to borrow the next bad time. I don't remember it with regards to the 1987 recession but it could easily have been mentioned then and I wouldn't have noticed (being only 7 at the time :) )

SI

[SteveMax58]

I think the single biggest problem I have with the bill, and I can only speak for myself, is that if only 5-7 people "possibly" could have read this bill prior to voting on it...then my trust has to be placed primarily on the small group that had control of the bill in the late hours of Thursday/Friday AM. I have almost no faith that the majority of our Senate (or House for that matter), is able to digest a typical article in the WSJ, let alone one of(maybe THE?) largest bills intended to stimulate the economy ever. EDIT to add: I have no faith they could have digested this bill in a day.

The other concern I have is that there isnt nearly the energy infrastructure projects that I would have hoped for in such a massive bill. So that means we'll be seeing another one of these within a year or so. So while I do agree that a large bill is necessary, and that tax cuts alone arent going to be the long term solution, I think this bill is entirely too rushed for the limited short-term stimulus it will deliver.

[Flasch186]

Now THAT is a good point that goes to the heart of the opposed due to trust argument and I can buy that. You're not saying the intent is to pass the bill and than do things different than that which the bill affords but that the bill has been passed so fast that it may NEED to be pushed aside, tweaked, cajoled, or massaged. I can understand that POV.

[SteveMax58]

Yeah, I think the Japan issues from the 90's are worthwhile to keep in mind, but I dont buy that NO spending is the alternative. It's all about ROI to me...and what gives better long-term ROI.

To me, and I wont claim to be an economist or expert, if you are going to try and cause a degree of inflation (by printing and circulating money internally to the US) to combat deflation (or devaluation) then it makes sense to try and alleviate external purchasing where plausible. To me, the most plausible way is through energy independance, the jobs that creates while eliminating outgoing recurring expenses to the country. I dont think that is protectionist or isolationist...as once you do that you can begin exporting your energy technology/expertise to the rest of the world(that hasnt done so themselves).

But while building bridges and high speed trains create some jobs...they are temporary by nature(albeit longer term temporary), and produce little ROI (where ROI means "how does the overall country profit from such an expense?"). Having nice roads doesnt necessarily invite a significant amount of external (to US) revenue to come enjoy your roads or bridges. So, yes there are necessary projects like that, they arent all necessary ASAP...even if they could begin ASAP. ROI-based projects are more critical.

[Buccaneer]

I agree with SteveMax. Cost/Benefits have always been my thing, along with the dominance of the federal govt in many state, local and personal issues.

[Marc Vaughan]

To me one of the most ludicrous aspects of the current stance to the economic crisis in America seems to be the lack of attention and investment given to the most vital future resource of the country - that being its education system.

I don't know if this is repeated in other states but in Florida they're cutting teaching jobs hugely and increasing class sizes - both of which will be very detrimental to the quality of education supplied.

Yet its educated people who in the whole are more likely to setup their own businesses, invent new technology etc.

[SportsDino]

Here's a summary of my position as brief as i can make it:

- I am opposed to TARP. I'll put it in bold letters: I THINK IT IS A MISTAKE TO BUY DERIVATIVE INSTRUMENTS THAT ARE EFFECTIVELY WORTHLESS. Any money pumped into them evaporates instantly without creating ANY economic value whatsoever. It is a political/corruption move to cook the books of bad business, and you cannot convince me otherwise unless you are willing to actually break down exactly how economics says bailing out morons is capitalism. Or chasing lost money with even more money makes sense.

- I am opposed to tax cuts on capital gains. Because most of the people gaining right now are just like me, they made the easily predictable short (leveraged inside information or just plain good guesses) and every dollar they made is basically money sucked out of the economy. It will not stimulate growth either, it will stimulate continued looting of the businesses as the value of speculating is high and the value of investing is low.

- I am opposed to wasteful spending to 'just create jobs'. First and foremost, large amounts of each dollar will go to corruption, with the likelyhood being only pennies on the dollar actually leading to worker salaries. Second, government debt will need to be paid eventually. Third, most of the money spent will not generate any future value added to the economy... it will not have either a lasting impact, or create jobs that will survive longer than a tiny period of time.

- I have advocated spending as part of a stimulus package, I have even gone through and mentioned some I liked and others I disliked. I even made my list of six or seven proposals that I would like as focused stimulus packages that I think would have a lasting impact. I know I have posted a lot of junk, but I believe I have been internally consistent all this time... I want spending on America's messes (huge spending perhaps) that will make us stronger in the future. And I want it spent with a vicious eye kept out for thieves. Right now I'm looking at this stimulus with a vicious eye, if you did too I'm sure you could spot the 'hahaha, good old Democratic back scratching' moments litterred in there. Hell, you can probably link every Republican vote (3ish?) to a particular portion of the bill if you tried hard enough.

- I agreed with the depreciation changes as a method to affect current cash flows, and I believe that is in the package, although I have not verified what survived or not. Although i think they may be abused and hope someone is watching for it.

- I'm for a payroll holiday to improve the ability of employees to whether there expenses when there is likely no raises this year.

- I don't think I have mentioned it, but I approve of unemployment extensions and improvments. People can't find a job if their life depended on it right now, and sadly their lives do depend on it.


I'm sure I've babbled plenty of other stuff out there if you want more details. If anything, despite the massive amount of words and noise, of anyone on the board I'm probably the easiest to guesstimate what my stance is on a particular issue since I've spouted out so many of them. I'm sorry I didn't compartmentalize it into some nice tidy 'liberal', 'conservative', or other box for you to categorize which herd I belong to. I pretty much burn the entire spectrum with my criticism and my views of economics, which are supported by neither party in office, and certainly not by most modern business.

I also am very skeptical because I see the games politicians and businesses are playing, and break down what they are really trying to do, not what they are saying they are trying to do. Do you really believe the same folk who screwed us so royally are truly going to do the best thing for the US as a whole now?

[SportsDino]

I am saying that the things in the bill themselves are enough to show how useless or ill advised they are. How they describe the bill in the news, and what the actual language really tells are two different things. That and some people might honestly believe X billion for yada yada is all great and gonna save the economy, but I am saying that X billion is not all its hyped up to be. That it may be too much for yada yada, or it will be mis-spent because the bill has nothing in there to prevent it from being wasted. I may even disagree that yada yada will have any useful effect whatsoever on economic growth (or job growth).

If there is X billion being spent, I want to see 5000*X jobs created. For 800 billion I am expecting 4 million jobs. Somehow I doubt that is happening with this package as it is currently constituted. You find me where even 2 million jobs get created by that bill and I swear I'll shut up. Hell, for 1 million I'll at least tip my hat to you and Obama. It would have cost 800,000 per job created, but at least you would have a measurable result. It still would only be a dent in the side of exploding unemployment.

And finally, 2 trillion in bank handouts probably won't create a single job. It'll be sucked up to counter balance their bad bets of the last two years IF THAT (since we are talking 10 to 20 times leveraging on a nice day).

[Flasch186]

good post but i think theyre saying jobs saved too, I have to go to lunch but I want to read your post again.

[Mac Howard]

Isn't that how it should work? When times are bad, you might come up a little short but then definitely pay it back and get ahead in the good times so you don't have to borrow the next bad time. I don't remember it with regards to the 1987 recession but it could easily have been mentioned then and I wouldn't have noticed (being only 7 at the time :) )

SI

I'm not sure it was the 87 recession - these things see to come along far too often and it's difficult to remember exactly when. But I do recall it was seen as a new idea which is surprising when you consider how obvious it is. But then economic theory, it seems to me, is so corrupted by self-serving ideology that I shouldn't be surprised at anything it throws up :)

[lungs]

U.S. agents enter Stanford Financial Houston office (http://www.reuters.com/article/domesticNews/idUSN1736672620090217?feedType=RSS&feedName=domesticNews&rpc=22&sp=true)

You have to wonder how much more of this bullshit is out there. These jackasses should be taken to the wall.

[Mizzou B-ball fan]

Stock market looking good in preseason.

[JonInMiddleGA]

I went into this in one of the TV related threads but it probably deserves a brief mention here too.

The latest forecast for advertising spending in the U.S. looks for 2009 to drop to the lowest ratio of advertising to GDP since 1946, in other words the tightest environment in the lifetimes of virtually everyone connected to the business.

[albionmoonlight]

I went into this in one of the TV related threads but it probably deserves a brief mention here too.

The latest forecast for advertising spending in the U.S. looks for 2009 to drop to the lowest ratio of advertising to GDP since 1946, in other words the tightest environment in the lifetimes of virtually everyone connected to the business.

Good luck, man. "Worst in my lifetime" isn't good for anyone trying to make a dollar in a business.

[JonInMiddleGA]

Good luck, man. "Worst in my lifetime" isn't good for anyone trying to make a dollar in a business.

Thanks, although to be honest I'm pretty much resigned to our fate at this point & am just faking my way through every day until that becomes impossible.
It borders on a miracle that a shop the size of ours has lasted this long when most of the others like us have already folded and by the time it's all said & done I suspect most of the mid-size shops that are still around will be lucky to be even a quarter of their current size.

It is what it is though, y'know?

[sterlingice]

http://biz.yahoo.com/ap/090218/obama_home_foreclosures.html

So? Thoughts on the housing measure today? Keeping in mind, I'm no expert on housing so feel free to correct me if you see something incorrect.

I'm pretty happy with it, but I think it only affects a small number of people.

The first part basically is for people with Fannie and Freddie. Everyone across the board gets an interest rate reduction. I'm ok with this since it's across the board- it's not just people who are behind or anything like that- anyone can refinance if they want and there's liquidity with those companies to do so.

The second part will be interesting to implement. I'm not sure if this really incentivizes the banks to do anything as $1K is chump change to them, even in large quantities. However, I'm also not sure what Obama meant when he talked about banks who took TARP money were going to be held to do this. Hell, I'm not sure he knows.

I kept hearing "real estate experts" hating the plan. Except it seemed like all of them to a man (or woman) were pissed because it didn't involve large amounts of cash going directly to homeowners and ultimately their industry and pockets. Or because it didn't allow prices to be marked down to "market value" with taxpayers essentially footing the difference- again, putting money in their pocket at someone else's expense. In short, all the real estate experts were people in real estate who had a real vested interest on how this went and was perceived.

In the end, I think this helps somewhat but there is still the problem out there of the people who are badly underwater, particularly in those insane markets (Cali, AZ, Fla, the east coast, etc). I don't know what the answer is for them. It's definitely not fair to mark their houses down to "market value" since it penalizes people who did things the right way. Nor is it fair to basically subsidize those loans and pour all of that money back into banks who took silly risks. However, until we address those problems- and I'm not sure what "address those problems" means, particularly in a fair way to homeowners and banks who didn't screw themselves over, do we find a floor in the housing market and ultimately the economy.

SI

[Flasch186]

yes. its a good plan and it doesnt cost any more money than that which has already been earmarked for spending. Moral hazard issues aside this will help people stay int heir homes while not bailing out those who speculated. This is good for the country in the long run.

[Buccaneer]

I really like the 6 questions that were asked and look forward to the answers to those. If the answers are satisfactory, then it would be ok but so far, all we are getting is "the funding would not reward unscrupulous or irresponsible speculators". Everyone should be sceptical and hold the federal govt accountable but too many are simply willing to go along with it without raising valid questions.

[albionmoonlight]

Beer Sales Suffering in Recession (http://http://www.fivethirtyeight.com/2009/02/breaking-beer-no-longer-recession-proof.html)

I'm doing my part to keep the industry afloat guys, but I am only one man. We all need to do our part here.

[Flasch186]

I have begun to pay for pRon

[JonInMiddleGA]

I have begun to pay for pRon

Isn't that kind of like giving the Sultan of Brunei a stimulus package (no pun intended) though? I mean, if there's any industry that probably doesn't need an additional economic injection (pun intended) it's pRon.

[sterlingice]

Beer Sales Suffering in Recession (http://http://www.fivethirtyeight.com/2009/02/breaking-beer-no-longer-recession-proof.html)

I'm doing my part to keep the industry afloat guys, but I am only one man. We all need to do our part here.

:D

Homer: "But what can I do. I'm just... (thinks about it)... one man"

SI

[JPhillips]

Add another 627,000 to the unemployed.

Initial claims for state unemployment insurance benefits were a seasonally adjusted 627,000 in the week ended Feb. 14 unchanged from an upwardly revised 627,000 the previous week.

I wish the media would stop causing all these lay-offs.

[Raiders Army]

Queens homeowner pleads: I need your help, President Obama (http://www.nydailynews.com/news/politics/2009/02/18/2009-02-18_queens_homeowner_pleads_i_need_your_help.html)
Queens homeowner pleads: I need your help, President Obama
BY Celeste Katz
DAILY NEWS POLITICAL CORRESPONDENT

Wednesday, February 18th 2009, 11:18 PM

Marlo Saab hasn't missed a payment yet but wonders how much longer he can manage the $3,400 in monthly mortgage payments. Marlo Saab bought a $555,000, two-family home in Queens three years ago - no money down.

Now, teetering on the brink of defaulting on his mortgage, Saab is looking to President Obama's plan for struggling homeowners to help him hold on to his house.

"I think that his plan gives us hope," said Saab, 40, a computer technician. "I just want a little help not [to] go down the drain."

When he bought the Jamaica Hills house, Saab got an 80/20 mortgage - splitting his borrowing between two lenders, IndyMac and Countrywide - for a total of $3,400 in monthly payments.

He makes $80,000 a year and says he has a healthy credit rating. The Saabs have rental income and they've paid off their car.

However, Saab's overtime has been slashed. His wife is looking for work. The couple also have renovated their home and spend $10,000 a year to send their two kids to Catholic school.

Saab has racked up $70,000 in credit card bills and borrows from family and friends to make his mortgage. He has never missed a payment, but he's not sure how much longer that can last.

"I've been calling the bank since October," Saab said. "They say, 'There's nothing right now we can [do to] help you ... You have to default first [for us] to look [into] your case.'"

He even has appealed to Rep. Anthony Weiner (D-Brooklyn/Queens) to intervene.

Michael Moskowitz of Manhattan-based lender Equity Now said Saab appears to be a good candidate for aid under the President's proposal.

"[Obama is] trying to take a deserving person whose mortgage is worth more than the property is and refinance them," he said. "It's not good to have people default. It's better to [give] them a lower rate."
I just love how my kids go to a public school and my kids are going to pay for his mistakes. I can also look forward to my grandkids paying for his kids' mistakes.

People like the guy in the article should lose their homes. They deserve to live in a cardboard box for their stupidity.

[Marc Vaughan]

I just love how my kids go to a public school and my kids are going to pay for his mistakes. I can also look forward to my grandkids paying for his kids' mistakes.
People like the guy in the article should lose their homes. They deserve to live in a cardboard box for their stupidity.

I actually have a fair bit of sympathy for the chap - so long as he's sensible in his negotiations I'd have thought he's exactly he type of person a bank should want to help.

He's not missing payments and has a reasonable job - as such I'd have thought its in the banks interest to wrangle more interest out of him by extending his mortgage period from the initial duration by another few years and thus giving themselves more interest income during its duration.

Surely this is more sensible than renegotiation for people who have proven to be unable to plan ahead and realise they might have problems in the future and so are trying to cut costs somewhat now? - those people surely are the ones who are most likely to default.

[Mizzou B-ball fan]

I actually have a fair bit of sympathy for the chap - so long as he's sensible in his negotiations I'd have thought he's exactly he type of person a bank should want to help.

He's not missing payments and has a reasonable job - as such I'd have thought its in the banks interest to wrangle more interest out of him by extending his mortgage period from the initial duration by another few years and thus giving themselves more interest income during its duration.

Surely this is more sensible than renegotiation for people who have proven to be unable to plan ahead and realise they might have problems in the future and so are trying to cut costs somewhat now? - those people surely are the ones who are most likely to default.

He's run up 70K in credit card bills. I'm all for simpathy, but no one should ever be granted a 550K loan with no money down and an 80K salary. I was told I was stretching it when I got a $125K loan on a $45K salary. Getting a loan that is 7X your salary is outright stupidity.

Also, there's no guarantee to owning a home. This guy obvious has had problems for 2+ years to get in this situation. At some point, it's time to sever ties and save your finances. There wasn't any planning in regards to this guy.

[sterlingice]

I actually have a fair bit of sympathy for the chap - so long as he's sensible in his negotiations I'd have thought he's exactly he type of person a bank should want to help.

He's not missing payments and has a reasonable job - as such I'd have thought its in the banks interest to wrangle more interest out of him by extending his mortgage period from the initial duration by another few years and thus giving themselves more interest income during its duration.

Surely this is more sensible than renegotiation for people who have proven to be unable to plan ahead and realise they might have problems in the future and so are trying to cut costs somewhat now? - those people surely are the ones who are most likely to default.

I agree with that, Marc. He's trying to pay his bills the right way (sort of, tho running $70K in credit card debt isn't the right way).

The one problem I have is that there's no way anyone should be buying a house with 0 down.

And they sure as hell shouldn't be buying a home costing $550K on that salary, even assuming his wife makes about the same. Especially not with kids and a $10K per year high school. I think my college cost less than that after scholarships.

SI

[Mustang]

There is a line between being an idiot and bad luck. He crossed it to the idiot side.

[JonInMiddleGA]

I was told I was stretching it when I got a $125K loan on a $45K salary.

Was that "stretching it" to comfortably make the payment each month or "stretching it" as far as how much they were willing to lend you?

If the latter then somebody really must have not liked your tie or something, because 6x to 8x of salary seemed to be pretty common for at least several years.
(edit to add) That's not to say it's a good idea to do it, but banks were definitely handing that out.

Our current mortgage is similar to the ratio you did but the bank was downright bewildered that we would "settle" for this house when we could have been financed for at least twice the price we eventually paid. And that doesn't seem to have been an uncommon scenario from other stories I've heard from that time frame (roughly 3 years ago).

[JonInMiddleGA]

I think my college cost less than that after scholarships.

It's doesn't seem uncommon for private schools now to cost more annually than the parents paid for their college. That's actually become a running joke with people we know, as we all look forward to our kids going off to college so we can save money.

[gstelmack]

I agree with that, Marc. He's trying to pay his bills the right way (sort of, tho running $70K in credit card debt isn't the right way).

The one problem I have is that there's no way anyone should be buying a house with 0 down.

And they sure as hell shouldn't be buying a home costing $550K on that salary, even assuming his wife makes about the same. Especially not with kids and a $10K per year high school. I think my college cost less than that after scholarships.

SI

I have 2 kids and am probably in roughly the same salary ballpark, and our $230K home has been a reasonable mortgage payment. I'm glad we didn't do much more home. $550K home would have KILLED us.

[gstelmack]

Rental income is the interesting question here, and I wonder if the rental property was put down as collateral or something...

[JPhillips]

Regardless of the man's financial planning, this is precisely the kind of situation where it greatly benefits the bank to renegotiate terms. If they foreclose they'll be lucky to sell the home for 400K and they'll have the costs of foreclosure as well as all the costs associated with selling a home. Meanwhile the home is providing zero income for the bank while it's on the market.

There are moral hazards involved in redoing mortgages, but it's almost always better for the lender to keep payments, even if reduced, coming in.

[Anthony]

his kids don't have to go to private school. pull them out and use their tuition for mortgage payments. fuck him, kick his family out to the curb and let them freeze on the street. its not their God-given right to be in a home and have private schooling for their kids. you provide the life for your kids that you can afford, not the one you want (and then subsequently ask for assistance to help you maintain).

[Raiders Army]

Regardless of the man's financial planning, this is precisely the kind of situation where it greatly benefits the bank to renegotiate terms. If they foreclose they'll be lucky to sell the home for 400K and they'll have the costs of foreclosure as well as all the costs associated with selling a home. Meanwhile the home is providing zero income for the bank while it's on the market.

There are moral hazards involved in redoing mortgages, but it's almost always better for the lender to keep payments, even if reduced, coming in.

I can see the numbers supporting this. The problem I have is that people (such as myself) who did not poorly plan have to pay for it.

[SportsDino]

This is certainly one of those cases where the banks should be renegotiating to protect their own bottom line (a 550K mortgage being paid back, even with reworking the terms, is better than it defaulting and getting a house now worth 300K or 200K). Most banks are too stupid to do that sort of math.

Government bailout though, I don't know... I personally think the government should step in and provide a rework of any mortgage someone wants to submit to the program (before the missed payment or default situation), but that it have tough terms and not involve handouts so much as massed bargaining power to get banks to submit to refinancing (rather than stonewalling, killing mortgages and banks, banks are too shortsighted on their own lately to see this).

I do not think anyone in this sort of situation needs any more assistance other than the government to tell the bank: 'rework the rate to extend the term, create an interest rate to generate more long term revenue but make the payments possible'. We want less defaults,especially of people who can pay, all of us want that banks included... that is how you stabilize this housing mess as a first step.

Handouts though, I say screw him. Unfortunately govt only understands throwing money at things rather than attacking problems with solutions that require thought.

[SportsDino]

dola, let me pre-clarify to avoid confusion:

I don't want the government to give this guy money to stay in that expensive house.

I want the government to have some way where it can force banks to rework a mortgage.

The method of that reworking should be along the lines of:
- converting crazy ass loans into fixed term loans.
- extending the term of loans as needed to reduce monthly payments
- fixing interest rates to not adjust to the craziness caused by the current crisis... whatever the terms of the crazy contract may have been.
- void any overly harsh fees or clauses that are cleary designed to screw over homeowners in the banks favor, or make reworking mortgages harder.

The costs associated with such reworking is that banks would have given out loans expecting crazy clauses to increase their future value. I think that source of profit though is mostly evil in nature, banks trying to screw over consumers, so screw em in the earhole and tell the banks to eat the cost of having their precious fees and tricks removed.

Another cost is extending the term of loans does change risk profile of said loan. Although usually a longer term would have a lower risk rate in normal times, in this era there may be issues from having your money in the market for a longer period of time, but I'd say its an acceptable cost for handling the short term shocks to the system we are seeing. Longer terms also effects situations where the consumer may want to sell the house in the future, the government rework should clearly take that into consideration and prevent ways of reworking the loan that may make it too easy to offload the house at random prices in a recovery and screw the banks. This is why I tend to avoid changes to principle balance in this policy, ripe for exploit.

If the balance alone is enough to kill this house, which may be the case here, than I saw screw the guy. You are not entitled to irresponsible levels of credit and massive luxury in life. Hell I went through all sorts of shit just for having a debt of 5,000 (10,000 after bank tricks)... so I have little sympathy for people with 100 times the debt I had being mollycoddled.

[JPhillips]

I don't understand why Congress hasn't changed bankruptcy law to allow judges the ability to renegotiate mortgages during bankruptcy proceedings.

And with that I'd support sending guys like this into bankruptcy proceedings.

[SportsDino]

I'd rather avoid mass bankruptcy though. The hard economist in me says its probably best to just hit everyone with a giant mallet who made any sort of stumble in the last decade... but really to help stabilize the situation we want as many people as possible to stay current with their debts and keep working business as usual. Some lifestyles need to be crushed, particularly those of the mega-rich credit junkies... but bankruptcy is one of those things that hurts all sides involved really (creditors, the person extended the credit, the government, future loan seekers, banks).... lawyers might get away with some money, but they always seem to be able to do that.

[sterlingice]

dola, let me pre-clarify to avoid confusion:

I don't want the government to give this guy money to stay in that expensive house.

I want the government to have some way where it can force banks to rework a mortgage.

The method of that reworking should be along the lines of:
- converting crazy ass loans into fixed term loans.
- extending the term of loans as needed to reduce monthly payments
- fixing interest rates to not adjust to the craziness caused by the current crisis... whatever the terms of the crazy contract may have been.
- void any overly harsh fees or clauses that are cleary designed to screw over homeowners in the banks favor, or make reworking mortgages harder.

The costs associated with such reworking is that banks would have given out loans expecting crazy clauses to increase their future value. I think that source of profit though is mostly evil in nature, banks trying to screw over consumers, so screw em in the earhole and tell the banks to eat the cost of having their precious fees and tricks removed.

Another cost is extending the term of loans does change risk profile of said loan. Although usually a longer term would have a lower risk rate in normal times, in this era there may be issues from having your money in the market for a longer period of time, but I'd say its an acceptable cost for handling the short term shocks to the system we are seeing. Longer terms also effects situations where the consumer may want to sell the house in the future, the government rework should clearly take that into consideration and prevent ways of reworking the loan that may make it too easy to offload the house at random prices in a recovery and screw the banks. This is why I tend to avoid changes to principle balance in this policy, ripe for exploit.

If the balance alone is enough to kill this house, which may be the case here, than I saw screw the guy. You are not entitled to irresponsible levels of credit and massive luxury in life. Hell I went through all sorts of shit just for having a debt of 5,000 (10,000 after bank tricks)... so I have little sympathy for people with 100 times the debt I had being mollycoddled.

I'm good with all of this and some expansion:

-If a homeowner can pay his/her mortgage if they get the loan bought out at its value with a low interest rate and reasonable fees and terms (i.e. no funny business) through some vehicle, say Fannie and Freddie, then it's done. Then people are out of the arm, they pay the fixed rate loan, and everyone's happy.

If you can get everyone, or a normal rate (i.e. all but 3%) paying back on a normal pay schedule, doesn't that pretty much make the mortgage backed securities at least worth something to the market? And then you make really strong rules not allowing a lot of the crap that went on to get us into the place. That fixes a lot of these problems, right? And isn't that pretty much what happened yesterday, at least with Fannie and Freddie's loans?

This still leaves the huge problem of upside down loans. I still have no good answer to that. You guys all know I hate the banks, right? We've been down this road enough times for you guys to know how much I hate the banks. But it sure as hell isn't fair to them that Mr $550K loan gets it written down to only $350K in principal because that's what it's worth now. You signed up for $550K, you pay $550K for your house but we'll work with you on the terms- we can stretch it out to 40 years and give you a reasonable loan at a bargain basement rate and no stupid fees, but we sure as hell aren't lopping $200K off the loan at taxpayer's expense and it's not really fair to the banks either.

SI

[Mac Howard]

A bit of armchair economics here:

Set all mortgage rates to variable at 1% above the fed rate (that's enough profit for these bastards) and extend mortgages out to 50 years if necessary. Problem fixed!

[JonInMiddleGA]

and extend mortgages out to 50 years if necessary. Problem fixed!

Or maybe not.

Where does it put us, long term I mean, if we're doing 50 year loans on houses that often quite literally aren't likely to last that long? A lot of these houses headed for default seem likely to be new construction and frankly, from what I've seen, a lot of them aren't likely to last 50 years without falling in on themselves.
No idea what it's like in your part of the world but here, construction quality has gone to shit steadily over the past decade or two at least.

I'm tired, my mind is on about 15 different things so I'm not thinking as clearly as I might, but wouldn't that end up being only a short to medium term solution at best? Granted, that's probably more than enough to satisfy a lot of people for now but in theory, what are the ramifications of having loans secured by collateral that's worth less than the remaining note by the end of the loan? Or for that matter having loans beyond the life expectancy of the borrower. The most obvious would be an extremely high default rate down the road at some point but maybe our financial wizards can tick off a list of other issues that creates as well.

[Mac Howard]

Or maybe not.

Where does it put us, long term I mean, if we're doing 50 year loans on houses that often quite literally aren't likely to last that long? A lot of these houses headed for default seem likely to be new construction and frankly, from what I've seen, a lot of them aren't likely to last 50 years without falling in on themselves.
No idea what it's like in your part of the world but here, construction quality has gone to shit steadily over the past decade or two at least.

:lol:

40 and 50 year mortgages are available here since the horrendous rise in house prices since 2000.

I'm tired, my mind is on about 15 different things so I'm not thinking as clearly as I might, but wouldn't that end up being only a short to medium term solution at best? Granted, that's probably more than enough to satisfy a lot of people for now but in theory, what are the ramifications of having loans secured by collateral that's worth less than the remaining note by the end of the loan? Or for that matter having loans beyond the life expectancy of the borrower. The most obvious would be an extremely high default rate down the road at some point but maybe our financial wizards can tick off a list of other issues that creates as well.

Few mortgages are carried to conclusion and the houses sold well before the period comes to and end. Presumably the economy will recover in the medium term and the negative equity situation will have unravelled by then (at least for houses currently owned) and so people can sell their homes and pay off what remains.

Hopefully the housing crisis is a short term problem.

Note I said "variable" interest rate - so any subsequent house price bubble can be controlled by the Fed with rising rates.

What triggered the thought was an interview I've just seen with the Governor of the Australian Federal Reserve Bank who explained that because around 90% of Australians are on variable loans the recent drop in rates has reduced the monthly payment on a $200,000 house by $400 thus relieving mortgagees' financial problems. So repossessions are not taking place at anything like the rate for Americans where the percentage is very much lower.

When a large percentage of mortgagees are on variable interest loans monetary policy is much more effective because of its direct influence on consumers through mortgages. I guess it's a cultural difference - mortgagees here can choose fixed rates if they wish but don't - I assume Americans have the same choice but prefer fixed interest. I wonder if there is something to explain this difference in the terms of the loans.

And I did say it was armchair economics (and talking crap hasn't deterred anyone else ;) ) - I guess someone has thought of this and rejected it :)

[Galaxy]

So this guy in Queens spent $550,000 on a house with no-money down (on a $80,000 a year salary). He has racked up $70,000 in CC debt for his mortage payment?

Throw in the fact they renovated the house and spend $10,000 a year on private school, plus rental income (does that mean they have another mortage on the rental property?).

[JonInMiddleGA]

(on a $80,000 a year salary).

I don't think it was clear from the article whether that was $80k at the time they took on the mortgage or if that's what he makes now but was more when he was getting overtime plus his wife was working.

[BishopMVP]

A key part of the Japan lost decade comparisons that gets lost behind the 'more money, faster' tagline, is actually ripping the banks apart (in audits) and wiping out shareholders if necessary. The banks in Japan did not want that and held on until something had to be done, and the banks in the US are going to do the exact same thing.

Making the banks fail if that must be the case is a critical requirement of recapitalizing them. Default and get it over with, hell most of the equity in the banks is evaporating anyway with several major players less than half or in some cases 5-10% of previous size! (by share value).Another key point of the Japanese "Lost Decade" is the allegation there was a recovery afterwards. Considering their current GDP contraction, I'd venture to say they were temporarily pushed higher by the US overconsumption boom. There was no recovery, and there won't be a significant long-term one unless they drastically change their xenophobic attitudes towards foreigners and immigration policies. Meanwhile, they have a national debt 180-200% of GDP, combined with a population median age 43.And where you see a deflationary spiral, I see necessary deleveraging. We only are printing money to obfuscate bad debt from bad decisions by bad leaders at bad banks. I've already argued before that we never saw the sort of inflated prices to match that massive leverage (did your loaf of bread cost ten times the price of 1990?), so the real result of printing money is going to be an increase in prices (now that everyone knows the wizard of oz is just some fool behind a curtain).

To even start to match all that super leveraged debt to avoid what they are terming deflation, you would need to quintiple prices, at least.Thank you. Broken down to its most simplest form, we are in a recession right now because people used credit to pay more than the real value for certain items (mainly houses). You can't make a house worth its purchase price unless you want to inflate the economy by that same amount. Likewise you can't make the massive credit debt disappear unless people save money and pay it off. All these stimuli packages are doing are protecting the perceived wealth of a lot of people when it fact it wasn't there to begin with. That Queens house isn't any bigger or smaller if it's worth 250k or 500k, and a 401(k) with a 30% higher balance isn't worth anything more if there has been 30% inflation, yet somehow all the political solutions are centered on preserving the perceived value of things rather than any actual productive long-term planning.

Personally, deflation is fantastic for me (and pretty much every one of my friends). I've never been in debt, wages are sticky downwards and the majority of my money is spent on food, rent/utilities, and all the insurance my state forces me to pay for (36% of my salary last month after taxes despite the fact I've never been in an accident or seen a doctor in 5 years) (oh, and beer - I'm doing my part albion). It sucks for other people that overleveraged themselves in the pursuit of often unnecessary material goods and services, but that's the risk you take.

[SportsDino]

Both true points Bishop, although Japan's 'recovery' of course depends on the U.S. consumption beast that is dying a slow death... it was still better than the path they were going. Hardly out of the ballpark, but if they continued down that previous road AND this craziness occurred, Japan would probably be a really bad mess right now.

We don't necessarilly want 40/50 year mortgages either... as Jon said, there is a point where we hit the silly factor. I do think we need to negotiate out the floating rates, if there is a recovery there may be a squeeze (if Fed continues its rate games policy) and it might choke dead any progress we make. Really the floating rate stuff to me is just encouraging homeowners to join the gambling club, and makes no rational economic sense to me. We have plenty of ways to make money off of random changes in rates in the markets, we don't need houses as another avenue for those games.

Some mortgages will need to die, even worst now that the companies are cutting to the bone because of the government's craptacular reaction to the falling economy. I really wish back in say July/August that the debate went towards shoring up the real economy and not the banks... we might be in a slightly different boat right now because prices might have stabilized faster into a more gentle downward adjustment instead of spiking every which way from the market panic, sending financial instruments off kilter that sent bank values into the tanks.

Billions of injections into over-leveraged balance sheets...., or stabilizing the assets whose PREDICTED collapse is causing the balance sheets to get covered in more and more blood red ink? Thats why I was harping the whole mortgage reform system so strongly back in the first talks about bailouts, and to a degree I think that is going to occur at any point as they try every other option and realize its time to take the common sense medicine and implement something similar to my idea.

[Edward64]

Sheesh. What a day, shoot me now and put me out of my misery. Let's nationalize those banks (and big 3 while we are at it) and get it over with.

[Galaxy]

We better not nationalize the Big 3.

[sterlingice]

Sheesh. What a day, shoot me now and put me out of my misery. Let's nationalize those banks (and big 3 while we are at it) and get it over with.

Did anyone else get a "Heck of a job, Brownie" vibe towards BoA and Citi from watching the Robert Gibbs statement?

SI

[JonInMiddleGA]

Couldn't figure out where to put this, figured I'd just throw it in here for lack of a better idea.

I thought this article was interesting, although not very deep or detailed, on the process underway at AIG as it's being unraveled & dismantled.
Meek ending for mighty unit that gutted AIG - Washington Post- msnbc.com (http://www.msnbc.msn.com/id/29311015)

[Young Drachma]

Here's a local story.

'Homeless in 2 weeks Please help!' :: Beacon News :: Local News (http://www.suburbanchicagonews.com/beaconnews/news/1442890,2_1_AU21_EVICT_S1.article)

[Grammaticus]

Here's a local story.

'Homeless in 2 weeks Please help!' :: Beacon News :: Local News (http://www.suburbanchicagonews.com/beaconnews/news/1442890,2_1_AU21_EVICT_S1.article)

I wonder what the dispute with her landlord is all about.

[SFL Cat]

Based on market reaction, I'd say we're in for at least 9-12 more months of a hard ride.

[SFL Cat]

Dola...hmmm higher taxes on "the rich" during the worst recession we've had since the 1970s...

Obama to Unveil an Ambitious Budget Plan (http://www.washingtonpost.com/wp-dyn/content/article/2009/02/21/AR2009022100911_pf.html)

I revise my estimate to 18-24 months.

[Galaxy]

Yeah, let's raise taxes on businesses. Great idea! Between Bush and Obama, it's becoming a no-win situation.

[Flasch186]

I thought, and I could be wrong, that the official statistics from the gov't stated that most small business which is 95% of commerce or somethig like that, make under $250K / year. I thought I remember some sort of back and forth about that with Joe the Plumber's aftermath....

I was wrong, according to CNN's analysis of IRS filings it looks like 98.6% of small businesses would be unaffected

Checking facts: Will Obama raise small biz taxes? - Oct. 16, 2008 (http://money.cnn.com/2008/10/15/smallbusiness/small_biz_taxes_factcheck.smb/?postversion=2008101611)

(CNNMoney.com) -- In speech after speech, presidential candidate John McCain hammers on the claim that his rival Barack Obama will raise taxes on many small businesses.

At the debate on Wednesday night, McCain said, "The small businesses that we're talking about would receive an increase in their taxes right now."

More typically he has said: "What [Obama] hasn't told you is that he would tax half of the income of small businesses in America," a line used in La Crosse, Wisc., last week.

Should small business owners fear for their wallets if Obama is elected? Not the vast majority, business and tax experts say.

To make its claim, according to a McCain spokesman, the campaign counts as a small-business owner any taxpayer who files a Schedule C, E or F - the forms used to report gains and losses from business ventures and farms.

Using that definition and citing IRS data, the campaign notes that "56.8% of total small business income is earned by businesses in the top two rates, which Barack Obama has pledged to raise."

It's true that Obama has proposed raising taxes on the top two income rates.

But there are three main problems with McCain's charge.
What is a small business?

First, it relies on a broad definition of what counts as a small business, including everyone who files a Schedule C, E and F.

But most people who file those forms don't run a business for a living: Those forms are also used to report income from freelance and consulting work, real-estate rentals, and most other non-salary sources.

For example, McCain and Obama both file Schedule C returns, thanks to their book royalties - but they hardly should be considered small business owners.

In 2005, there were 21.5 million Schedule C returns filed, according to the IRS.

A more realistic definition of small businesses turns up far fewer firms. The Small Business Administration estimates that there were 6 million small businesses in 2005, as measured by those with fewer than 500 employees and with staff on the payroll other than the owner.
Who pays?

Second, even using the broad definition of small business that McCain likes, very few owners would see their own taxes rise.

That's because the lion's share of taxable income comes from a small number of wealthy businesses. Out of 34.7 million filers with business income on Schedules C, E or F, 479,000 filers fall into the top two brackets, according to an analysis of projected 2009 filings by the nonpartisan Tax Policy Center.

The other 34.3 million - or 98.6% - would be unaffected by Obama's proposed rate hike.

That includes Joe "The Plumber" Wurzelbacher, whom McCain invoked nearly two dozen times at the debate Wednesday night to illustrate the plight of the average worker and small business owner.

"Joe wants to buy the business that he has been in for all of these years ... he wanted to buy the business but he looked at your tax plan and he saw that he was going to pay much higher taxes," McCain said.

In an interview afterward with WTOL, Wurzelbacher acknowledged that he'd still like to eventually buy the plumbing company he works for but that he wouldn't yet be hit by higher taxes.

"I want to set the record straight: Currently I would not fall into Barack Obama's $250,000-plus," he said. "But if I'm lucky in business and taxes don't go up then maybe I can grow the business and be in that tax bracket - well, let me rephrase it. Hopefully, that tax won't be there."

Few owners are that lucky in business. In a member survey conducted late last year, the National Federation of Independent Business (NFIB) found that only 14% of respondents said they had $200,000 or more in annual income.

As Tax Policy Center fellow Len Berman recently told Fortune Small Business: "Most owners of small businesses have small incomes."
What gets taxed?

Third, even if you're one of the rare business owners making enough money to be affected by Obama's proposed tax increases, you still won't see a big hike in your tax bill.

McCain's claim that Obama "will increase taxes on 50% of small business revenue" - the line he used in the second presidential debate - is incorrect because of how income is taxed.

If a business owner falls into the top bracket, that doesn't mean that all of his or her income is taxed at the highest level.

For example: If a small-business owner makes $210,000 in taxable income, he edges into the 33% bracket, one of the two top tax rates that Obama would like to raise.

But he would pay the higher tax only on the amount that exceeds the cutoff - in 2007, the two top tax rates applied to single filers with income of $160,850 or more and joint filers with income of at least $195,850. As a single filer, this business owner would see his federal taxes increase $1,475 under Obama's plan, which calls for raising the 33% tax rate to 36%.

"While Obama does favor raising the top two rates, the quote is not true because not all the small business income of those in the top two rates is taxed at the 33% and 35% rates," said Gerald Prante, a senior economist at the nonpartisan Tax Foundation.

The bottom line: McCain's claim only works by using an overly broad definition of what counts as a "small business" - and even with that definition, fewer than 2% of business owners would be hit by Obama's proposed rate increase. For those who are affected, the increase would be levied only on a part of their earnings, not all of them.

[Raiders Army]

Flasch, I'm not sure about the relevance of quoting an article before the election. Obama's already gone back on his word, so I would take his campaign promises with a grain of salt.

[Flasch186]

it was a reference of the statistic within the article of what $250K (which is the number he has recently mentioned) means....history didnt start in November.

Another amazing or mind boggling thing to me is that what SFL fails to mention is that Obama has stated he'd do this when the economy recovers and not during the recession, at least on everything ive read and heard so perhaps he read or heard something different.

Than those opposed to all the money spent on recovery usually mention inflation and deficits so you'd think that they would see this other side of the scale as being a good thing to counteract the expenditures now, no? well, no....

[JPhillips]

I'm not sure how the country will survive with tax rates slightly lower than during the Clinton years.

[Raiders Army]

it was a reference of the statistic within the article of what $250K (which is the number he has recently mentioned) means....history didnt start in November.

Another amazing or mind boggling thing to me is that what SFL fails to mention is that Obama has stated he'd do this when the economy recovers and not during the recession, at least on everything ive read and heard so perhaps he read or heard something different.

Than those opposed to all the money spent on recovery usually mention inflation and deficits so you'd think that they would see this other side of the scale as being a good thing to counteract the expenditures now, no? well, no....

I'm not really finding anything recent about what he's said about business taxes that quotes $250K. He's talked about individual taxes and $250K.

My point was that he's already gone back on his word about his nominees and pork in bills. That's two for two on major things he's done in the first month of office.

[Flasch186]

yup and he went back on his word about expeditiously nixing the Bush Tax cuts....for shame.

To the point mentioned recklessly IMO by SFL is that he'd raise taxes on businesses which is true but somewhat ingenuous when using the definitions as stated as $250K which would mean 2% of businesses. PLUS he fails to mention that it isn't raising taxes BUT letting the Bush tax cuts expire as intended when they were passed. I'm with JPhillips, that when it expires, IF we're clear of the recession, than it would be a GOOD thing to try to get back to a balanced budget which will mean choices and taxes.

He had to pass a 'spending' bill IMO so I guess we differ on the need for some pork right now.

I dont know what you mean about the nominees....for the most part he's been grilling them and forcing them to pull out if there is something massively wrong ethically. I DO have a problem with Geithner getting through after the taxes came up and think Geithner shouldnt have been confirmed on that note (also on a side note that Geithner was supportive of Lehman's allowance to fall).

[Raiders Army]

yup and he went back on his word about expeditiously nixing the Bush Tax cuts....for shame.

To the point mentioned recklessly IMO by SFL is that he'd raise taxes on businesses which is true but somewhat ingenuous when using the definitions as stated as $250K which would mean 2% of businesses. PLUS he fails to mention that it isn't raising taxes BUT letting the Bush tax cuts expire as intended when they were passed. I'm with JPhillips, that when it expires, IF we're clear of the recession, than it would be a GOOD thing to try to get back to a balanced budget which will mean choices and taxes.

He had to pass a 'spending' bill IMO so I guess we differ on the need for some pork right now.

I dont know what you mean about the nominees....for the most part he's been grilling them and forcing them to pull out if there is something massively wrong ethically. I DO have a problem with Geithner getting through after the taxes came up and think Geithner shouldnt have been confirmed on that note (also on a side note that Geithner was supportive of Lehman's allowance to fall).

Gotcha.

I'll agree to differ on pork.

According to Gibbs, he never put pressure on Daschle to pull out. In fact, on February 2nd he said that he stood behind him. On February 3rd he accepted his withdrawal "with sadness and regret." There's no evidence of Obama forcing Richardson to pull out either.

[JPhillips]

My understanding was that Richardson was asked to resign, but you're right on Daschle.

[Galaxy]

I'm not sure how the country will survive with tax rates slightly lower than during the Clinton years.

Obama already gave tax cuts to a huge portion of taxpayers who don't even pay any income tax once they take deductions and credits. It's not a tax cut when you don't have to pay taxes to begin with.

We need real tax reform.

[JPhillips]

Obama already gave tax cuts to a huge portion of taxpayers who don't even pay any income tax once they take deductions and credits. It's not a tax cut when you don't have to pay taxes to begin with.

We need real tax reform.

Taxes and income taxes are not the same thing.

I'll agree, however, that it would have been better to do the majority of the tax cuts as a payroll tax holiday.

[sterlingice]

I just don't give a crap if the rich have their tax rate go up 3%. All this "they'll go somewhere else" or "it'll hurt business" is nonsense. It's pretty clear that money was just going into people's pockets and they just wanted more. Not only that but if you have a good accountant, and $250K+ per year affords you that, with all the loopholes in the tax code- they're paying a lesser percentage than those of us who just pay middle class rates.

So forgive me if I don't get all up in arms about the rich having a tax cut expire.

SI

[Galaxy]

Taxes and income taxes are not the same thing.

I'll agree, however, that it would have been better to do the majority of the tax cuts as a payroll tax holiday.

I guess I thought your statement was regarding the income tax hikes. I know we have so many taxes. One thing is clear, tax hikes or cuts are worthless if you don't adjust your spending/budget according to that.

[flere-imsaho]

I actually have a fair bit of sympathy for the chap - so long as he's sensible in his negotiations I'd have thought he's exactly he type of person a bank should want to help.

Agreed. I think the issue is that I'd rather not see my tax dollars bail this guy out. I'd rather have the banks see sense and refinance these failing mortgages into terms people can pay, since the banks, frankly, own at least half of the culpability here.

I don't want the government to give this guy money to stay in that expensive house.

I want the government to have some way where it can force banks to rework a mortgage.

Yep.

I'm tired, my mind is on about 15 different things so I'm not thinking as clearly as I might, but wouldn't that end up being only a short to medium term solution at best?

Besides what Mac said, switching these mortgages to 50-year time periods will spread out the instances of failure points, which will put less stress on the system.

[flere-imsaho]

All this stuff makes me wish my wife & I had gone for the ridiculous mortgage we were offered a few years ago! :D

[Galaxy]

Did anyone see one of the CNBC reporters rip on Obama and the bailout plan? It was kind of funny, even if you don't agree with it.

[Flasch186]

yeah, kind of a homogenous audience though.

[JPhillips]

And funny how he didn't have anything to say about the TARP bailout.

[SportsDino]

All I gotta say is, thank God for the SDS.

[SportsDino]

Or better, the SKF. Time to liquidate for the second time this month, yay evil short monster.

[sterlingice]

All I gotta say is, thank God for the SDS.

Or better, the SKF. Time to liquidate for the second time this month, yay evil short monster.

Ok, I just looked those up and need some education: ProShares UltraShort?

SI

[Flasch186]

they go up (usually) when the market or sector goes down however that is NOT absolutely true of all short ETF's.

[Galaxy]

I'm starting to agree with Mark Cuban and his view on the stock market.

http://blogmaverick.com/2006/01/03/the-stock-market-is-for-suckers/

[SportsDino]

SDS is double leveraged short of the S&P 500. SKF is same for financials. NOT an investment, best to treat it like a highly dangerous way to short a sector of the economy if you think it is going to go down.

The leverage and the general panic mongering we have been seeing has made it one of the speculation bets I pick up from time to time (lately anytime that I sense bad news triggers on the way and it has been at a stable or low point). It is pretty much pure asshattery, but it has been one way to ride the avalanche of bad news to profit.

It is very much a daytrading thing in you ask me, stay away from it unless you have catlike reflexes! :devil:

I'm pretty much sold on stock market as a giant gambling machine, especially given that my long portfolio only makes money if I sell off on spikes and reload low which I'm trying to avoid doing (so far only got 3% overall on my hold group, better than market for sure, but easily erased, it was slightly underwater for a while recently).

[SteveMax58]

I'm starting to agree with Mark Cuban and his view on the stock market.

The Stock Market is for suckers…. « blog maverick (http://blogmaverick.com/2006/01/03/the-stock-market-is-for-suckers/)

That's pretty much my own opinion as well. The problem is that things like 401k matching adds an additional level of complexity to the equation. Do I put money in, assuming my employer's contribution will (hopefully) at least offset any potential loss?

For me, and I suspect most people with 401k's, the answer is yes...it is probably worth it. Unless this past October becomes an annual occurence.

[cougarfreak]

I'm starting to agree with Mark Cuban and his view on the stock market.

The Stock Market is for suckers…. « blog maverick (http://blogmaverick.com/2006/01/03/the-stock-market-is-for-suckers/)

What's his advice? Get insider trading knowledge, cheat, and get caught?:lol:

[SportsDino]

There is a lot of truth in that blog post. Arguably insider information is what we should have... just transparent enough that everyone can see it. :)

I've talked to very few people who can successfully explain their 'buy and hold' strategies without inevitably pointing at 'well on average it grows 12%' statistic. I make several times more money off of speculation than any sort of holding policy (hell, most of my hold stocks I buy and sell at a decent clip to look in cash on the upswings). The only reason I hold stocks at all is to try and get at some of those traditional dividend style companies Cuban is talking about where I am hoping the dividend makes the investment worth something regardless of spot price fluctuations. This will probably be the best entry point we will see in some time to get price/dividend ratios that make sense to invest in. Forget your price/earnings ratios, you can get price to CASH MONEY ratios, presuming dividends are stable or growing (a big presumption).

[Galaxy]

What's his advice? Get insider trading knowledge, cheat, and get caught?:lol:

I'm not sure I would go that far. The case by the SEC seems rather weak in my view.

Of course, when Mark buys stock, he'll buy a large enough stake where he can have influence and follow up on his investment.

[SportsDino]

I think the SEC and its insider trading bit is more put on for show than anything. Rather than all these artificial barriers and regulations that are impossible to really enforce, I much rather would like to see companies that are pretty much incapable of hiding anything. Make so much stuff in plain view that it is pointless to be an insider (you could still effect future planning, but if others can view the exact state of your company at a point in time it is much more difficult to make effective use of that inside information without it being detected).

That would also oddly enough make the stock market make a smidgeon more sense and play up that whole public investment ideal rather than the backroom dealing with the public on the front end basically pulling a slot machine lever. Nothing about the fundamental meaning of corporation includes "obfuscate as much data as possible about state of the company or its intentions", that is all set up merely to serve insider exploitation.

[JPhillips]

And another 667000 jobs lost.

[Flasch186]

and no top in sight.

[SportsDino]

These job losses are going to crush us. I still think we need the 'Clean Up all the Fricking Messes in America' Act. Long term projects (enough with the shovel-ready shit, its okay to spread true investment over a long term, you don't need to spend money on things that can only be started tomorrow)... fix up that power grid, invent some new damn cars, clean up the water and air, make recycling into a big business... I dunno, just stimulate jobs creation not just keep handing out money with no strategy.

The capital games don't work, it might save corporations at the expense of hundreds of thousands of workers (no need to fix your business, we'll pay for your losses and meanwhile you can still cut through the bone to maximize how much government monopoly money you get to hold onto).

Instead of pulling out Iraq a year from now, we should be gone a month from now.

Instead of foreclosing houses we should put a stop on bank's smashing people across the head with an eviction notice, and let people adjust their terms to keep making payments (and keeping the prices from further plummeting, foreclosures drive down the market as far as I can tell, Flasch might know more in that area).

Instead of waiting for some consumption boost, which makes no damn sense in a country where everyone is losing their job, we should find ways to get business back to normal. We are letting financial decay spill over to everywhere else, and we do not have to. In the worst case scenario (which will happen anyway if we completely collapse) we will just end up setting the imaginary numbers to zero and canceling them out. It happens. Millions of people don't care about how much red ink is on a piece of a paper, when push comes to shove they'll burn it all. So if it really is coming to that point anyway, I say step in and erase the balance sheet manually. This means some very big banks with some very pansy ass CEOs are going to have large chunks of their net worth set to zero (as well as many average people who still have their assets tied into companies proving they are increasingly worthless). But when the dust settles, we'll still have a country, we'll still have an interest in buying and selling goods, and the economy will start climbing back up.

The reason we can't get out of this downward slide right now is because we have a bunch of lard asses riding our backs with their bags full of millions of dollars that used to be billions. The government is trying to turn those bags back into billions of dollars for no good reason other than corruption or ignorance (probably a lot of both). They are holding hostage the wealth of the average American, however that is rapidly disappearing anyway. Heck, if the average american was holding banks, they have already lost 90% of their life savings on average I would presume... going full on to zero probably won't make much more of a difference.

[JonInMiddleGA]

make recycling into a big business... I dunno, just stimulate jobs creation

Somehow I don't picture those two specific things going together. As soon as you ramp up recycling you also ramp up the urge to automate the process even further. And while you create a relative handful of jobs there, you likely put people out of work in the raw materials sector who have been providing for the manufacturing of new packaging/products.

But when the dust settles, we'll still have a country, we'll still have an interest in buying and selling goods, and the economy will start climbing back up.

If you zero out the cash of the people who provide the funding to manufacture those goods, what do you think people going to buy or sell? And who is going to be left to pay them a salary to buy it with? Or do you really believe Americans are capable (never mind willing) of reverting back to an agrarian society & growing their own and bartering carrots for cotton?

They are holding hostage the wealth of the average American
Which many of those people you're ready to sell down the river provided in the first place.

What you really highlight for me here is a pretty simple reality: we've got more people than we've got money to go around, and as I've known for a long time we've got a lot of dead weight. What we really need is fewer people.

[Galaxy]

Terms of Service (http://www.bloomberg.com/apps/news?pid=20601070&sid=aFsqsDD7lF1Y&refer=home)

Feb. 26 (Bloomberg) -- President Barack Obama proposed almost $1 trillion in higher taxes over the next decade on the highest-earning Americans, Wall Street financiers, U.S.-based multinational corporations and oil companies to pay for permanent tax breaks for lower earners.

Obama’s 2010 budget proposal, released today, would reinstate the top two Clinton-era tax rates of 36 percent and 39.6 percent, up from the 33 percent and 35 percent the richest Americans now pay. That would affect about 2.6 million taxpayers. The budget also would raise taxes on capital gains and dividends to 20 percent for top earners, up from the 15 percent set by former President George W. Bush in 2003.

The tax increases, which Obama vowed to impose as a presidential candidate, would take effect in 2011 and be the first on high-income earners since 1993. They also would reverse a course set by Bush of lowering the tax burden on the nation’s wealthiest people.

‘Obama Robin Hood’

“It’s a clear repudiation of Bush’s policy,” said Peter Morici, an economist at the University of Maryland in College Park. “It’s more Obama Robin Hood.”

Obama’s budget would keep in place Bush’s tax cuts that benefit lower- and middle-income earners, and it preserves a sliver of policy that benefits the more affluent: A preferential tax rate on corporate dividends. Before Bush, dividends were taxed as ordinary income, at rates as high as 39.6 percent in the 1990s.

“It is a hugely positive step to keep that part of the ‘03 changes,” said Pamela Olson, who was the top tax official in Bush’s Treasury Department when the tax rate on dividends was reduced. “It’s good economic policy, good corporate governance policy and good tax policy.”

Obama also proposes to stop the scheduled repeal of the estate tax next year and to impose a 45 percent tax rate on a married couple’s estate valued at more than $7 million.

Higher-income earners, primarily families with more than $250,000 of income, would face an additional tax burden under a proposal to limit their itemized deductions. That provision would subject more of their income to tax.

Deductions Cap

The proposal would cap the value of deductions for things like charitable donations, mortgage interest and investment expenses at 28 percent for people in the top brackets, or 30 percent less than they would otherwise receive.

Senior Treasury officials speaking on background to reporters acknowledged the proposal would be controversial. They defended it, saying it still gives top earners a deduction worth twice as much as Americans in lower brackets receive.

In all, top-earning households would pay $636.7 billion in additional taxes over the next decade, Obama’s budget estimates.

Linda Beale, a tax-law professor at Wayne State University Law School in Detroit, said “many will object to reinstituting phase-outs for itemized deductions because of the complications that creates.”

Representative Mike Pence of Indiana, the No. 3 Republican leader in the House, said Obama can expect a wall of opposition to his proposed tax increase on top-earners. Roughly half of Americans earning $250,000 are small-business owners, and the proposed increase will stifle the troubled economy, he said.

‘Overwhelming Opposition’

“There will be overwhelming opposition from the American people and House Republicans to the idea that we should raise taxes during a recession,” Pence said in an interview. “Raising taxes in a recession is not a strategy for recovery.”

Representative Jeb Hensarling, a Texas Republican, said in an e-mail, “You cannot help the job-seeker by punishing the job creator.”

The higher taxes on individuals will largely be used to pay for expanded health coverage for lower-income Americans and to make permanent Obama’s tax breaks such as a payroll tax credit worth up to $800 that was adopted on a temporary basis in the $787 billion fiscal stimulus measure earlier this month.

“He’s being so generous at the lower-income level that making $200,000 is going to be like falling off a cliff,” said Dustin Stamper, an analyst in the National Tax Office at Grant Thornton LLP. “Say what you want about the Bush tax cuts favoring the rich, but this is just becoming punitive.”

AMT Lives On

Obama’s budget also assumes Congress will continue to index the alternative minimum tax for inflation. The AMT is a parallel system that can impose higher rates on families earning between $75,000 and $500,000 when their deductions are too high relative to their income.

Executives at private-equity firms, venture-capital firms, some hedge funds and other partnerships that receive a 20 percent “carried interest” in the firm’s profits would see their tax burdens nearly triple under Obama’s budget.

Most of their carried interest currently is taxed at the 15 percent rate for long-term capital gains. Obama is asking Congress to tax the profit share as ordinary income, arguing that it’s a form of wages; under his plan, most executives would pay 39.6 percent.

That proposal will likely reignite a debate that was waged by Congress in 2007 when the House of Representatives approved the change and the Senate never considered it.

Corporate Tax Increase

Obama proposed $353.5 billion in higher taxes on corporations over the next decade, the bulk of which would come from “reforming” rules that allow U.S.-based multinational corporations such as General Electric Co. to defer U.S. tax on profits they earn overseas. GE has about $75 billion offshore on which it has never paid U.S. taxes, according to its regulatory filings.

The Treasury officials said they were preparing a more detailed plan on overhauling the international tax rules, which they may make public in the next month.

Obama’s budget estimates that such changes and beefing up Internal Revenue Service enforcement of international tax rules would generate $210 billion in additional revenue over the next decade. He also proposed to limit tax shelters by requiring they serve a business purpose by redefining the tax code’s “economic substance doctrine.”

‘Last-In, First Out’

Obama’s budget would end a tax-accounting technique called “last-in, first out,” or LIFO, that primarily benefited oil and gas companies when oil topped $100 a barrel but is widely used across industries.

Republican senators in April 2006 floated such a tax increase but backed off after Exxon Mobil Corp. Chairman and Chief Executive Officer Rex Tillerson called the proposal a “backdoor windfall-profits tax.”

In addition to oil companies, the repeal of LIFO would hit retailers, automakers and makers of non-automotive heavy equipment, textile makers, consumer products, drug companies, alcohol and tobacco manufacturers and wholesalers when times are good, according to tax experts.

The accounting method has been commonly used since the 1930s and is viewed as the most accurate measure of income for financial statement purposes, according to the congressional Joint Committee on Taxation, a nonpartisan panel.

A plan to reinstate an expired oil and chemical excise tax to fund hazardous waste cleanup would generate $6.6 billion between 2010 and 2014, according to the budget.

To contact the reporter on this story: Ryan Donmoyer in Washington at [email protected];


Wasn't sure if I should put this here or the Obama thread.

[JonInMiddleGA]

Yep, liberal vermin like Obama doing what they do: redistributing the wealth whether the bottom feeders actually do anything to deserve it or not.

I just wish to hell I could have convinced my wife to get the fuck out of here when we had the means to do so :(

[Philliesfan980]

Yep, liberal vermin like Obama doing what they do: redistributing the wealth whether the bottom feeders actually do anything to deserve it or not.

I just wish to hell I could have convinced my wife to get the fuck out of here when we had the means to do so :(

Just out of curiousity, where would you have gone?

[SportsDino]

Automating recycling would create tech jobs and manufacturing for the automation, yes it would kill jobs at the manual labor level and raw resource acquisition and processing. But if overall amount of material needed to create stuff decreases, and we have less garbage just sitting around, i'll take it. You are the person saying we have too many people for our resources, I'm saying reduce the amount of resources we use/waste if possible. Kind of supporting arguments in a way.

I don't believe in crapping in the pool just to give a guy a job shoveling poop out of the water. And we'll always need raw materials and processing jobs, I just want recycling as another source of those materials, and perhaps in pipe dream land a more cost efficient one overall. Creating all those recycling processes and machines though will create some jobs for some amount of time, and leave off us someplace better overall even if we end up cutting more overall jobs from more efficient processes, so be it.

I would zero out the NEGATIVE NET WORTH of massive banks. If they overleveraged out their ass, they owe more money than they have, and lately it shows, they are not building anything with all that money we hand them, and the jobs keep being cut. We need investors, and I don't think the current crop of stock market speculators makes the grade. Sorry if I disagree with the traditional trickle down economic view (although I've consistently disagreed with the notion that rich people with more money or tax cuts grows economies, in fact I've made the case that sometimes these rich people are looting productive assets rather than growing them, acting more like cancer than executives). So no, I'm not taking money from the rich and handing it out to the poor. I'm not giving them trillions in tax payer dollars to make up for their STUPID AS FUCK decisions to super-leverage and make bets they can't cover. They zeroed it out and then some into the negatives, I'd just kick them to the curb like they have kicked out so many numerous other people over the years.

As for the wealth of the average American, I think its detiorating at a rapid pace as is. I think it will detiorate even further trying to prop up failures, and avoiding massive messes that are just continuing to pile up. I consider it holding people hostage with the threat 'give us the bailout, we are too big to fail, if we go down we'll take down the whole economy with us'. You know that is not capitalism Jon, where is the 'tough luck, do better next time welfare scum!' I would expect from a fiscal conservative? Whereas most people are concerned with the big companies of the day, I'm concerned with the whole dang economy... right now I see a need to get back to business, and more and more it looks like some stuff is just going to need to be sweeped out of the way to do so.

[sterlingice]

These job losses are going to crush us. I still think we need the 'Clean Up all the Fricking Messes in America' Act. Long term projects (enough with the shovel-ready shit, its okay to spread true investment over a long term, you don't need to spend money on things that can only be started tomorrow)... fix up that power grid, invent some new damn cars, clean up the water and air, make recycling into a big business... I dunno, just stimulate jobs creation not just keep handing out money with no strategy.

I know it's not what you meant but I'm going to take this and run with it. These job losses are going to crush us just like the 2001 recession. Those jobs went overseas, never to be seen again. They were replaced by minimum wage service jobs, non-insurance-offered contract positions, and H1-B visas which are getting paid half their American counterparts.

Instead of waiting for some consumption boost, which makes no damn sense in a country where everyone is losing their job, we should find ways to get business back to normal. We are letting financial decay spill over to everywhere else, and we do not have to.
Going back to the point before, if we keep getting rid of the jobs that drove this consumer boom over the past 30 years, why should we keep pushing a consumer based economy. It seems like all it did was push the money around to the rich and overseas. But that well is running dry and it's not like we're going to be able to refill it. It's not like we're waiting on World War 3 to wreck everyone else's economy so we can emerge in a strong position. If there is a WW3, we're going to be the Germany who was bombed to oblivion or, at the very least, the country who pissed away countless dollars fighting a war that didn't improve our way of life.

The reason we can't get out of this downward slide right now is because we have a bunch of lard asses riding our backs with their bags full of millions of dollars that used to be billions. The government is trying to turn those bags back into billions of dollars for no good reason other than corruption or ignorance (probably a lot of both). They are holding hostage the wealth of the average American, however that is rapidly disappearing anyway. Heck, if the average american was holding banks, they have already lost 90% of their life savings on average I would presume... going full on to zero probably won't make much more of a difference.

Again, going back to before- it's not as if they have wealth to hold us hostage with. It's not like they're going to suddenly or even gradually increase wages when balanced versus inflation. Globalization is out of the bag and we're just going to gradually settle back towards the rest of the world as they keep coming up towards us. But it seems like we're not even interested in trying to slow that down- we'd rather scrap over what's left so that a few can get fat and happy, the many get token handouts, and all of it just accelerates our plunge towards mediocrity.

SI

[sterlingice]

What you really highlight for me here is a pretty simple reality: we've got more people than we've got money to go around, and as I've known for a long time we've got a lot of dead weight. What we really need is fewer people.

I hate to agree with you on something like this, since I think you have a few different ways of getting to that than I do but I think you're right. The ecosystem seems to adjust when it's getting too overcrowded for the population on it and we're getting due for a big plague, particularly since no one except the recent Chinese have any interest in population control.

I was thinking of starting a poll of "unlikely things that will happen in your lifetime" that span the gamut- things like great depression ii, world war 3, plague that wipes out over 1B people, major meteor strike, major geologic event, human mass extinction event, us land on mars, us travel out of the solar system, make first contact with sentient life, etc. Maybe that's tomorrow's idea for posting...

SI

[sabotai]

I don't believe in crapping in the pool just to give a guy a job shoveling poop out of the water.

I like this line. I am stealing it.

[JonInMiddleGA]

Just out of curiousity, where would you have gone?

There were, no joke, a few remote islands out of major storm paths that had nice houses/estates on them in both the Atlantic & the Pacific. Even more shocking, relative to US home prices they were surprisingly reasonably priced at that point. At least a couple of them appeared to be so far off the beaten path that the governmental jurisdiction they fell under seemed extremely unlikely to even realize they existed and even if they did it was hard to imagine they'd be all that interested. I really can't think of anything that would suit me better than that.

About the biggest worry I had about it was high speed internet access, my wife had more concerns about the isolation and because of having a kid it became a subject I wasn't going to make any headway on. But if you told me I could get us there tomorrow & have it be doable I'd be gone so fast I wouldn't even leave a memory.

[flere-imsaho]

There continues to be a lot of hyperbolic over-reaction to Obama's tax plans, when all he's proposing is basically a repeal of the truly ridiculous over-generous tax cuts Bush gave to top earners and top earners only.

[JPhillips]

There were, no joke, a few remote islands out of major storm paths that had nice houses/estates on them in both the Atlantic & the Pacific. Even more shocking, relative to US home prices they were surprisingly reasonably priced at that point. At least a couple of them appeared to be so far off the beaten path that the governmental jurisdiction they fell under seemed extremely unlikely to even realize they existed and even if they did it was hard to imagine they'd be all that interested. I really can't think of anything that would suit me better than that.

About the biggest worry I had about it was high speed internet access, my wife had more concerns about the isolation and because of having a kid it became a subject I wasn't going to make any headway on. But if you told me I could get us there tomorrow & have it be doable I'd be gone so fast I wouldn't even leave a memory.

You wanted to be a Bond supervillian.

[JonInMiddleGA]

There continues to be a lot of hyperbolic over-reaction to Obama's tax plans, when all he's proposing is basically a repeal of the truly ridiculous over-generous tax cuts Bush gave to top earners and top earners only.

Sorry, but there's simply no such thing as an overgenerous tax cut on top earners until we get to a flat tax.

[JonInMiddleGA]

You wanted to be a Bond supervillian.

Honestly I was thinking more along the lines of a hermit. I'm so over 90% of the people I encounter that it's ceased to be funny.

[sterlingice]

You wanted to be a Bond supervillian.

:D

SI

[flere-imsaho]

Sorry, but there's simply no such thing as an overgenerous tax cut on top earners until we get to a flat tax.

As usual, we disagree on the basic assumption. In my opinion the tax rate on top earners was already generous before Bush's tax cuts.

Honestly I was thinking more along the lines of a hermit. I'm so over 90% of the people I encounter that it's ceased to be funny.

Ironically, I actually feel the same way. I'll probably get blasted for this, but in all honesty the world would be a significantly better place with about 4 billion less people.

[JonInMiddleGA]

Ironically, I actually feel the same way. I'll probably get blasted for this, but in all honesty the world would be a significantly better place with about 4 billion less people.

Presumably neither of us are even including any Chinese in that figure, so it could get larger.

[flere-imsaho]

Yes, probably. To be honest I wasn't really thinking of nationalities. I tend to agree with general Malthusian principles. I'm fully aware that we still possess the ability to provide for the number of people on the earth (i.e. we can produce, if not distribute, enough food), but it's my opinion that that's only one part of the equation.

Obviously with a drastically smaller population you lose a lot of good things, like the overall amount of creativity and production, as well as the rate of scientific advancement. But I'm one of the people of a mind that the current population's strain on the carrying capacity of the earth creates more problems than it solves.

That's the intellectual argument.

The emotional argument is that I tend toward the misanthropic anyway, and I'd say the majority of people I meet (perhaps not Jon's 90%) tend to simply reinforce this.

[Mizzou B-ball fan]

Found the study cited here to be pretty interesting. It notes that 55% of all foreclosures and 87% of all home value losses in the current recession are located in four states. That actually explains quite a bit. I've noted in previous threads that home value hasn't been affected a whole lot in our area and this study seems to confirm that point. We've lost a bit here and there, but overall, the downturn in the economy has been much harder on just a few areas.

Hit & Run > Eighty Seven Percent of Housing Value Loss* in Just Four States - Reason Magazine (http://www.reason.com/blog/show/131890.html)

[sterlingice]

Found the study cited here to be pretty interesting. It notes that 55% of all foreclosures and 87% of all home value losses in the current recession are located in four states. That actually explains quite a bit. I've noted in previous threads that home value hasn't been affected a whole lot in our area and this study seems to confirm that point. We've lost a bit here and there, but overall, the downturn in the economy has been much harder on just a few areas.

Hit & Run > Eighty Seven Percent of Housing Value Loss* in Just Four States - Reason Magazine (http://www.reason.com/blog/show/131890.html)

Hold on, lemme guess: Cali, Arizona, Nevada, and Florida? With a special prize for New York City coming in the next few months?

SI

[Galaxy]

As usual, we disagree on the basic assumption. In my opinion the tax rate on top earners was already generous before Bush's tax cuts.



Ironically, I actually feel the same way. I'll probably get blasted for this, but in all honesty the world would be a significantly better place with about 4 billion less people.

How were the tax cuts generous?

The Tax Foundation - Summary of Latest Federal Individual Income Tax Data (http://www.taxfoundation.org/news/show/250.html)

"This year's numbers show that both the income share earned by the top 1 percent of tax returns and the tax share paid by that top 1 percent have once again reached all-time highs. In 2006, the top 1 percent of tax returns paid 39.9 percent of all federal individual income taxes and earned 22.1 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of adjusted gross income (AGI) and paid 36.9 percent of federal individual income taxes."

"The IRS data below include all of the 135.7 million tax returns filed in 2006 that had a positive AGI, not just the returns from people who earned enough to owe taxes. From other IRS data, we can see that in 2006, 92.7 million of the tax returns came from people who paid taxes into the Treasury. That leaves 43 million tax returns filed by people with positive AGI who used exemptions, deductions and tax credits to completely wipe out their federal income tax liability. Not only did they get back every dollar that the federal government withheld from their paychecks during 2005, but some even received more back from the IRS. This is a result of refundable tax credits like the Earned Income Tax Credit, which are not included in the aggregate percentile data here."

"The IRS data below include all of the 135.7 million tax returns filed in 2006 that had a positive AGI, not just the returns from people who earned enough to owe taxes. From other IRS data, we can see that in 2006, 92.7 million of the tax returns came from people who paid taxes into the Treasury. That leaves 43 million tax returns filed by people with positive AGI who used exemptions, deductions and tax credits to completely wipe out their federal income tax liability. Not only did they get back every dollar that the federal government withheld from their paychecks during 2005, but some even received more back from the IRS. This is a result of refundable tax credits like the Earned Income Tax Credit, which are not included in the aggregate percentile data here."

[JonInMiddleGA]

How were the tax cuts generous?

Because it hasn't reached 100% yet silly.

Did you not get the memo? Anyone who makes more than you do is "rich" and should therefore be taxed until there's nothing left, with the money redistributed among those who have failed to earn the same level of income.

Once they're broke of course, there's a new set of "rich" & the cycle begins all over again.

[JPhillips]

This brings back memories of the "Cadillac Soup Kitchens" of the 1990s, when former billionaires were reduced to begging for food from charities due to their excessive tax bills. The charities, of course, were unable to help as the economy had withered due to the crippling tax burden placed on the wealthiest one percent.

[flere-imsaho]

How were the tax cuts generous?

Let's review what I wrote again:

In my opinion the tax rate on top earners was already generous before Bush's tax cuts.

Bolded for emphasis.

Tax rates for high earners in the U.S. are not onerous and haven't been since Reagan got a hold of them.

Now, you can certainly argue that tax money isn't well spent, and that people paying taxes, especially large amounts of taxes, have a right to complain, and I won't disagree with that. Especially in the U.S. But that's a different argument.

[DaddyTorgo]

There were, no joke, a few remote islands out of major storm paths that had nice houses/estates on them in both the Atlantic & the Pacific. Even more shocking, relative to US home prices they were surprisingly reasonably priced at that point. At least a couple of them appeared to be so far off the beaten path that the governmental jurisdiction they fell under seemed extremely unlikely to even realize they existed and even if they did it was hard to imagine they'd be all that interested. I really can't think of anything that would suit me better than that.

About the biggest worry I had about it was high speed internet access, my wife had more concerns about the isolation and because of having a kid it became a subject I wasn't going to make any headway on. But if you told me I could get us there tomorrow & have it be doable I'd be gone so fast I wouldn't even leave a memory.

you know how far apart we fall on the political spectrum, and yet I 100% agree with you on this. Also on your espousal of Malthusian principles. We do need a die-off. And whether we create it (although TBH I don't think we can create it in a way large enough to reach equilibrium), or the Earth does it via natural means (over a longer timeframe and with more prolonged suffering) it will happen. It's happened before and it will happen again. As much as we like to think we're the "masters of the earth" it will regulate if need be.

[sterlingice]

How were the tax cuts generous?

The Tax Foundation - Summary of Latest Federal Individual Income Tax Data (http://www.taxfoundation.org/news/show/250.html)

"This year's numbers show that both the income share earned by the top 1 percent of tax returns and the tax share paid by that top 1 percent have once again reached all-time highs. In 2006, the top 1 percent of tax returns paid 39.9 percent of all federal individual income taxes and earned 22.1 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of adjusted gross income (AGI) and paid 36.9 percent of federal individual income taxes."

I'd like to see those numbers when adjusted not for income but for total money gained in a year. People on the lower 98% of the scale aren't storing money away in offshore accounts or using tax loopholes to deflate their incomes a substantial amount (i.e. I took a loss on my second home that I claim is rental property so I can deduct that so my salary isn't as much or I got a bunch of bonus/stock/retirement money that I can magic away tax free because I have a good tax lawyer).

This sounds like how our CEO the other day said he was taking a 20% pay cut (on his 1.5M) while those of us in the rank and file only lost 2.5% or 5%. Oh, but his bonus money comes from another program so it doesn't count. And that doesn't take into account his stock options he cashed in or his stock vesting. When you look at the SEC filings for our company, he was compensated at $45M and if you counted everything he got, it's well over $60M so even the SEC doesn't account for all the money he's getting (a $15M not counted by them) and his 20% pay cut becomes realistically under 1%.

I could be wrong but I suspect I'm not.

SI