The Great Recession - post mortem

[DaddyTorgo]

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.

only 4? I'd say with about 5-6 billion less people.

Get us down to about 3-4 billion tops. I'd prefer 2 billion to be brutally honest.

[Mizzou B-ball fan]

only 4? I'd say with about 5-6 billion less people.

Big fan of dinosaur rule, are you?

[DaddyTorgo]

Big fan of dinosaur rule, are you?

hmm?

[DaddyTorgo]

http://upload.wikimedia.org/wikipedia/commons/thumb/7/77/World-Population-1800-2100.png/588px-World-Population-1800-2100.png

International Programs (http://www.census.gov/ipc/www/worldhis.html) - estimated world population back to 10,000 BC

[SportsDino]

Before we start daydreaming about the death of billions of people, how about we increase our resource efficiency first... otherwise you just kill off a few billion people and all the resulting 'wealth' that frees up from that doesn't end up making everyone X% better, it means you still have your shit job and shit life and crazy ass speculators ('like me' says my best Joker impression) increase their balance sheet numbers by the difference.

Malthus is more about the collapse of ecosystems than magically fixing our economy my peoples! I'll admit of course trying to make a standard of living with ten billion people versus five billion is obviously harder.

[Flasch186]

not sure if this is the same thread I said GE would be a buy and I hoped they would keep the credit rating. I have been nibbling my way in and they cut their dividend today which while making that crazy yield more in line with the rest of their peers (im talking about financials since theyre being traded as if they were one) it is soooo good that they did this. Im very excited about this play over the next few weeks and intend on nibbling a little more next week while I expect it to fall a bit more before rebounding with a market rebound (short term). See if Im right and this time I have the smallest of holding but a holding nonetheless as opposed to the calls Ive been right on and never profited from :( (dont get me wrong, I have been more wrong than right and have lost money along with most people)

[Buccaneer]

Can someone tell me why Capital One jacked up everyone's credit card interest rate to 29.4%, even for those customers in good standing?

[Anthony]

because they're in an unregulated industry that will soon have the eyes of the government turned on them in about a few years?

[JPhillips]

Can someone tell me why Capital One jacked up everyone's credit card interest rate to 29.4%, even for those customers in good standing?

Because they're technically insolvent and need to get every penny they possibly can if they intend to stay in business?

[Buccaneer]

What do you guys recommend as a good credit card company with reasonable rates?

[flere-imsaho]

We've switched our credit card to JPM Chase (already had checking there), as I'd say that's one of the few banks likely to survive. Wells Fargo should also make it.

[miked]

Capital One just sent me a notice that due to my low balance and infrequent use, my rates were being jacked up. Something like 15% or so. Kind of funny, I transferred a balance there last year because they offered 0% for a year, so I never used it, just paid down my balance. I now have like $50 on it and I guess I'll close it since their rewards start at 20,000 points and the interest rate is high.

[JonInMiddleGA]

otherwise you just kill off a few billion people and all the resulting 'wealth' that frees up from that doesn't end up making everyone X% better, it means you still have your shit job and shit life and crazy ass speculators ('like me' says my best Joker impression) increase their balance sheet numbers by the difference.

Yeah, but think how much less annoying having the shit job & shit life would be with only half as many useless idiots around. That alone has to be worth something.

[Buccaneer]

because they're in an unregulated industry

As it should be. They offered great rates for years and people flocked to them. Now that they are chosing to screw the pooch, then they would suffer any consequences of such actions. Meanwhile, consumers have plenty of other options to choose from. The government's only role is to prevent monopolistic and predatory practices.

[sterlingice]

Can someone tell me why Capital One jacked up everyone's credit card interest rate to 29.4%, even for those customers in good standing?

because they're in an unregulated industry that will soon have the eyes of the government turned on them in about a few years?

As it should be. They offered great rates for years and people flocked to them. Now that they are chosing to screw the pooch, then they would suffer any consequences of such actions. Meanwhile, consumers have plenty of other options to choose from. The government's only role is to prevent monopolistic and predatory practices.

Actually, it's about to be regulated. Bill was passed a month or so ago but CC companies said "wait, we can't get our computers updated until 2010". Yeah, they seem to be able to screw people at the drop of a hat but if you want to take money out of their pockets, it's 18 months of continued gouging. So, in short, CC companies are trying to grab what they can right now before the rules are put into place.

Congress pushes for credit card relief - Jan. 19, 2009 (http://money.cnn.com/2009/01/16/smallbusiness/congress_credit_card_rights_bill.smb/)

Not only that, but I'd argue there needs to be substantial regulation as your credit score is tied to opening and closing credit cards. If you wanted to shop around and change credit cards whenever yours changed their terms, you'd take a hit on your credit score. They know that and take advantage of it.

Frankly, I have a Capital One card but I pay it off every month so I'm basically using them for their convenience and rewards. I've already had WaMu cancel a card of mine earlier this year for a lack of use without so much as a warning- I got a letter saying "this card is going to be discontinued as of Dec" in November and that was it.

SI

[JPhillips]

Yeah, the fat that changing to a better card or even getting rid of a card can lower your credit score is appalling.

[sabotai]

Interestingly (or not), I have a credit card from Citi, and the interest on it has stayed the same.

[sterlingice]

I have 2 from BoA that haven't changed either and they're the second most stressed bank, it seems. Originally, neither were BoA but both banks were bought up by them from in the last 10 years.

SI

[Buccaneer]

SI, yeah I know. It's fun to rant off after a long week.

[Galaxy]

Let's review what I wrote again:



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.

So, you believe that tax rates should be 50 %-70%? Just because someone worked hard, created a business and grew it (creating jobs, tax revenue in a variety of forms)? (Note, I'm not talking about the small handful of corrupt Wall Streeters/bankers/CEOs) Are you nuts? Talk about killing an economy and the entrepreneurial spirit that makes America great.

Nearly half of Americans don't even pay any taxes (and even get money back from the government), and the 1% of the income earners pay about 40% of the income as it is.

The oil tax is a political ploy that shows that the left side has no idea on how the oil industry (US oil companies import most of their oil at the market value) works or even looks at the balance sheets/statements of oil companies (10% profit margins, which is pretty bad).

Also, a lot of states are looking/or are increasing gas taxes. Is that really the best idea?

[JPhillips]

So, you believe that tax rates should be 50 %-70%? Just because someone worked hard, created a business and grew it (creating jobs, tax revenue in a variety of forms)? (Note, I'm not talking about the small handful of corrupt Wall Streeters/bankers/CEOs) Are you nuts? Talk about killing an economy and the entrepreneurial spirit that makes America great.

Nearly half of Americans don't even pay any taxes (and even get money back from the government), and the 1% of the income earners pay about 40% of the income as it is.

The oil tax is a political ploy that shows that the left side has no idea on how the oil industry (US oil companies import most of their oil at the market value) works or even looks at the balance sheets/statements of oil companies (10% profit margins, which is pretty bad).

Also, a lot of states are looking/or are increasing gas taxes. Is that really the best idea?

I believe we've had this discussion before, but taxes and income taxes are not the same thing. And given the way FICA taxes have worked since Greenspn & Co. fixed SS, a portion of FICA taxes go into the general fund are are de facto income taxes.

[SportsDino]

http://www.berkshirehathaway.com/letters/2008ltr.pdf

Somewhere in that letter Buffett mentions that we're probably going to see inflation, and that yes something had to be done in the middle of the mess last year (so a point to me and Flasch if you trust Warren).

I would not be too excited about cutting the dividend at GE. I likes my dividends! They probably think it would be better to throw that what, 10 to 15 billion???, elsewhere... can't blame em really. I'm still long on them (at the unfortunate price of 11), although I did one of my controversial short term hedge gizmos on them at 12 (my finance buddy does not like the idea of having them long at 11 and short at 12).

So anyhoo, the end result is dumb luck will probably net me 30-40%, which (don't do this at home kids, I'm not a financial advisor just some gambling crazy kid)... I will probably sink back into a half boring old savings and half long GE (to average down that stake a bit). I'm kind of expecting the yield to get around 6-7% (yes that it is a price between 5 and 7), but I'm too chicken to try timing it so I'll probably move sometime this week. Given dumb luck shorting is responsible for so much money, I'm finding it hard to play long. Especially when I spend half the thread warning about the ultimate failure of capitalism being a possibility, lol. Need to start my guns and ammo hording investment strategy as a hedge.

[Flasch186]

i hear you on GE BUT I think that that dividend cut was being begged for if you look at the price of it. The dividend was at a freakish yield so preserving that capital now I dont think realy hurts them and the price drop yesterday had more to do with the environment as a whole IMO than the actual cut itself. Preserving that bond rating is the key and I do not think they'll have a hard time doing so. BTW dont even get me started on the rating agencies....they deserve to be dragged to the woodshed.

[Buccaneer]

Yeah, the fat that changing to a better card or even getting rid of a card can lower your credit score is appalling.

What about this idea. I can pay off my Capital One card in the next several months. I would keep that card (until they cancel it due to inactivity or going out of business) but get a new card, like at Wells Fargo or Chase?

[JPhillips]

I've been told that there's a sweet spot of having just enough cards. You don't want too many or too few apparently, regardless of balance.

[Galaxy]

I believe we've had this discussion before, but taxes and income taxes are not the same thing. And given the way FICA taxes have worked since Greenspn & Co. fixed SS, a portion of FICA taxes go into the general fund are are de facto income taxes.

I'm guess I'm not sure what your talking about. I'm talking about income taxes only (and the capital gains tax, a seperate tax, can be included as well).

[SportsDino]

I've never had much faith in the rating agencies, its been clear for years they don't do their homework (I dunno, actually determining credit-worthiness of companies, ahem ahem!). However, markets go gonzo for rating downgrades... so still have to pay attention to them.

I would have downrated a whole lot of credit ratings in 2007, or hell earlier than that if I was into the part time speculator biz before that.

[JPhillips]

I'm guess I'm not sure what your talking about. I'm talking about income taxes only (and the capital gains tax, a seperate tax, can be included as well).

But you say they don't pay taxes when they certainly do, and some of the taxes they pay go into the same fund as income taxes. There's not a single worker that pays no federal taxes. It's fine, if misleading, if you want to limit the discussion to income taxes, but don't say that people aren't paying taxes when they are.

[SportsDino]

The point of a progressive tax system is supposed to be that it hurts a hell of a lot less to pay taxes when you have more money, since you are much farther away from scraping by just for survival.

The problem with the whole silly tax fights we have is that one side whines like little bitches whenever a tax hike is mentioned at all, even if it is on an upper bracket they'll likely never reach, because they bought some line a long time ago that rich people not paying taxes are essential since they invest the money better than the government. The bad side of course is that government tends to spend the same, therefore the real result is that taxes on everyone end up huge, including those at the low and middle brackets that are closer to 'scraping by'. So the feedback loop is the fight against taxing the rich, often supported by middle to upper middle class, often leads to a higher overall tax burden on that middle class (in my opinion, especially in the era of tax dodging tricks for politicians and super wealthy). Ironically, what is in there best immediate interest is an increase in the highest tax brackets first, so that the scrapers have enough money to continue financing the consumerist machine that the super wealthy have built their fortune on.

On the other side you have the liberals who think it is a matter of fairness that the rich should be taxed more. Again, similarly ludicrious, there is nothing inherintly wrong from the pursuit of wealth... especially if done in an ethical and pro-growth manner such as creating businesses (and jobs). Taxing should not be a penalty for success, it should merely be collecting resources from the best location in the economy to collect those resources from, and from a net standard of living point of view that means a much higher proportion of income will come from the highest brackets. This makes sense in a direct, measure the impact on the efficiency of the country sort of way. Ironically, what would help the class of those at the bottom end and liberals who want a higher percentage of taxes to be paid by the rich, is a reduction in government spending (and specifically waste). By reducing the cost per citizen you dramatically effect the amount of taxes you really need to collect in other forms, such as taxes mostly hitting the poor like payroll, sales tax, and so on. If we had more efficient spending, the best thing for businesses and the super wealthy would actually be to have low taxes on the low brackets so that the overall standard of living rises, and they can sell the products and services to provide that standard. With more of the economy in the private sector, and growing, you have less need for government spending, so even if the tax burden is most heavilly allocated on the wealthy, the overall net tax required goes down and they would end up saving money in the long run (both paying less taxes overall, and higher profits from their businesses).

So we really need to see the parties switch sides, the liberals should go on a 'kill all government waste' streak, and the conservatives should back off the 'must protect the Bush tax cuts for the rich' and go on a 'kill off terrible government programs wasting money'. Poor all of that money into roads and unicorns to ride upon them and all will be happy!

[Flasch186]

This week may be a week of maximum panic and such could be another point to drop a little cost averaging in. I love how Cramer and Suze Orman are both harping on the if you need $ in the next 5 years get out of the market....a little late for one and no shit for two. The question is how much reserves allows one to still invest with their other monies. I have a nice safety net however I look at it sometimes in wonder and say, perhaps that should be bigger, hmmmmm.

and wow:

Reports: AIG to get up to $30B more in Fed aid - Yahoo! Finance (http://finance.yahoo.com/news/Reports-AIG-to-get-up-to-30B-apf-14505400.html)

Im against disorderly unwinding but even Im starting to wonder where the light at the end of the tunnel is (which means in the contra-flasch theorem we should be getting close and this week will be a nice rally :) )

There's some crazy shit in the new AIG monies too:

1. Taxpayer being repaid in shares as opposed to the cash that was intended.
2. Theyre going to securitize life insurance policies. OK, well I guess those arent a bubble and people will start dying tomorrow in droves...maybe the safest securitization in the last 10 years.

Honestly watching business news the last 2 years has been better than any Hollywood movie Ive seen in a long time (BTW anyone see the First 48 the other night with the Memphis Massacre? Riveting).

[Mizzou B-ball fan]

Warren Buffet takes a pretty heavy-duty swipe at the large government handouts in the bailout bills..........

http://www.berkshirehathaway.com/letters/2008ltr.pdf

This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone "all in." Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome after effects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won't leave willingly.

[ISiddiqui]

Apparently Consumer Spending was higher than anticipated in January this year:

Consumer Spending Rose More Than Expected - NYTimes.com (http://www.nytimes.com/2009/03/03/business/economy/03econ.html?hp)

So, that's one good news in a sea of bad.

[gstelmack]

So is it worth talking about how Congress has once again kept their annual pay raises, or did I miss the discussion?

[Mizzou B-ball fan]

So is it worth talking about how Congress has once again kept their annual pay raises, or did I miss the discussion?

Was that hidden in one of the spending bills or did they create a separate bill for that? Any chance it was posted for 5 days on the internet before a vote?

[gstelmack]

It's set up so they have to vote to get rid of it, which of course means they never vote on it.

Apparently a bill was introduced to freeze them, but it never made it out of committee.

Most of the search links I'm finding on this are third-party watchdog groups. CNN, etc don't seem to have picked up on it. A search on CNN.com turns up the same links, and if you force it to search just CNN it picks up mostly on "2009" and "congressional".

[flere-imsaho]

Yeah, the fat that changing to a better card or even getting rid of a card can lower your credit score is appalling.

The way credit scores are done is broken, simply put. Anyone who's had to contest a line item from a credit agency or, worse, has been the victim of identity theft, knows this.

I hate to be cynical, but as far as I can tell your credit rating is based on the flawed twin principles of a) you're guilty of being a credit risk until you can prove your "innocence" through spending and paying bills and b) you need to spend like a good little consumer enough to earn a really good rating.

So, you believe that tax rates should be 50 %-70%?

I'm OK with everyone from my tax bracket and up having an overall "income" tax burden (including state & local taxes, and FICA, but not things like capital gains) of 50%.

Now, seventy percent? Probably not. If government services were provided as I saw them in Denmark, Sweden and Norway then sure, but the government still wastes too much of my money for me to go that far.

Which is the other part of the bargain. I'll pay 50% if the government will try to waste less. But since I live a comfortable life and live in a comfortable tax bracket, I'm willing to take the first step.

Besides, as a citizen of Cook County, Illinois, the Federal Government wasting my money is the least of my worries. I'll get around to them eventually, but I've got other fish to fry.

Are you nuts? Talk about killing an economy and the entrepreneurial spirit that makes America great.

In 10 years I've gone from a net income of 0 to a net income of, well, considerably more than 0. In all that time I can assure you that my ambition was never tempered by the thought that the government would keep taking more of my money as I succeeded in life.

Now, if the tax rate for people making over, say, $200,000/year was 75% or more, I think you might have a point. I think this is one of those talking points that really doesn't have a lot of bases in reality, aside from the fact that everyone likes to bitch about taxes, especially the "rich".

Nearly half of Americans don't even pay any taxes (and even get money back from the government),

As JPhillips pointed out, this isn't necessarily true. In fact, there's no one in America, including illegals and tourists, that don't pay some sort of tax at some point.

and the 1% of the income earners pay about 40% of the income as it is.

This is another one of those talking points that has a considerably different meaning depending on whether it's presented in context of the amount of money the top 1% earn, or if it's presented without context (as above).

I mean really, when you're talking about the top 1% and the 50% or whatever of the population who make $50,000 or less, you're talking about an absolutely huge difference in scale. The top 1% are going to earn more from basic interest on their assets in a year than most of the other 50% are going to earn in their lifetimes. And that's being conservative.

Not to get too off base here, but this is why I always liked the way soccer stars' pay in Europe is listed in amounts per week. So Wayne Rooney earns something like $250,000 a week. And Wayne Rooney isn't even within spitting distance of the top 1%. The top 1% are earning millions, tens of millions, a week. I mean, they're earning more per hour than people are going to earn all year, or in a decade, or in a lifetime.

It's not fair or unfair that the top 1% are paying 40% of all taxes, it's basic mathematics.

Also, a lot of states are looking/or are increasing gas taxes. Is that really the best idea?

Depends on your point of view. Four dollar/gallon gasoline looks like the amount that finally got Americans to start changing their habits. Given that in the future we're going to have to be more conservation-minded, getting gas back up to that level to spur innovative ideas to save gasoline and other energy might not be a bad idea.

But sure, we probably shouldn't do it in a recession. And the states that are proposing this are doing it as little more than a money grab.

[flere-imsaho]

So is it worth talking about how Congress has once again kept their annual pay raises, or did I miss the discussion?

I always love this whenever it comes up. It always underlines what a bunch of self-serving jackasses most of them are, as well as the fact that so few have actually held real jobs.

However, the best part is taking a look, each year, to see which ones, if any, introduced resolutions to try and freeze the raise.

[gstelmack]

However, the best part is taking a look, each year, to see which ones, if any, introduced resolutions to try and freeze the raise.

One link I found claims:

Rep. Harry Mitchell, a first-term Democrat from Arizona, sponsored legislation earlier this year that would have prevented the automatic pay adjustments from kicking in for members next year. But the bill, which attracted 34 cosponsors, failed to make it out of committee.

[JPhillips]

So is it worth talking about how Congress has once again kept their annual pay raises, or did I miss the discussion?

But if they don't get a raise how will they ever attract the top talent?

[flere-imsaho]

:D

[Mizzou B-ball fan]

But if they don't get a raise how will they ever attract the top talent?

I see what you're doing here.

[Flasch186]

unfortunately it looks like the week has started like I thought it would. Im hoping that this creates a panicky bottom to the market so that some slow healing can begin and it could happen as over the next 6 weeks there is a lot of unveiling to be done for programs and such.

[Marc Vaughan]

Ok to me things have gone from 'bad' to stupidly panic driven in the last month, I can definitely see an arguement that the market was overblown and needed to come down a bit - but its now down over 50% from its peak and obviously solid companies with safe income and turn over such as Microsoft and Nokia are tumbling like leaves ....

While their profits may well be affected by the downturn I can't believe that they'd fail to be profitable and indeed with their cash reserves I'd expect them to benefit from the situation by picking up smaller companies and weathering the storm better than most (leading to increased market share etc. come the recovery).

[Flasch186]

I throw GE into that bunch however the market is obviously pricing in a rating cut on them which is just insane although I have to admit that the books of all these companies in freefall look like a 3 year old got into the crayon box on it. I just cant imagine a ratings cut on them and continue to scale into GE but what was once a value play IMO is becoming speculative and I do not like that one bit. GE....speculative. HA!

[SteveMax58]

Similar to the housing market...I would expect there will be overcorrection on the downside a bit as well.

Hopefully that's what is happening with (seemingly) undervaluation of solid companies and stocks.

[JPhillips]

I see what you're doing here.

Shh! Let's keep it a secret from lesser minds.

[Galaxy]

I'm OK with everyone from my tax bracket and up having an overall "income" tax burden (including state & local taxes, and FICA, but not things like capital gains) of 50%.

Now, seventy percent? Probably not. If government services were provided as I saw them in Denmark, Sweden and Norway then sure, but the government still wastes too much of my money for me to go that far.

Which is the other part of the bargain. I'll pay 50% if the government will try to waste less. But since I live a comfortable life and live in a comfortable tax bracket, I'm willing to take the first step.

Besides, as a citizen of Cook County, Illinois, the Federal Government wasting my money is the least of my worries. I'll get around to them eventually, but I've got other fish to fry.



In 10 years I've gone from a net income of 0 to a net income of, well, considerably more than 0. In all that time I can assure you that my ambition was never tempered by the thought that the government would keep taking more of my money as I succeeded in life.

Now, if the tax rate for people making over, say, $200,000/year was 75% or more, I think you might have a point. I think this is one of those talking points that really doesn't have a lot of bases in reality, aside from the fact that everyone likes to bitch about taxes, especially the "rich".



As JPhillips pointed out, this isn't necessarily true. In fact, there's no one in America, including illegals and tourists, that don't pay some sort of tax at some point.



This is another one of those talking points that has a considerably different meaning depending on whether it's presented in context of the amount of money the top 1% earn, or if it's presented without context (as above).

I mean really, when you're talking about the top 1% and the 50% or whatever of the population who make $50,000 or less, you're talking about an absolutely huge difference in scale. The top 1% are going to earn more from basic interest on their assets in a year than most of the other 50% are going to earn in their lifetimes. And that's being conservative.

Not to get too off base here, but this is why I always liked the way soccer stars' pay in Europe is listed in amounts per week. So Wayne Rooney earns something like $250,000 a week. And Wayne Rooney isn't even within spitting distance of the top 1%. The top 1% are earning millions, tens of millions, a week. I mean, they're earning more per hour than people are going to earn all year, or in a decade, or in a lifetime.

It's not fair or unfair that the top 1% are paying 40% of all taxes, it's basic mathematics.



Depends on your point of view. Four dollar/gallon gasoline looks like the amount that finally got Americans to start changing their habits. Given that in the future we're going to have to be more conservation-minded, getting gas back up to that level to spur innovative ideas to save gasoline and other energy might not be a bad idea.

But sure, we probably shouldn't do it in a recession. And the states that are proposing this are doing it as little more than a money grab.

Guess we'll have to agree to disagree.

On the gas tax, I think it's stupid to raise it now, in a recession as bad as this. However, a lot of states are looking to go with a "pay-as-you-go" system that charges you on how many miles you drive. A money grab that goes against the entire purpose of ending our gas/oil-addiction.

[Fidatelo]

Flasch, haven't you been calling for a bottom for like 6 months now?

This ship is going lower for a while yet.

[Flasch186]

hoping.

[SportsDino]

I think my current strategy is to fund all my buys with shorts. But can the markets fall even further? hahahahaa... they'll give it the old college try apparently.

I finally cashed out my long standing grudge against GM. Shorted 100% (in May), covered for 10%. Looking at many stocks now cause this is one of my oldest shorts, and I basically could have picked any stock in the country and performed the same and been a winner.

[SportsDino]

YouTube - Confessions of an Economic Hit Man - Part I (http://www.youtube.com/watch?v=yTbdnNgqfs8&feature=related)

Interesting interview: Confessions of an Economic Hit Man

[Mac Howard]

The way credit scores are done is broken, simply put. Anyone who's had to contest a line item from a credit agency or, worse, has been the victim of identity theft, knows this.

I hate to be cynical, but as far as I can tell your credit rating is based on the flawed twin principles of a) you're guilty of being a credit risk until you can prove your "innocence" through spending and paying bills and b) you need to spend like a good little consumer enough to earn a really good rating.



I'm OK with everyone from my tax bracket and up having an overall "income" tax burden (including state & local taxes, and FICA, but not things like capital gains) of 50%.

Now, seventy percent? Probably not. If government services were provided as I saw them in Denmark, Sweden and Norway then sure, but the government still wastes too much of my money for me to go that far.

Which is the other part of the bargain. I'll pay 50% if the government will try to waste less. But since I live a comfortable life and live in a comfortable tax bracket, I'm willing to take the first step.

Besides, as a citizen of Cook County, Illinois, the Federal Government wasting my money is the least of my worries. I'll get around to them eventually, but I've got other fish to fry.



In 10 years I've gone from a net income of 0 to a net income of, well, considerably more than 0. In all that time I can assure you that my ambition was never tempered by the thought that the government would keep taking more of my money as I succeeded in life.

Now, if the tax rate for people making over, say, $200,000/year was 75% or more, I think you might have a point. I think this is one of those talking points that really doesn't have a lot of bases in reality, aside from the fact that everyone likes to bitch about taxes, especially the "rich".



As JPhillips pointed out, this isn't necessarily true. In fact, there's no one in America, including illegals and tourists, that don't pay some sort of tax at some point.



This is another one of those talking points that has a considerably different meaning depending on whether it's presented in context of the amount of money the top 1% earn, or if it's presented without context (as above).

I mean really, when you're talking about the top 1% and the 50% or whatever of the population who make $50,000 or less, you're talking about an absolutely huge difference in scale. The top 1% are going to earn more from basic interest on their assets in a year than most of the other 50% are going to earn in their lifetimes. And that's being conservative.

Not to get too off base here, but this is why I always liked the way soccer stars' pay in Europe is listed in amounts per week. So Wayne Rooney earns something like $250,000 a week. And Wayne Rooney isn't even within spitting distance of the top 1%. The top 1% are earning millions, tens of millions, a week. I mean, they're earning more per hour than people are going to earn all year, or in a decade, or in a lifetime.

It's not fair or unfair that the top 1% are paying 40% of all taxes, it's basic mathematics.



Depends on your point of view. Four dollar/gallon gasoline looks like the amount that finally got Americans to start changing their habits. Given that in the future we're going to have to be more conservation-minded, getting gas back up to that level to spur innovative ideas to save gasoline and other energy might not be a bad idea.

But sure, we probably shouldn't do it in a recession. And the states that are proposing this are doing it as little more than a money grab.

Excellent post, flere-imsaho. It's good to read a post that rejects the rationalised self-interest that is corrupting so much economic debate currently.

I almost considered excluding my signature :rolleyes:

[DaddyTorgo]

Investors worldwide pulled money out of stock funds last week at levels last seen in mid-October, according to the Cambridge, Mass.-based Emerging Portfolio Fund Research Inc.
Globally, investors yanked $10.4 billion out of stock funds and $568 million out of bond funds during the week ended Feb. 27. U.S. equity funds made up more than 60% of the total equity outflows worldwide. At the same time, U.S. bond funds were the only fixed-income group to post inflows, taking in $831 million, the firm reported.


http://www.pionline.com/apps/pbcs.dll/article?AID=/20090303/REG/903029963

[Mizzou B-ball fan]

Couple of thoughts on a couple of Obama's proposals that directly affect me.

1) I'm one of those families that may actually cut back on work to improve my financial position. Depending on the details that are passed in a bill, our accountant has advised that we may need to cut my wife's salary back to a certain level. I don't know the specifics, but that's all kinds of wacky that lowering your salary could be a benefit at any income level. It seems awfully counter-productive.

2) With the housing market as it currently is, do we really think that getting rid of some mortgage income deductions for the higher income taxpayers is a good idea? Giving less incentive for property ownership for the people who can afford to boost this market doesn't seem like a very good idea IMO.

[JPhillips]

I'd really quiz your accountant. There's very little likelihood that reducing gross income will result in greater net income. It may be possible, but tax brackets only apply to income above a set level, not the total income.

[Mizzou B-ball fan]

I'd really quiz your accountant. There's very little likelihood that reducing gross income will result in greater net income. It may be possible, but tax brackets only apply to income above a set level, not the total income.

Understood. I just threw it out there because I was surprised to even hear this kind of thing. I think the reason for cutting back would be certain deductions would only be allowed for people who make less than $XXX,XXX. And it certainly should be noted that the proposals by Obama will likely differ significantly from what eventually is passed through Congress.

[Flasch186]

I'd really quiz your accountant. There's very little likelihood that reducing gross income will result in greater net income. It may be possible, but tax brackets only apply to income above a set level, not the total income.

BINGO!! the accountant is either spun or an idiot.

[JPhillips]

Understood. I just threw it out there because I was surprised to even hear this kind of thing. I think the reason for cutting back would be certain deductions would only be allowed for people who make less than $XXX,XXX. And it certainly should be noted that the proposals by Obama will likely differ significantly from what eventually is passed through Congress.

Even considering deductions, it seems unlikely. Whatever passes will probably have a scale based on income. I doubt that it will be 100% at 249,999 and 0% at 250,000.

[Flasch186]

yup...how stupid. Typical.

[Mizzou B-ball fan]

Even considering deductions, it seems unlikely. Whatever passes will probably have a scale based on income. I doubt that it will be 100% at 249,999 and 0% at 250,000.

Agreed. I just thought I'd ask about it because I wasn't certain if anyone had heard something different.

[JPhillips]

The more I think about it the more I'd recommend getting a new accountant. Nothing has been passed or even brought to the floor. There's no possibility of knowing exactly what the final bill will mean as regards to your personal finances. Giving you advice now on lowering your gross income is completely irresponsible.

[Flasch186]

Agreed. I just thought I'd ask about it because I wasn't certain if anyone had heard something different.

Oh I didnt realize your post above was a question...lemme see if I can find a question mark in it or if it was posed as a question or being passed as some semblance of knowledgable information sharing to paint the upcoming budget as somewhat challenging to you and your familiy's drive to increase your income.

nope.

[Mizzou B-ball fan]

The more I think about it the more I'd recommend getting a new accountant. Nothing has been passed or even brought to the floor. There's no possibility of knowing exactly what the final bill will mean as regards to your personal finances. Giving you advice now on lowering your gross income is completely irresponsible.

Trust me, I'm not lowering anything without a final bill. It was something mentioned as a possibility. It goes without saying that I'd prefer to continue to maximize my income.

[cartman]

http://blogs.tnr.com/tnr/blogs/the_plank/archive/2009/03/03/wealthy-idiots-meet-idiot-reporter.aspx

[flere-imsaho]

It goes without saying that I'd prefer to continue to maximize my income.

What's your motivation? After all, the government is just going to take more and more of your money as you make more....

:devil:

[Mizzou B-ball fan]

http://blogs.tnr.com/tnr/blogs/the_plank/archive/2009/03/03/wealthy-idiots-meet-idiot-reporter.aspx

Thanks. File that under the same file as the e-mail stating that every citizen would get $200K if the gov't distributed the stimulus money equally.

[Mizzou B-ball fan]

What's your motivation? After all, the government is just going to take more and more of your money as you make more....

:devil:

But on the other hand, the expansion of gov't by the same administration who increases my taxes further ensures my job will be here for some time. What's a man to do? :)

[JonInMiddleGA]

I doubt that it will be 100% at 249,999 and 0% at 250,000.

You obviously have more faith in the current crop in DC than a lot of people do.

[Flasch186]

I typed out a lot and deleted it all because countering MBBF's question is such a waste of time I find it silly beyond almost anything. He knows exactly what he means at all times. At least Jon is funny.

[Mizzou B-ball fan]

I typed out a lot and deleted it all because countering MBBF's question is such a waste of time I find it silly beyond almost anything. He knows exactly what he means at all times. At least Jon is funny.

You give me FAR too much credit. I was being sincere and honestly didn't have any alternative motive.

[Flasch186]

Im shocked. <-----feigned shock.

[Ronnie Dobbs2]

At least he wasn't surprised by something this time.

[Mizzou B-ball fan]

At least he wasn't surprised by something this time.

:eek:

[Galaxy]

http://blogs.tnr.com/tnr/blogs/the_plank/archive/2009/03/03/wealthy-idiots-meet-idiot-reporter.aspx

Thanks. I was going to say something along those lines.

[Galaxy]

Excellent post, flere-imsaho. It's good to read a post that rejects the rationalised self-interest that is corrupting so much economic debate currently.

I almost considered excluding my signature :rolleyes:

It's just up to one's beliefs in all politics. You'll never change someone's mind, but it's good to discuss, argue, and kept those ideas flowing.

[Kodos]

Okay, time to fess up. Who were the 11 guys who voted for "No Recession"?

[Galaxy]

Any changes to the AMT?

[JPhillips]

I'm generally a peaceful guy, but this shit makes me want to get a torch and pitchfork, and probably another blood pressure pill.

Whether they deserve to be or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.

So it may come as a surprise that a dozen top Countrywide executives now stand to make millions from the home mortgage mess.

Stanford L. Kurland, Countrywide’s former president, and his team of former company executives have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.

“It has been very successful — very strong,” John Lawrence, the company’s head of loan servicing, told Mr. Kurland one morning last week in a glass-walled boardroom here at PennyMac’s spacious headquarters, opened last year in the same Los Angeles suburb where Countrywide once flourished.

***

“It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margo Saunders, a lawyer with the National Consumer Law Center, which for more than a decade has sought to place limits on abusive lending practices.

[BishopMVP]

Not to get too off base here, but this is why I always liked the way soccer stars' pay in Europe is listed in amounts per week. So Wayne Rooney earns something like $250,000 a week. And Wayne Rooney isn't even within spitting distance of the top 1%. The top 1% are earning millions, tens of millions, a week. I mean, they're earning more per hour than people are going to earn all year, or in a decade, or in a lifetime.

It's not fair or unfair that the top 1% are paying 40% of all taxes, it's basic mathematics.$250,000*52weeks=13 million/year
$1m*52 weeks=52 million/year
$10m*52 weeks=520 million/year
350 million/100=3.5 million people
$52million/year*3.5 million people = $182,000,000,000,000
$182 trillion/$15 trillion = the top 1% supposedly earning >12 times the US GDP

Now that's basic mathematics. But at least we know where Obama is getting his figures to say taxing the top 1% will pay for everything.

(For fun - 40 hours*52 weeks*$50,000 median income = $104 million/year if a person made the yearly median income every hour.)I'd really quiz your accountant. There's very little likelihood that reducing gross income will result in greater net income. It may be possible, but tax brackets only apply to income above a set level, not the total income.The way he wrote it originally I thought he was saying he owned a small business, his wife worked for that, and there was some corporate/personal income tax arbitrage situation. Or there being certain income thresholds where she was started being eligible for Medicare or food stamps or something. But neither make sense based off MBBF working a gov't job, so yeah, I'd say go requiz the accountant on that. I'd really love to see where the misunderstanding is (or the loophole if it really exists.)

[BishopMVP]

I'm generally a peaceful guy, but this shit makes me want to get a torch and pitchfork, and probably another blood pressure pill.I defend capitalism to the death, but the punishment disparity between white collar crime and armed robbery is despicable. If no one in a legal position is going to hold anybody accountable, I understand why people are so willing to go after every rich person's wealth.

[Marc Vaughan]

While it can be argued that its 'fair' to tax the top 1% heavier than others - its unrealistic for many reasons.

These people have huge amounts of cash - if they have taxes raised in one country they'll relocate to another, its not like they're a massive corporation and can't do this ... indeed the very money that Obama etc. are trying to get off them makes it extremely easy an practical for them to do so.

Not only that but their wealth means other countries will welcome them with open arms because they're likely to invest and spend a higher proportion in the country they're based within.

[Mizzou B-ball fan]

The way he wrote it originally I thought he was saying he owned a small business, his wife worked for that, and there was some corporate/personal income tax arbitrage situation.

My wife has a S Corp that she funnels her income through. Perhaps there is something there that I'm not understanding that could change.

[SteveMax58]

While it can be argued that its 'fair' to tax the top 1% heavier than others - its unrealistic for many reasons.

These people have huge amounts of cash - if they have taxes raised in one country they'll relocate to another, its not like they're a massive corporation and can't do this ... indeed the very money that Obama etc. are trying to get off them makes it extremely easy an practical for them to do so.

Not only that but their wealth means other countries will welcome them with open arms because they're likely to invest and spend a higher proportion in the country they're based within.


Not sure if you are lumping this in...but this would also describe why I believe corporate tax rates being higher, in a world that can now support remote offices, etc. is the wrong approach. The US is now "competing", at some level, for corporations & rich people alike, to want to live and base here.

I don't like the whole "rich people suckup" as a strategy for policy...but they are the one's who drive the economy. Not people like me who buy groceries and the occassional splurge on a TV(or some such purchase).

[JPhillips]

While it can be argued that its 'fair' to tax the top 1% heavier than others - its unrealistic for many reasons.

These people have huge amounts of cash - if they have taxes raised in one country they'll relocate to another, its not like they're a massive corporation and can't do this ... indeed the very money that Obama etc. are trying to get off them makes it extremely easy an practical for them to do so.

Not only that but their wealth means other countries will welcome them with open arms because they're likely to invest and spend a higher proportion in the country they're based within.

But there was no mass exodus of the wealthy during Clinton. Why would you expect that to happen now? For that matter we had plenty of rich folks in the fifties and sixties when the top rate was much higher.

[Marc Vaughan]

But there was no mass exodus of the wealthy during Clinton. Why would you expect that to happen now? For that matter we had plenty of rich folks in the fifties and sixties when the top rate was much higher.

How many exodus depends relationally with how many loop holes are available to allow them to dodge the tax.

For instance you can put in a 40% upper bracket limit with no side effect if you allow the same people to open a limited company and then pay themselves via. dividends at a much lower rate (this is quite common place in England for instance if you look through companies house you'll find all Premiership footballers pretty much are paid this way simply because dividend payments are taxable only at a 20% rate).

If you close off the loopholes then you WILL find people will exodus, maybe not visibly but enough to dodge paying tax ... no one likes giving away wadges of cash when they don't need to.

(on the other hand if you're happy with just making gestures for the medias sake and leaving loopholes open then obviously it'll have no effect at all in reality apart from making accountants a little richer as people employ more of them to just through the hoops)

[sterlingice]

While it can be argued that its 'fair' to tax the top 1% heavier than others - its unrealistic for many reasons.

These people have huge amounts of cash - if they have taxes raised in one country they'll relocate to another, its not like they're a massive corporation and can't do this ... indeed the very money that Obama etc. are trying to get off them makes it extremely easy an practical for them to do so.

Not only that but their wealth means other countries will welcome them with open arms because they're likely to invest and spend a higher proportion in the country they're based within.

Seriously, someone you know is going to move elsewhere because their $250K+ per year is taxed at 5% (35% to 39.6%) more than it was before? Hell, in some cases, moving costs more than wipe out any tax gain you'd get. Oh, and did I mention that pretty much all of the 1st world has higher taxes than us currently (http://en.wikipedia.org/wiki/Tax_rates_around_the_world). Most places in Europe hang around 40% while some go up to 60%. I don't see the rich moving to the Eastern Bloc, Middle East, or Africa to pay less taxes- it's just not going to happen as they can't get the standard of life they enjoy currently. And I suspect they don't have the crazy level of deductions that we allow here, as almost all of these countries are more heavily regulated so a good tax lawyer gets you paying a lot less here in the US.

So, please, let's stop this meme of "they'll go elsewhere" because it's a load of crap.

SI

[sterlingice]

Not sure if you are lumping this in...but this would also describe why I believe corporate tax rates being higher, in a world that can now support remote offices, etc. is the wrong approach. The US is now "competing", at some level, for corporations & rich people alike, to want to live and base here.

I don't like the whole "rich people suckup" as a strategy for policy...but they are the one's who drive the economy. Not people like me who buy groceries and the occassional splurge on a TV(or some such purchase).

I fail to see how the rich drive the economy we currently enjoy. No, that's glib. But, I fail to see how they drive it more than the middle class, considering what an extreme consumer-based economy we have. Once you get beyond a certain level of living, you can't consume any more.

Considering you have 99 "poorer" people for every 1 rich person- how does letting them have money to buy 1 Rolls Royce help the economy more than 10 of those 99 having the money to buy a car from GM? Great, so they can buy a $5M home. Does that employ more people than 10 of those 99 buying a $150K home? $100 bottle of wine/$3 6-pack of coke? Expensive work of art/tv? $100 restaurant meal/Mickey-D's?

Most of the money the rich have is tied up in assets like stock either for investment or owning corporations, funds, real estate (derivatives), etc- in short, investments. In a way those help the economy run, but clearly a lot of that is just vehicles of moving capital up the ladder, making the rich richer and the poor poorer- as we've seen very clearly in the last few months, robbing long term 401k's to make a quick buck, etc. How does that help the economy at all?

Basically, the poorer you get, the more is spent locally on everyday needs on consumer goods. Now, if you want to argue whether a consumer-based economy is good, we've got a lot longer conversation. But the fact remains that the further away you get from everyday needs, in terms of income, the less is going to circulate, especially for the US. If you have just basic needs, they will mostly be met by US workers: gotta have locals to build your home/apartment, make your food, run your cable/electricity/water, build your car- American or American-made foreign car, etc. Put that together with some cheap electronics, furniture, and necessities like pots/pans/etc that are made in China and you have a basic living.

As you go up the ladder towards more luxuries, you're talking about branching out to a lot more foreign sources.

And you know what's good about capitalism, as a basic system: If you removed the top 1% right now, there'd be millions of people left, looking to take their place, making products, employing people, and selling products and become the new top 1%. So, let's not pretend the current rich we have now are the people who deign us to spend their money and give us jobs by their good graces.

SI

[Marc Vaughan]

Seriously, someone you know is going to move elsewhere because their $250K+ per year is taxed at 5% (35% to 39.6%) more than it was before? Hell, in some cases, moving costs more than wipe out any tax gain you'd get. Oh, and did I mention that pretty much all of the 1st world has higher taxes than us currently
So, please, let's stop this meme of "they'll go elsewhere" because it's a load of crap.

You'll find some people will - simple as that, I know a LOT of people who have left England as their careers have progressed and for many a reduction in tax paid has been a factor in that.

(I also know some people who have moved to the UK from higher taxed European countries for similar reasons)

It should also be noted that the people involved aren't just 'tax payers' they also people who tend to drive the economy by starting companies etc. - hence their loss to a country is more than just the immediate personal tax contribution imho.

So no I don't think its just 'crap' - but however I do also acknowledge that the effect is somewhat muted so long as countries retain the normal tax dodges (such as the one I mentioned that Premiership players use in the UK) available to the hugely weathy and instead just treat such rises as an attack on the middle class who are caught in the 'reasonably affluent' but not rich bracket.

[DaddyTorgo]

Seriously, someone you know is going to move elsewhere because their $250K+ per year is taxed at 5% (35% to 39.6%) more than it was before? Hell, in some cases, moving costs more than wipe out any tax gain you'd get. Oh, and did I mention that pretty much all of the 1st world has higher taxes than us currently (http://en.wikipedia.org/wiki/Tax_rates_around_the_world). Most places in Europe hang around 40% while some go up to 60%. I don't see the rich moving to the Eastern Bloc, Middle East, or Africa to pay less taxes- it's just not going to happen as they can't get the standard of life they enjoy currently. And I suspect they don't have the crazy level of deductions that we allow here, as almost all of these countries are more heavily regulated so a good tax lawyer gets you paying a lot less here in the US.

So, please, let's stop this meme of "they'll go elsewhere" because it's a load of crap.

SI

my thoughts exactly

[DaddyTorgo]

I fail to see how the rich drive the economy we currently enjoy. No, that's glib. But, I fail to see how they drive it more than the middle class, considering what an extreme consumer-based economy we have. Once you get beyond a certain level of living, you can't consume any more.

Considering you have 99 "poorer" people for every 1 rich person- how does letting them have money to buy 1 Rolls Royce help the economy more than 10 of those 99 having the money to buy a car from GM? Great, so they can buy a $5M home. Does that employ more people than 10 of those 99 buying a $150K home? $100 bottle of wine/$3 6-pack of coke? Expensive work of art/tv? $100 restaurant meal/Mickey-D's?

Most of the money the rich have is tied up in assets like stock either for investment or owning corporations, funds, real estate (derivatives), etc- in short, investments. In a way those help the economy run, but clearly a lot of that is just vehicles of moving capital up the ladder, making the rich richer and the poor poorer- as we've seen very clearly in the last few months, robbing long term 401k's to make a quick buck, etc. How does that help the economy at all?

Basically, the poorer you get, the more is spent locally on everyday needs on consumer goods. Now, if you want to argue whether a consumer-based economy is good, we've got a lot longer conversation. But the fact remains that the further away you get from everyday needs, in terms of income, the less is going to circulate, especially for the US. If you have just basic needs, they will mostly be met by US workers: gotta have locals to build your home/apartment, make your food, run your cable/electricity/water, build your car- American or American-made foreign car, etc. Put that together with some cheap electronics, furniture, and necessities like pots/pans/etc that are made in China and you have a basic living.

As you go up the ladder towards more luxuries, you're talking about branching out to a lot more foreign sources.

And you know what's good about capitalism, as a basic system: If you removed the top 1% right now, there'd be millions of people left, looking to take their place, making products, employing people, and selling products and become the new top 1%. So, let's not pretend the current rich we have now are the people who deign us to spend their money and give us jobs by their good graces.

SI

nailing it on the motherfucking head man!

[Marc Vaughan]

I fail to see how the rich drive the economy we currently enjoy. No, that's glib. But, I fail to see how they drive it more than the middle class, considering what an extreme consumer-based economy we have. Once you get beyond a certain level of living, you can't consume any more.

Ok using an example of someone I've met personally - Ian Livingstone is a fairly affluent person and undoubtably pays a fair whack in income tax.

Ian founded Games Workshop (bloodbowl, warhammer etc.), then invented the 'Fighting Fantasy' gamebooks (choose your own adventure etc), he then got involved Domark and when they were bought out became chairman of Eidos for ages (which is around the time I met him).

Now I'm biased because he's a nice bloke and I've always admired the games he's had a hand in creating but ....

I think its safe to say that the amount of income tax he paid was marginal in contrast to the effect on the economy of the jobs and companies he created.

Thats whats generally meant by the importance of the higher paid individuals - they aren't thinking of high paid 'employees', most people in those brackets are involved in stimulating the economy by creating jobs etc.

[Flasch186]

BTW if Oil already tested it's low anyone want to tell me what the $/barrel was? :)

on the other hand GE continues to get pounded relentlessly and IMO unwarranted (or grossly exaggerated). GE Capital while a large and exposed facet of the company I do not believe will cause it to get a ratings downgrade (although if the stock price drops far enough it will put more pressure on the company to raise capital - I cant believe Im saying this about GE) and while they have taken unnecessary risks I see this as an incredible value going forward. Im still scaling in for a $/avg that is much lower than I anticipated but I cant believe that it's dropped this much. Shocking and right in line with everything contra-flasch.

[JPhillips]

Ok using an example of someone I've met personally - Ian Livingstone is a fairly affluent person and undoubtably pays a fair whack in income tax.

Ian founded Games Workshop (bloodbowl, warhammer etc.), then invented the 'Fighting Fantasy' gamebooks (choose your own adventure etc), he then got involved Domark and when they were bought out became chairman of Eidos for ages (which is around the time I met him).

Now I'm biased because he's a nice bloke and I've always admired the games he's had a hand in creating but ....

I think its safe to say that the amount of income tax he paid was marginal in contrast to the effect on the economy of the jobs and companies he created.

Thats whats generally meant by the importance of the higher paid individuals - they aren't thinking of high paid 'employees', most people in those brackets are involved in stimulating the economy by creating jobs etc.

But if he doesn't have a large consumer base to buy his products his innovation doesn't matter. It's all about a balance between creators and consumers.

[DaddyTorgo]

BTW if Oil already tested it's low anyone want to tell me what the $/barrel was? :)

on the other hand GE continues to get pounded relentlessly and IMO unwarranted (or grossly exaggerated). GE Capital while a large and exposed facet of the company I do not believe will cause it to get a ratings downgrade (although if the stock price drops far enough it will put more pressure on the company to raise capital - I cant believe Im saying this about GE) and while they have taken unnecessary risks I see this as an incredible value going forward. Im still scaling in for a $/avg that is much lower than I anticipated but I cant believe that it's dropped this much. Shocking and right in line with everything contra-flasch.

yeah I was just commenting last night that there are a lot of blue-chip names that have been oversold with very attractive valuations and I need to consider building positions in some of them for the very-longterm as well as considering my strategy for participating in the market upside - whether it's solely via index funds to capture the broad market upside, or whether I toss some sector-specific ETF's in there as well...

[Marc Vaughan]

But if he doesn't have a large consumer base to buy his products his innovation doesn't matter. It's all about a balance between creators and consumers.

I agree there is a balance to be had between the two, but its often economic incentives which gives people the 'push' to create companies and thus jobs etc.

Thats the arguement against having hugely onerous taxes (without loopholes) for rich people.

Strangely this is also the 'standard' arguement against socialism - ie. if you pay everyone the same and limit incentives for people to go above and beyond you end up with very little stimulation of an economy or improvements.

There are some interesting economic papers which have been written on capitalism being introduced to China incidentally which if you're interested in this sort of thing make fascinating reading (I've got a book at home in Florida which references a load of them - if anyones interested PM me and I'll forward the name etc. onward once I get back there in a few days time).

[JPhillips]

I would agree, but our definition of onerous is very different. All of the Western European democracies have a wealthy class and the tax tax burden in some of those countries is significantly higher than the U.S. In the nineties the U.S. had a wealthy class and Obama plans to restore the top marginal rate to what is was under Clinton. There's no rational argument to be made for that tax change to cause a mass exodus of wealth from the U.S.

[Galaxy]

Marc,

That won't happen in the US first one simple reason. The US taxes it citizens on their worldwide income, regardless or residency. I believe that the first certain amount is tax-free, but after that the US taxes it. The rich do tend to legally reside in tax-free states like Florida and Texas.

In defense of Marc, the wealthy Europeans flock to places Monaco, Switzerland, and the UK (which only taxes foreigners on UK income only). Those countries have a very high level standard of living.

I'm can see Marc's view, but it doesn't apply in the US.

One thing about Obama's plan that could backfire is the AMT. Unless it's changed, won't it wipe out those "middle class" tax cuts down the line?

[SportsDino]

I laugh at the threats of tax exodus, to be honest we would be better off without most of those morons in the country (especially if it means we could get some new corporate leadership that doesn't suck). SterlingIce pretty much described the basis of a real economy, I've played with numerous toy economies (it is my hobby) and studies... the U.S. is basically capital rich, it would take an apocalyptic event (not a tax hike) to really drive down investment necessary for basic functioning of the economy. In fact, the unregulated, untaxed corporate looting of the Bush era may be more responsible for the largest reduction of investment power we have seen in decades.... you are seeing productive capital being exploited and extorted away in this economy into places where it will not generate growth (such as speculation). The growth it does tend to encourage is not the best kind, such as increases in the use of leverage, or various bubblenomic situations (currently we are in a negative bubble, it is so easy to short and there is so much money doing it that it can drive prices below norm).


Anyhoo, in a capital rich environment economic growth is driven fastest by increases in average standard of living (more products consumed, increasing net revenues). If that is coupled with increasing efficiency (i.e. less waste per product) it creates the most sustainable growth... out of control subsidizing of production combined with inefficiency has a tendency to both run up the costs of debt and dealing with pollution (health care, cleanup, toxic accidents, decline in property values near pollution).

The best balance, according to my random asshattery, is to have money flow in common sense patterns. That means allowing standard of living to go up through natural processes (technology, mass production, and efficiency) and not allowing exploitation of resources for the benefit of a few. It also means rewarding rich investors with gains from that increased overall standard of living... but that value remains there whether you tax it or not. The amount of tax you need to make a severe disincentive is pretty high... if you want to compete with the third world or second world (haha, never hear that one, I wonder what it means)... well you can't. They don't mind living like shit and they have the revolutions to prove it. You need structures that build economies, NOT ARISTOCRATS, that is the whole basis of American economic success. Unfortunately, most of our elites are too busy patting themselves on the back and corrupting things further to see they are killing the cow that keeps them fed as much as the rest of us.

I personally want to be fricking super wealthy. I don't want to be taxed into oblivion when I get there, but I'm willing to pay taxes to live here in America, hire Americans, and do my business in America... not because of home team loyalty, but because we've got the best culture, technology, and prospects for innovative growth. I'll let the fatcats go exploit some third world country and laugh when their mansion gets overrun by a revolt, or their daughter gets kidnapped for ransom. Instead I'd rather be here at the center of creative activity in the world economy, making the businesses that will make me crazy rich, and make the products to make me feel crazy good (like flying cars dammit, and robot women... for uh doing laundry, ya thats the ticket).

[SportsDino]

Oh forgot my whole original purpose. Liquidated my GE short (started at 12, hit my target at 6 and auto-executed at 6.17). Bit of a gamble, but I decided to reshuffle around my money to basically buy twice as many shares as I shorted originally. I'm figuring if the ten cent dividend holds up a 6% yield at 6.5 share price is not too bad.

My averaged out long price is 7.5. I am hoping the Contra-Flasch theorem does not screw me and GE reveals something like it bought a trillion dollars worth of credit default swaps.

[Mizzou B-ball fan]

These threats of the wealthy abandoning ship are just as stupid as all the actors who stated they would move out of the country if Bush was re-elected in 2004. They just hung around and kept complaining.

[SportsDino]

Citigroup to lower some mortgage payments - BusinessWeek (http://www.businessweek.com/ap/financialnews/D96MSAO00.htm)

Citigroup may finally have realized something I could have told them months ago. It might seem they are doing this in response to pressure from Obama or some random bullshit, but I think the real thing they are noticing is that they need cash flows before there equity falls below, oh say, 5 billion.

And the Countrywide statement earlier by someone is just more fuel for the fire on the whole angle of 'banks were trying to enforce crazy ass mortgages rather than stabilize them to avoid foreclosure'. Many banks decided they could ride this out and extract thousands of houses in the process and get even more rich, they saw the crisis as a GET EVEN RICHER scheme, or possibly as a WELL WE WILL MAKE UP WHAT WE LOSS IN THE RECOVERY WITH THESE STOLEN HOUSES. Instead they rode the economy right into the ground, and they will pay for it (or more likely we will pay for it since they seem to be successfully transferring many of the costs of their greed onto the government).

They are not leaders, they are losers trying to grab as much money as they can. Fire their ass and move on. A whole clean chop of the entire top executive level of these banks will help, let the underlings clean up the mess.

[Marc Vaughan]

That won't happen in the US first one simple reason. The US taxes it citizens on their worldwide income, regardless or residency. I believe that the first certain amount is tax-free, but after that the US taxes it. The rich do tend to legally reside in tax-free states like Florida and Texas.
Thats interesting - I wasn't aware of that.

(that would imply incidentally that rich people who weren't also US citizens would still be affected and able to 'hide out' though?)

[Flasch186]

Fed's Beige Book warns of possible deflationary pressure to core in the nearterm future amongst other things as I interpret it.

Upward price pressures continued to ease across a broad spectrum of final goods and services. This was largely associated with lower prices for energy and assorted raw materials compared with earlier periods, but also with weak final demand more generally, which spurred price discounting for items other than energy and food. With rising layoffs and hiring freezes, unemployment has risen in all areas, reducing or eliminating upward wage pressures. A number of reports pointed to outright reductions in hourly compensation costs, through wage reductions and reduction or elimination of some employment benefits.

Basically the January and February uptick in consumer, which Jon had noted earlier was a relief from the massive contract in Nov and Dec, IMO and theirs.

About half of the Districts reported that consumer demand was softer than during recent reporting periods or fell significantly below levels twelve months earlier. However, compared with the preceding reporting period that included the holiday season, retail spending was described as "mixed" in the Boston and Richmond Districts, "nearly steady" in Philadelphia, and slightly improved in Cleveland and Dallas, while New York reported a reduced rate of decline compared with the "steep" pace in December.

Finally

Prices and Wages
Upward price pressures were very limited during the reporting period, as a result of lower energy and commodity prices and weak demand for final goods and services across a wide range of sectors. The lower prices of energy and raw materials generally were passed on and contributed to downward pressure on the final prices of various products, according to Chicago and Dallas. Prices dropped on selected retail items in the Philadelphia, Kansas City, and San Francisco Districts, as discounting was widespread. Selected food products were a notable exception to downward price pressures, with Philadelphia reporting that some food processors raised their product prices. Gas prices rose, but according to Chicago and San Francisco the increase was not large enough to substantially offset the ongoing effects of the net decline from last year's highs.

Upward wage pressures eased in all Districts, as a rising incidence of hiring freezes and continued job cuts increased the degree of labor market slack. Contacts from various Districts pointed to a higher incidence of wage freezes resulting from the added slack, with a few noting outright wage reductions. Some employers also reduced compensation by lowering benefit costs, including reduced contributions to employee retirement programs, according to the Philadelphia, Chicago, Minneapolis, and San Francisco Districts.

http://www.federalreserve.gov/FOMC/BEIGEBOOK/2009/20090304/default.htm

[Galaxy]

Thats interesting - I wasn't aware of that.

(that would imply incidentally that rich people who weren't also US citizens would still be affected and able to 'hide out' though?)

Opps...Meant to say, "That won't happen in the US for one simple reason. The US taxes it citizens on their worldwide income, regardless of residency. I believe that the first certain amount is tax-free, but after that the US taxes it. The rich do tend to legally reside in tax-free states like Florida and Texas."

[SteveMax58]

I fail to see how the rich drive the economy we currently enjoy. No, that's glib. But, I fail to see how they drive it more than the middle class, considering what an extreme consumer-based economy we have. Once you get beyond a certain level of living, you can't consume any more.

Considering you have 99 "poorer" people for every 1 rich person- how does letting them have money to buy 1 Rolls Royce help the economy more than 10 of those 99 having the money to buy a car from GM? Great, so they can buy a $5M home. Does that employ more people than 10 of those 99 buying a $150K home? $100 bottle of wine/$3 6-pack of coke? Expensive work of art/tv? $100 restaurant meal/Mickey-D's?

Your talking about consumption-driven purchasing as if that is all the "rich" contribute. I mentioned consumption because the vast majority of us "non-rich" only contribute by consuming. I'm not debating who has control over consumption-related demand, pricing, etc. It's about who has the capital to make something that meets that demand?

Using your example, to illustrate my point...without the rich, you would not see a new startup company emerge to make that $100 bottle of wine, or create a distribution company to distribute the 6-packs of coke, or create a manufacturing plant to make new cars. By contrast...if you removed the top 1% from the country, we'd be just as wealthy (or un-wealthy) as we were before. The only difference is that the rich who might have opened one of those businesses in you neighborhood before, isn't here to do so. So his money will be used to pay other people, in other areas, to make his products so he can make a profit there. His spending and personal consumption is almost negligible in the grand scheme of things, but it's certainly more than I contribute.


Most of the money the rich have is tied up in assets like stock either for investment or owning corporations, funds, real estate (derivatives), etc- in short, investments. In a way those help the economy run, but clearly a lot of that is just vehicles of moving capital up the ladder, making the rich richer and the poor poorer- as we've seen very clearly in the last few months, robbing long term 401k's to make a quick buck, etc. How does that help the economy at all?


Many rich people are no longer rich for the same reasons. They had "dumb money". The whole market is so leveraged(pun intended) against a "commoner" trying to enter it, that I don't why anybody that isn't being paid to understand it would. But I digress.



And you know what's good about capitalism, as a basic system: If you removed the top 1% right now, there'd be millions of people left, looking to take their place, making products, employing people, and selling products and become the new top 1%. So, let's not pretend the current rich we have now are the people who deign us to spend their money and give us jobs by their good graces.


The problem I see with your logic here is that very few businesses start with 99 middle-class CEO's all pitching in an equal share and all making equal decisions...or trusting each other to do so. Just doesn't work that way. But 1 rich person can.

[JPhillips]

One rich person can't do shit without employees and consumers.

Balance.

[SportsDino]

Even if the rich move out of country, the money would probably still be in the U.S. trying to generate a return. As for 'creating jobs elsewhere'... umm thats what they already did. They outsourced every frickin thing they could up to this point even with their tax money still here.

Republicans or people fooled with a crappy definition of conservative 'economics' need to pull their heads out of the sand. Taxes are not the problem with the economy. They are annoying, and hell yes we want them to go down across all brackets ultimately... but it is not the holy grail of economics it was made out to be.

Don't think of it in terms of innovators (guess what, most rich appear to be dumb stupid fucks, and innovation often seems to be coming from the hungry and ambitious middle classers who found the businesses that become the new super rich)... don't think of it in terms of capital supply, even with all this mess, you can drudge up capital for a real business in a variety of ways without a single tax dodging wealthy person contributing (hell, that is the point of the stock market folks, not spot price speculation)... and don't think of it in terms of consumption, rich people buying junk to increase their marginal standard of living is not as beneficial to growing economies as average standard of living margins increasing, this can be proven mathematically even using the flawed macronomics of a Bernanke type thinker.

Supporting the mega-rich does not equal a good economy, if it goes too far it actually supports fuedalism (which is what most board rooms these day resemble, not capitalism). We shouldn't do communist style strategies to destroy them either, but a capital gains from say 15 to 25%, being called bloody murder by these 'conservatives', is not the worst thing you can do in the world. Hell, if you want some capital gains to begin with its better to take the chunk out of the profits, rather than tax the same amount from marginal incomes and face the resulting decline in consumption. You need to have profits before you even pay that tax, you would think with all the losses the last year or so that taxes would not even matter.

[SteveMax58]

One rich person can't do shit without employees and consumers.

Balance.

Oh I don't disagree. I don't even necessarily think a 5% tax hike(or return to old tax rate) is really that harmful.

But there have been many consumer demands throughout the years that were not met when they could have been met earlier(technically). Personal computing, telecommunications, and modern automobiles come to mind...and all required investment from rich people to become reality. They didn't come to fruition because a bunch of middle-class workers saved up for 40 years and decided to gamble it all on an idea.

I'm just saying that we have to be mindful not to try and recoup everything from the rich by over-taxing them just because many of them are scum and screwed the economy.

In reality, we should hold our government officials responsible for this, and not reward them (i.e. the government officials) by allowing them to stay in office or create more ineffective (or larger) bureaucracies.

[JPhillips]

I just don't think it's at all beneficial to look at Obama's plan to let Bush's top rate cut expire and return to 39.6 and jump to fears of taxing the rich out of the country. Contrary to Fox News, this change does not signal a return to a 90% top marginal rate.

(btw the top rate currently is 36, not 35)

[SteveMax58]

I don't think the 39.6% is too much relative to the other tax brackets...I just believe government should not require 39.6% of anybody's income to function.

And not wanting higher taxes for anybody does not necessarily mean one subscribes to "conservative" economics. Stereotyping leads to a complete dismissal of valid arguements that both sides have, in general.

[sterlingice]

Don't think of it in terms of innovators (guess what, most rich appear to be dumb stupid fucks, and innovation often seems to be coming from the hungry and ambitious middle classers who found the businesses that become the new super rich)... don't think of it in terms of capital supply, even with all this mess, you can drudge up capital for a real business in a variety of ways without a single tax dodging wealthy person contributing (hell, that is the point of the stock market folks, not spot price speculation)... and don't think of it in terms of consumption, rich people buying junk to increase their marginal standard of living is not as beneficial to growing economies as average standard of living margins increasing, this can be proven mathematically even using the flawed macronomics of a Bernanke type thinker.

Supporting the mega-rich does not equal a good economy, if it goes too far it actually supports fuedalism (which is what most board rooms these day resemble, not capitalism). We shouldn't do communist style strategies to destroy them either, but a capital gains from say 15 to 25%, being called bloody murder by these 'conservatives', is not the worst thing you can do in the world. Hell, if you want some capital gains to begin with its better to take the chunk out of the profits, rather than tax the same amount from marginal incomes and face the resulting decline in consumption. You need to have profits before you even pay that tax, you would think with all the losses the last year or so that taxes would not even matter.

(Don't you just love getting lost in Wikipedia for a little bit and learning about stuff you never knew anything about before? Anyways, that's kindof an aside)

Ok, really stupid question about short term investing and the purpose of the stock market:

I think technology (i.e. computers and internet trading) has really revolutionized how we use the stock market as a short term gambling tool. It made daytrading accessible to the masses in ways it never could have been before which distorted what is arguably the goal of said stock market (i.e. long term investment in a company who you think has a good long term idea).

However, how much do you think that drastically reducing of capital gains taxes in 1997 significantly sped up this process? And is there some way to screw with capital gains enough to significantly dampen short term gambling while mostly preserving long term growth? I'm sure the answer to the second question is yes but the "mostly preserving long term growth part" is a little more dicey (reminds me of the line in Freakonomics about how economists could design a system to do anything but you may not like the side effects).

SI

[Galaxy]

Bottom line:

Half of those are against the tax hikes/progressive tax system, and the other half is against them.

[SFL Cat]

Flat tax 5-10%...same rate for everyone on earned income, no loopholes. Only way to go. In my ideal world...no withholding either. People would have to write a check to the government. If they had to do that every year, they might pay a little more attention to how tax money is spent.

Only problem, it would put a hell of a lot of tax lawyers and tax specialists out of business.

[sterlingice]

How would 5-10% work? With a GDP of $13T and a budget of $3T, roughly- shouldn't that be 25%?

SI

[JPhillips]

Flat tax 5-10%...same rate for everyone on earned income, no loopholes. Only way to go. In my ideal world...no withholding either. People would have to write a check to the government. If they had to do that every year, they might pay a little more attention to how tax money is spent.

Only problem, it would put a hell of a lot of tax lawyers and tax specialists out of business.

How would you deal with families/individuals that didn't have enough left over at the end of the year to pay their taxes? How would you deal with the regressive nature of the total tax burden if the federal income tax were flat?

And as SI said, 5-10% is way to low to be revenue neutral.

[SteveMax58]

How would 5-10% work? With a GDP of $13T and a budget of $3T, roughly- shouldn't that be 25%?

SI

My thinking is that 10-15% should be a flat income tax across all brackets(i.e. no more brackets, per se), and the rest should be based upon a progressive consumption (or sales) tax which scales based upon necessity of the product. Luxury items get taxed higher, milk, bread, etc. get taxed lower (or not at all in some cases).

But I don't think you can completely go the consumption tax way (as some politicians have suggested) as it will just encourage many people to buy their luxury products from overseas.

[SFL Cat]

How would you deal with families/individuals that didn't have enough left over at the end of the year to pay their taxes? How would you deal with the regressive nature of the total tax burden if the federal income tax were flat?

The same way tax evaders are dealt with under the current system.

And as SI said, 5-10% is way to low to be revenue neutral.

If the flat rate isn't revenue neutral then cut spending. Government should be the one justifying to us why it needs more money to spend, not us justifying to government why we should keep more of the money we've earned.

[JPhillips]

So in short, you're not really serious about changing the tax code.

[SFL Cat]

Yep. Flat tax. Not wild about a consumption tax. Simplify, simplify, simplify.

[sterlingice]

So in short, you're not really serious about changing the tax code.

I can play silly games, too. If we pass a 10% income tax on every country in the world and get the proceeds for it, we'll be able to afford a $6T budget! :D

SI

[SFL Cat]

Or we can seriously look at cutting a budget that is more than the combined GNP of 2/3 or the rest of the countries on this planet.

...Oops silly me. GOP wouldn't do it, and now that the Dems are in control of everything...pipe dream at best.

[sterlingice]

Or we can seriously look at cutting a budget that is more than the combined GNP of 2/3 or the rest of the countries on this planet.

...Oops silly me. GOP wouldn't do it, and now that the Dems are in control of everything...pipe dream at best.

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.pnghttp://upload.wikimedia.org/wikipedia/en/thumb/7/7a/U.S._Federal_Spending_-_FY_2007.png/800px-U.S._Federal_Spending_-_FY_2007.png

So, where are you going to make these cuts? Eliminate Social Security? Why? That actually makes money for the government for now (took in $900B, paid out $613B) and we keep raiding the Social Security Trust Fund to pay down our debts so it will be insolvent fairly soon, whereas if we were saving the extra, we'd be just fine.

You can't eliminate those interest payments or the "other mandatory", so that's another $552B. So, we're at $1.16T already. That leaves 3 large chunks of the pie:

Defense at $613B on graph, actually $795B (http://en.wikipedia.org/wiki/Military_budget_of_the_United_States) if you include war funding that was done in separate bills
Medicare/Medicaid at $682B
Other Discretionary at $520B

So, where are your cuts?

SI

[GoldenEagle]

People tend to make fun of those living in Arkansas, but it is times like these that I really enjoy living here. Take a look at this link:

Where does your state rank? - CNNMoney.com (http://money.cnn.com/news/storysupplement/economy/gapmap/index.htm)

We have an unemployment rate of 6.2, no state budget deficit, and only 1.49% of homes have been foreclosed on.

No one I know has lost their job, other than those at Alltell which was sold to Verizon Wireless. That is not to say we are exempt from unemployment, as Walmart did lay off some people. But overall, things could be much worse and have a feeling this recession will not affect us much at all.

[DaddyTorgo]

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.pnghttp://upload.wikimedia.org/wikipedia/en/thumb/7/7a/U.S._Federal_Spending_-_FY_2007.png/800px-U.S._Federal_Spending_-_FY_2007.png

So, where are you going to make these cuts? Eliminate Social Security? Why? That actually makes money for the government for now (took in $900B, paid out $613B) and we keep raiding the Social Security Trust Fund to pay down our debts so it will be insolvent fairly soon, whereas if we were saving the extra, we'd be just fine.

You can't eliminate those interest payments or the "other mandatory", so that's another $552B. So, we're at $1.16T already. That leaves 3 large chunks of the pie:

Defense at $613B on graph, actually $795B (http://en.wikipedia.org/wiki/Military_budget_of_the_United_States) if you include war funding that was done in separate bills
Medicare/Medicaid at $682B
Other Discretionary at $520B

So, where are your cuts?

SI

2-300B in defense, porentially 100-150B in "other discretionary", and hopefully rework medicare/medicaid to bring that down a few tens of billions (600-620?)

[sterlingice]

I'm ok with that suggestion. I just want to see people proposing ridiculous things have to spell them out. It just reminds me of how McCain tried to play off reducing earmarks as a huge budget item. A problem, to be sure, but $10~$20B a year out of $3000B is a drop in the bucket.

SI

[JPhillips]

But earmarks have funny sounding titles! How do you manage a beaver? Waka-waka!

[Galaxy]

Market is just getting killed. How low can it go?

[Flasch186]

Wow. dunno. The problem is the E. Cant see what it's going to settle at (mind you discounting the fraudulent E's from the past 6-8 years) and therefore you cant know the P.

One thing to consider that is a tangent to all of this:

Many of the baby boomers who were going to retire in the next 1-5 years will put retiring on hold and will stay in their jobs therefore not allowing the next wave of employees to come in. This certainly could be a lost 5 years or more for our country just based on some of the statistics outside of the more easily culled data.

[Galaxy]

Yep. Flat tax. Not wild about a consumption tax. Simplify, simplify, simplify.

I would make the first $5,000 (and index it for inflation) tax-free. After that, tax it a flat rate (capital gains, income, ect.). You make $30,000 on say a 12% flat tax, you pay $3,000. You make $184,000, you'll pay $21,480 in taxes.

I think the tax hikes are insane and deduction limits are insane. Not to mention the cap-and-tax tax that could wipe out those tax cuts (and maybe increase your tax bill) for all levels. Throw in his plans to tax oil and gas companies, it may not be pretty. Hopefully he can prove me wrong.

[sterlingice]

Market is just getting killed. How low can it go?

Ugh. So much for a new bottom last week...

SI

[Galaxy]

I love how people clap at the closing bell.

[sterlingice]

I love how people clap at the closing bell.

They do these days, anyways :(

SI

[BishopMVP]

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.pngYou can't eliminate those interest payments or the "other mandatory", so that's another $552B. So, we're at $1.16T already. That leaves 3 large chunks of the pie:

Defense at $613B on graph, actually $795B (http://en.wikipedia.org/wiki/Military_budget_of_the_United_States) if you include war funding that was done in separate bills
Medicare/Medicaid at $682B
Other Discretionary at $520B

So, where are your cuts?I would eliminate Medicare and Medicaid, at least halve Other Discretionry and start paying down the debt so interest payments are lower in the future. But I have a fundamentally different outlook on life than most Americans. In short, I don't understand why I should care more about the welfare of someone I don't know who happened to be born within some nominal national boundaries than someone born outside them. So I basically don't see the point in distributing my income to help people who are in the 90th percentile improve their health care or standard of living to reach the 91st percentile when the same amount of money could drastically improve other people's welfare. It's quite clear that OECD countries, and the US in particular, having drastically higher rates of consumption and portions of wealth can't last indefinitely, but yet Obama and his followers would rather focus on things like giving everyone a college education, health care and a white collar job with a huge security blanket when these things just aren't feasible or worth the marginal costs.

[Galaxy]

They do these days, anyways :(

SI

"Yea! The stock market is hitting another new low! Yea!"

[sabotai]

I'm ok with that suggestion. I just want to see people proposing ridiculous things have to spell them out. It just reminds me of how McCain tried to play off reducing earmarks as a huge budget item. A problem, to be sure, but $10~$20B a year out of $3000B is a drop in the bucket.

SI

Well, technically they are a $0 problem, since earmarks simply direct where the money that's already in the hypothetical spending bill goes. $10-$20 billion may be earmarked, but take away earmarks, and that $10-$20 billion is still in the bills and still gets spent. Arguing against earmarks from a fiscal standpoint is just stupid (please don't search my post history. :D ).

Anyone have a link explaining what "Other Mandetory" includes in the chart above?

[JPhillips]

When the fuck are we going to start prosecuting the guys at the Fed? From TalkingPointsMemo:

But to understand what happened there, you have to understand the Fed's "Maiden Lane" vehicles and how it's used them to avoid what Congress intended with TARP, which was the real story that came out of Dodd's hearing on the AIG mess today. And the roots of it go back to the Bear Stearns rescue last year.

By law, the Fed isn't allowed to buy assets -- it can only lend, as lender of last resort. That was a problem for the Bear Stearns bailout, because JP Morgan said it would only buy Bear if someone else assumed responsibility for the crap. Fed came up with this idea to start a shadow company, called a special purpose vehicle (SPVs were how Enron operated, creating "Chewco" and the like named after Chewbacca - the New York Fed called their SPV "Maiden Lane LLC" for name of the street the NY Fed is located on in southern Manhattan). The deal then was JP Morgan put $1 billion into Maiden Lane, the Fed put $29 billion in cash into it. Maiden Lane paid Bear Stearns $30 billion, which went straight back to JP Morgan as this deal happened simultaneously to JP's purchase of Bear. So Morgan got $30 billion in cash ($29 billion net) and the Fed got stuck owning the crap, but was legally only making a loan to Maiden Lane, who was the legal owner (Maiden Lane was incorporated not in NYC, but in Delaware to avoid paying taxes). By the Fed's own accounting - which is very different from a real company's accounting - Maiden Lane has lost $5 billion between its creation and today.

The same problem happened in AIG, but this time there was no buyer. In Sept, the Fed bought AIG (80%) in exchange for an $85 bill loan. By Oct, it was clear AIG was still dying, so the Fed lent it another $40 billion. This $40 billion was restructured in November when the Treasury put in $40 billion of TARP funds, which was needed to bail out the Fed's loan which had by this time gone bad. But essentially AIG had 2 problems: it had lent out safe securities with real values and used that money to buy shit mortgage backed securities -- this was called 'Secured Lending Facility' which was done right under the nose of the state insurance commissioners. It was in the hole $20 billion. The other problem was the crappy insurance that AIG's financial products company had written on other people's shit mortgage backed securities - the credit default swaps (CDS). When the bad mortgages that AIG insured went bad, the insurance had to pay-up -- but because it wasn't called insurance, but rather derivatives, AIG hadn't reserved any money against it. This had lost about $25 billion.

Using the loophole it had learned during Bear Stearns, the Fed set up two new companies: Maiden Lane II and Maiden Lane III. Two dealt with the secured lending and Three the shitty credit default swaps. The Fed lent each Maiden Lane $20 billion and $25 billion and then Maiden Lane paid off the investors that had either lent AIG the money to buy the shitty mortgage backed securities (ML II) and those who had the shitty mortgages and the corresponding insurance (ML III). To avoid booking a loss on the Fed's balance sheet, because the Fed had some legal problems if either of these Maiden Lanes lost money, and because of a reporting requirement that Dodd had put into TARP which actually required the Fed to report to the Congress and the public about the cost to taxpayers from ML I, the Fed did some creative accounting. They still paid all of the investors off at full value (par), so that they didn't lose anything. But they booked the loss on AIG's balance sheet and kept Maiden Lane clean. This is the hidden story behind how AIG went from losing $38 billion during the first 9 months of 2008 to losing $61 billion in the 4th quarter.

This was all exposed at today's hearing. And despite repeated requests from Senators on both sides - Dodd, Shelby, Corker, Warner - the Fed is still refusing to say who it bailed out through Maiden Lane II and III.

[Flasch186]

WTF, Link please?

[JPhillips]

talkingpointsmemo.com (http://www.talkingpointsmemo.com)

[Buccaneer]

Well, you wanted the federal govt to do right then and now to prevent something bad from happening. What other results did you expect when something was rushed through like that? Same thing with the $800b stimulus - it can only start shoveling monies in different accounts with little oversights because no one cares (and those that want to hold the federal govt accountable gets slammed for being unrealistic).

[Flasch186]

well it's a blog, or at looks like one to me so I dont really trust the source. Should I trust TPM? Is there another news source?

and Bucc, I DO believe that it saved us from imminent peril at that time.

[JPhillips]

Well here's the website for Maiden Lane.

http://www.maidenlanellc.com/ (http://www.maidenlanellc.com/)

and here's the wiki page

http://en.wikipedia.org/wiki/Maiden_Lane_LLC

[Flasch186]

well J, wasnt the intention of TARP to BUY bad (toxic) assets....I mean thats the reason I was sooo mad when Paulson pulled that rug out right?

[JPhillips]

In this instance my issue isn't with TARP per se but the way the Fed quite clearly played fast and loose with the law. I'm a big rule of aw guy and I don't make exceptions for "I knew it was the right thing to do."

Also, I wanted to clarify TPM. I guess it is a blog, but it has a pretty strong reporting arm with experienced journalists on staff. Matt Cooper, who worked for Time among others is on the staff at TPM. TPM is trying to craft an advocacy/journalism niche in between standard blogs and major news organizations. Given the staff additions they've made over the past four or five years the model must be working for them, although working on a much smaller scale than the big journalistic outfits.

[Edward64]

Some pretty serious shit.

Workers clobbered by relentless layoffs - Stocks & economy- msnbc.com (http://www.msnbc.msn.com/id/29538287/)

Employers likely slashed a net total of 648,000 jobs last month, according to economists' forecasts. If they are right, it would mark the worst month of job losses since the recession started in December 2007. It also would represent the single biggest month of job reductions since October 1949, when the country was just pulling out of a painful recession, although the labor force has grown significantly since then.

"The pace of layoffs is fast and furious," said Stuart Hoffman, chief economist at PNC Financial Services Group. "We're still in the teeth of this recession and the bite has not let up at all."

With employers slashing payrolls, the nation's unemployment rate is expected to jump to 7.9 percent, from 7.6 percent in January. If that happens, it would mark the highest jobless rate since reaching 8 percent in January 1984, a time when the unemployment rate was still slowly moving down after having topped 10 percent during the early 1980s recession.

[gstelmack]

And Congress still doesn't get it:

Commentary: Congress wants to spend on itself in new bill - CNN.com (http://www.cnn.com/2009/POLITICS/03/05/campbell.brown.earmarks/index.html#cnnSTCText)

That same bill, which was designed to keep the federal government functioning through September, contains a nearly 11 percent increase in congressional spending on Congress, itself. That translates to a nearly half-billion dollar jump over last year.

Glad to here it's a new day in Washington and things are changing. Sigh.

[JPhillips]

Most of that 11% is keeping Republican staffing at the same level as the previous Congress. They were quite adamant that they keep the same level of staffing regardless of having roughly 20% fewer congressmen.

[cartman]

I hope this doesn't get buried in the thread, but here is a pretty amazing read about how the CEO of Overstock.com fought a bitter battle to expose the illegal practice of naked short selling. This is where you short a stock, but don't actually control any shares. It is done by exploiting a loophole in the system. Evidently this practice was honed to a fine art by persons in the media, and was used to take down over 1,000 companies, including Bear Stearns.

Warning, it is a long read, it took me over an hour to get through it, and I'm a speed reader.

Deep Capture | The Story of Deep Capture | Deep Capture Blog (http://www.deepcapture.com/the-story-of-deep-capture-by-mark-mitchell/)

[Flasch186]

unfortunately I still stand by my deflation fears and see it all over and spoke with a friend in S. Florida about it and he was baffled that there are people on these boards, as I described you all, as not seeing deflation. Whether or not inflation around the corner he didnt much have an opinion on but he definitely see deflation. Whether it be short term or long term he didnt have an opinion on but he knows it's happening now AND he said that it HAs already effected psychology (which is the very insidious part) in that he and many many other people have conversation where they discuss falling prices and their desire to wait until those prices stop falling before buying a good or service (not much detail as to what these were).

[SportsDino]

It reads too much like a novel for me to read it, but many companies would have fallen with or without naked short selling.

Naked short selling pisses me off, and should be vicously regulated (as in the companies doing it should have their executives disemboweled). There is no economic value in the process, and the idea of creating phantom shares just makes me want to beat people to death. Its bad enough the real shares are as flaky and unpredictable as you can get to begin with.

[DaddyTorgo]

here's a more positive slant on today's news

The 651,000 decline in U.S. non-farm payroll employment last month is nasty, but the rate of job loss has stopped accelerating.

The Obama administration's stimulus package should provide a short-term economic boost soon, so a bottom to the economic downturn may be approaching. But that doesn't mean an upturn follows quickly - sorting out the budget deficit and inflation will come later.

Upward revisions in job loss figures for December and January mean that February's decline was less severe than in previous months, suggesting a slight decrease in the rate of job loss.

Moreover, the Institute for Supply Management's February manufacturing and non-manufacturing indexes, respectively flat and down only slightly compared with January, also suggest that the pace of economic decline may be slowing.

[SportsDino]

I think deflation is being used in the wrong way by the media to try and convince people of one thing, while the truth is something else entirely. If prices snap back say, in July, then it was not deflation, it was prices being screwed up because everyone was chopping the hell out of their companies in a panic and didn't feel like buying anything. Then you'll see the talking heads come out on the tv and start saying how inflation is a great danger to the economy, and how we need to jimmy the rates and all that jazz.

The end result is, when the big head honchos screwed up and lost tons of money, their political cronies cried deflation, print a bunch of money, and just happened to hand it to their friends the big head dumbass honchos. Then, after that wave of destruction passes, and people like, say me, are drudging up funding for a new business to create jobs... all the rates are high, and all the prices on my supplies are higher too... in fact everything that could actually have some benefit to the economy is that much harder to obtain because we printed money to soak up the puddles of piss in some banks boardrooms when they were caught.

If you honestly go to the store next Christmas, and you can get the same pile of junk you got two years ago for a lot less money, and we are out of the whole 'discount clearance sale' phase of the economy... then I'll buy the whole deflation story. Until then it is just economy cutting causing an anomaly in prices, a natural reaction in difficult economic times (companies cut wages, purchases, and what not while they weather the storm).

[Flasch186]

so only time will tell.

I will say that if inflation begins to be spotted to the point where we need to raise rates to fight it it'll mean a lot of other GOOD things are occurring and Ill take it. In the meantime, I believe we have damaged a lot of the American consumer psyche and this deflation you think is short term will be longer than Im will to label as 'short'. We shall see but I am NOT hedged against inflation at this time.....<----that doesnt mean much since Im just as down on my portfol....(I lost the I and O) as anyone else.

[Fidatelo]

so only time will tell.

I will say that if inflation begins to be spotted to the point where we need to raise rates to fight it it'll mean a lot of other GOOD things are occurring and Ill take it. In the meantime, I believe we have damaged a lot of the American consumer psyche and this deflation you think is short term will be longer than Im will to label as 'short'. We shall see but I am NOT hedged against inflation at this time.....<----that doesnt mean much since Im just as down on my portfol....(I lost the I and O) as anyone else.

There will be nothing good about the upcoming inflation. It will not be a result of any kind of recovery, it will be a result of money being printed + scarcity of resources. And there will be no way to fight it effectively with interest rates because no one will be afford to pay them, which would just further deepen the mortgage crisis.

As for consumer psyche, it is irrelevant. Our days of buying new iPods to replace the ones we bought last year are over. O.V.E.R. The only result of the next 12-36 months will be a serious lowering in standard of living for everyone in North America, save for the uber-rich that are robbing us blind as I type.

[sterlingice]

I hope this doesn't get buried in the thread, but here is a pretty amazing read about how the CEO of Overstock.com fought a bitter battle to expose the illegal practice of naked short selling. This is where you short a stock, but don't actually control any shares. It is done by exploiting a loophole in the system. Evidently this practice was honed to a fine art by persons in the media, and was used to take down over 1,000 companies, including Bear Stearns.

Warning, it is a long read, it took me over an hour to get through it, and I'm a speed reader.

Deep Capture | The Story of Deep Capture | Deep Capture Blog (http://www.deepcapture.com/the-story-of-deep-capture-by-mark-mitchell/)

I'm only though part of the first chapter so far but I'm really enjoying the read. I'm both appalled and not really surprised. We were chatting about this at lunch today and in agreement that white collar badly needs new laws that throw some of these people in "federal pound-me-in-the-ass" prison.

SI

[SportsDino]

I'm all for white collar crooks being treated the same as a suspect for homocide. Or at the very least grand theft auto, or robbing a bank.

As for deflation/inflation, I'm generally in the camp of Warren Buffett... stuff was really screwed up last year, and could have been disastrous, but inflation is on the way. No one that I respect as an economist and talk to personally considers this deflation, though they split the spectrum on their stance about recent policy/situation. Finance guys I know are more quick to throw around the deflation and 'necessary inflation' terms, but most deep conversations tend to root out that we really are just trying to cover up a mess (we differ on whether that is a good thing or not, obviously I'm in the hang em camp).

[SteveMax58]

There will be nothing good about the upcoming inflation. It will not be a result of any kind of recovery, it will be a result of money being printed + scarcity of resources. And there will be no way to fight it effectively with interest rates because no one will be afford to pay them, which would just further deepen the mortgage crisis.

As for consumer psyche, it is irrelevant. Our days of buying new iPods to replace the ones we bought last year are over. O.V.E.R. The only result of the next 12-36 months will be a serious lowering in standard of living for everyone in North America, save for the uber-rich that are robbing us blind as I type.

+1...namely the bolded parts.

This is why my belief is that the Stimulus bill could have been half as much or twice as much, but it needed to be entirely driven towards eliminating outgoing expenses...such as for oil.

But alas...I've thought the US standard of living was unsustainable for quite a while now. Maybe nothing would have changed that.

[SirFozzie]

Re: DeepCapture

I've talked via email to both Judd Bagley (author of material on deep capture as well as antisocialmedia.com) and Patrick regarding how NSS crossed over on WIkipedia.

[lungs]

This recession is all in your heads. What a nation of whiners we've become.

[sterlingice]

Re: DeepCapture

I've talked via email to both Judd Bagley (author of material on deep capture as well as antisocialmedia.com) and Patrick regarding how NSS crossed over on WIkipedia.

A lot of this is scary, whether true or not. Just a simple search of some of the players and terms on the internet and you're completely slimed no matter which side of the aisle you're on. Frankly, I think I know where I'm leaning just based on who has the most to gain/lose in this and the fallout, but even the side who is basically "in the right" has been completely obliterated while the other side looks equally bad (tho mainly because it looks like they are that bad).

SI

[sterlingice]

This recession is all in your heads. What a nation of whiners we've become.

Cowboy up? ;)

SI

[sterlingice]

I hope this doesn't get buried in the thread, but here is a pretty amazing read about how the CEO of Overstock.com fought a bitter battle to expose the illegal practice of naked short selling. This is where you short a stock, but don't actually control any shares. It is done by exploiting a loophole in the system. Evidently this practice was honed to a fine art by persons in the media, and was used to take down over 1,000 companies, including Bear Stearns.

Warning, it is a long read, it took me over an hour to get through it, and I'm a speed reader.

Deep Capture | The Story of Deep Capture | Deep Capture Blog (http://www.deepcapture.com/the-story-of-deep-capture-by-mark-mitchell/)

I'm still only 20 pages into the ~70 page but the cliff's notes version, more with an emphasis on web 2.0 and new media and not as much on the naked short selling game, there's an interesting ~60 minute presentation that Judd Bagley did. The first half is about short selling and naked short selling. The second half is, well, it's about web 2.0.

For added fun, you get a nice chill about "new media" and similarities to "Ministry of Truth" in 1984 and how easy it is to manipulate things even, especially in wikipedia.

http://antisocialmedia.net/lecture1/player.html

SI

[SirFozzie]

Well, let me say this re:Wikipedia.

I was heavily involved with the issues with NSS on Wikipedia. I think even Judd admits in his speeches on the subject that when he sought to link the account "Mantanmoreland" to that of "Gary Weiss, financial journalist", that he didn't do it quite right, and it looked like a personal vendetta. So, the natural thought when you see an editor being attacked is to circle the wagons around them. That led to it looking like we were protecting an editor.

There was a point however, when it looked like Mantanmoreland had used multiple accounts to slant NSS articles on Wikipedia in a pro-NSS viewpoint, and I was part (I started it, but others did a hell of a lot of work on it) of an investigation on this./ It was all circumstantial, a lot of it was due to him using open proxies to hide the link between the two accounts, but there was a point where there was enough circumstantial evidence that he got restricted from the articles, and then when he tried to edit it with yet another account, he got banned from Wikipedia..

Is it perfect? No. In fact, there is a group of vandals who are using Wikipedia to try to harass and stalk others, both publicly and privately. One of my best friends on Wikipedia just retired from there, and turned in all her rights, because she had burnt herself way the hell out trying to keep up with the level of defamation and harassment going on, and to keep it"under wraps" I still think it's worthwhile to work on, but there are days where I pretty much hate Wikipedia, and the fights and the trouble it causes.

[SportsDino]

I don't know much about the deep capture storyline, but I've ranted and raved on here before about my hatred of the media and business, and in particular CNBC. I've got enough anecdotal statistic data to consider them either completely stupid, or more likely some form of the devil. Every time I listen to their drivel I can spot a flaw or light review of their 'picks' usually result in epic failure. Media = poo!

[cartman]

I don't know much about the deep capture storyline, but I've ranted and raved on here before about my hatred of the media and business, and in particular CNBC. I've got enough anecdotal statistic data to consider them either completely stupid, or more likely some form of the devil. Every time I listen to their drivel I can spot a flaw or light review of their 'picks' usually result in epic failure. Media = poo!

The story follows your assertions. The folks investigating found a large number of financial journalists with strong ties to several CNBC talking heads, namely Cramer. They found that anytime Cramer talked down a company, they were able to show a massive increase in naked short selling of that company's shares.

[sterlingice]

I don't know much about the deep capture storyline, but I've ranted and raved on here before about my hatred of the media and business, and in particular CNBC. I've got enough anecdotal statistic data to consider them either completely stupid, or more likely some form of the devil. Every time I listen to their drivel I can spot a flaw or light review of their 'picks' usually result in epic failure. Media = poo!

What cartman said.

I find it a fascinating read, personally, and it kept me up until about 4am last night reading. If what is alleged is true, there's a pretty sophisticated network of hedge funds with large parts owned by media members (and, allegedly, the mafia) who talk down stock right after short selling them. That would be shady and anyone with half a brain would see that as a complete conflict of interest and unethical.

Basically the idea is that there is a group in the media who run/own significant interests in a constellation of hedge funds along with other seedy and sundry characters (evil greedy people, lawyers, lots of convicted financial felons, and the mafia) who use the finance media to target companies to drive down their stock prices and make a ton of money by naked shorting companies into the ground.

The common tactic is that these funds will naked short sell a company, have someone in the media who owns a piece of the action (say, Jim Cramer) go on the news and bash that stock relentlessly. Then others of this group (they work for WSJ, CNBC, NY Post, thestreet.com, and more- tho it seems Forbes is mostly clean, just by omission) will join in and they have internet misinformation down to a science from playing the media and other reporters to editing wikipedia, in a "rewriting history" sense. Then they initiate an SEC investigation with their ties to a fake "investigative organization" so that it looks like they're dirty and have a crooked law firm file trading class action lawsuits against the company.

Then, these companies can't raise any capital and they pile on by naked short selling tons of the stock, more than even exists. So, this further dilutes the stock price and they can't make any money by releasing any more stock and their credit rating is shot so they are finished.

Oh, and this looks like these attacks have happened to hundreds, maybe thousands of companies and that there are an estimated $150B of phantom shares out there on the market right now.

The SEC looks inept (really, who didn't think that), the DTCC looks really really crooked- like "should have been what they blew up at the end of 'Fight Club' crooked, the press either crooked and in on it or negligent as they just continue to parrot the false information while doing no investigation of their own, and we just sit idly by not even understanding what is happening and even if we did, wouldn't care.

The really scary part is that, frankly, it seems really plausible and they have a pretty convincing paper trail connecting a lot of the people and a lot of the dots.

Again, SD, it may read like a bad movie script (actually, it reminds me a little of "And the Band Played On" in terms of style)- but I think you'd enjoy the read.

SI

[NoMyths]

I'd like the DeepCapture essay more if the author didn't fancy himself the second coming of Hunter S. Thompson in economics-jive form. Halfway through the first page I'm having to keep hitting the "don't bail" button on my bullshit detector based partially on the writing style, which is obscuring the meat of the piece.

[sterlingice]

It *does* read like B movie script. What's the financial equivalent of a "made for Sci Fi channel movie" script? ;)

SI

[sterlingice]

Well, let me say this re:Wikipedia.

I was heavily involved with the issues with NSS on Wikipedia. I think even Judd admits in his speeches on the subject that when he sought to link the account "Mantanmoreland" to that of "Gary Weiss, financial journalist", that he didn't do it quite right, and it looked like a personal vendetta. So, the natural thought when you see an editor being attacked is to circle the wagons around them. That led to it looking like we were protecting an editor.

There was a point however, when it looked like Mantanmoreland had used multiple accounts to slant NSS articles on Wikipedia in a pro-NSS viewpoint, and I was part (I started it, but others did a hell of a lot of work on it) of an investigation on this./ It was all circumstantial, a lot of it was due to him using open proxies to hide the link between the two accounts, but there was a point where there was enough circumstantial evidence that he got restricted from the articles, and then when he tried to edit it with yet another account, he got banned from Wikipedia..

Is it perfect? No. In fact, there is a group of vandals who are using Wikipedia to try to harass and stalk others, both publicly and privately. One of my best friends on Wikipedia just retired from there, and turned in all her rights, because she had burnt herself way the hell out trying to keep up with the level of defamation and harassment going on, and to keep it"under wraps" I still think it's worthwhile to work on, but there are days where I pretty much hate Wikipedia, and the fights and the trouble it causes.

I understand it from close enough to Wiki's point of view. Noob comes in and starts messing with long time mod's friends- who's going to get sided with? Yeah, exactly. It's like what Ben says about new posters here having a shorter leash and different standards than longtime posters.

I don't envy wikipedia editors- that sounds like a nightmare considering its greatest resource of having everyone able to contribute is also its greatest curse.

This case, frankly, seemed like the wiki community not knowing that something much bigger was going on than they realized and when you have someone you think is kindof on the onside feeding slanderous information, it's hard to know who to believe and not just go to the "don't make me turn this online encylopedia around" card. In short, the whole of wiki got in over their head and there was no way of knowing that was what was happening when you can't see out of the mess you are in because the view of the situation keeps being warped. It was a "no win" situation and that's what Weiss took advantage of.

SI

[SportsDino]

I second the language turn off aspect, it made it hard to get deep at all because my natural curiousity for all things potentially evil was battling with my 'are they just biased' mode. I'll give er a second look if I get a moment.

I really think the only way to combat what you briefly summarized is a complete revolution in the way we run and report business data. There really is no excuse for public corporations to not have highly transparent information (yes I'm talking beyond SEC reports, and yes provisions would be necessary for trade secret data which is maybe 1% of all data max if you boil it down).

Anyhoo, without such access to information you basically end up with a caste of grand poobahs of information (the media and or finance advisors), and with large pools of relatively uninformed money (investors who do not or cannot do their own research, which is nearly everyone)... I dunno, I find that very scary.

The situation you describe sounds vaguely like front running (say X is a broker working for Y, and Y puts in a buy order at P, X knows for certain they can sell at price P so they buy the share at price P - M and profit an illegal marginal amount M from control of information and transaction ordering). The difference is they would be taking a risk, loading up huge on a position and then hoping to spur the macro crowd in a general direction with a panic statement (easy to do though)... sounds highly illegal and evil, and certainly what I would consider gross speculation that is destructive in economies. (Note, this is why I hate giving tax cuts in capital gains where most of the people going up in this economy are short monsters like myself... does not grow economies at all)

Given my belief at the massive amount of sheep money out there, I can easily believe that the margins on such a scheme could be quite huge indeed with all the volatility. Heck, I make a crazy cut on just the volatility in one direction (i.e. I predict a trend up or down), if I could engineer the volatility and its timing that would be a terrible thing to behold. They can't possibly have perfect control though, I would assume the big money (banks) would just ignore the media and might derail some of the more crazy schemes if these hedge fund phantom shorters get too greedy. Granted, phantom shorts take a recovery to put the pain on... it might be in their interest for the economy to continue in a depression.

I should probably just read the article before I get too deep in speculation land!

[SportsDino]

Wow, that is a scary read (and there are apparently are a crazy number of side links). Can't really say what is true or not.

I will say looking at the interview where he was talking about his company, that it was completely silly. I may not know whether Overstock specifically is all that great, but it is an expected practice for companies to burn venture capital and have net losses. And if the growth numbers are true, he was following that model very successfully. Especially for a young e-business you would kind of expect that sort of situation.

As for the manipulating stock prices through the media thing, if even a fraction of it is true, its illegal as all hell (at least to me). I've been sold on the SEC being corrupt as it gets for quite some time (read the Madoff investigation article posted elsewhere in this thread, for a less theatrical take on that same corruption). They simply don't enforce what is on the books as it is, yet alone have the right stuff in the books to begin with.

I dunno, there is a lot in there that is worrisome, hard to know where to start. I will say Cramer is certainly a lying bastard, I've seen his show enough times (its good for a laugh and I'm a terrible channel surfer)... besides putting off the wrong vibes he is internally inconsistent in his statements so often that even sporadically seeing him on the television is enough to collect some contradictions.

And phantom stock is certainly real. I've heard of companies with volume greater than the amount of stock in existance, and I think I even recall when the executive of that one company (something Links) bought all of his own stock to prove that the market was still trading phantom shares.

[sterlingice]

Wow, that is a scary read (and there are apparently are a crazy number of side links). Can't really say what is true or not.

Like I said in a previous post, I look at motivation. Short of having some crazy obsession with Kramer and the others, I don't see what Byrne has to gain. It's kindof like complaining at the refs after they make a bad call that costs you the game- yeah, people know the refs blew it, but you still lost the game so it's just going to look like you're whining.

So, I'm not sure what his angle could be other than that.


As for the manipulating stock prices through the media thing, if even a fraction of it is true, its illegal as all hell (at least to me). I've been sold on the SEC being corrupt as it gets for quite some time (read the Madoff investigation article posted elsewhere in this thread, for a less theatrical take on that same corruption). They simply don't enforce what is on the books as it is, yet alone have the right stuff in the books to begin with.
I read a couple of things on the "Easter Bunny" 's site, which is oh so melodramatic. But after doing some reading, he was very right about a couple of things with regards to the SEC. It does look like the only reason they went after Madoff and now Stanford (another $8B scheme) was because Markpolos made the entire case for them, wrapped it in a bow tie and delivered it, and then ran to the media to light them up when he ignored them now that he can get enough press and the public is out for blood.

And phantom stock is certainly real. I've heard of companies with volume greater than the amount of stock in existance, and I think I even recall when the executive of that one company (something Links) bought all of his own stock to prove that the market was still trading phantom shares.
I want to say they mentioned this on one of the sites or maybe the presentation. How some guy bought up all of his stock and then the next day another $30-something million just appeared on the market and how at that point he pretty much knew he was screwed.

Frankly, again, the most damning part- well, I don't know if I can even say that because there's so much crap going on in this story that there's a lot of damning stuff- aside from the SEC being completely inept or compliant is the black box DTCC. The whole ~1% per day of stocks not being delivered just sounds like the lame Superman 3/Office Space plot about stealing fractions of pennies and no one will notice only on a bigger scale and larger percentage because no one can track and audit them. The circumstances surrounding Weiss and the wikipedia article are troubling in that either he or someone he knows was working on an obscure article article from within the DTCC and really makes it sound like there is someone on the inside doing this or at least allowing this to happen.

SI

[Mizzou B-ball fan]

Interesting story from a friend. I hadn't talked to him in a couple of months. He just informed me that he purchased a home in Vegas that had been foreclosed. 4,000 sq. ft., 5 bedroom, 7(!) car garage for $350,000.

Cripes. I had heard that market was rough, but that's unbelievable.

[flere-imsaho]

This recession is all in your heads. What a nation of whiners we've become.

I wonder if Gramm had any money with Madoff or Stanford. That would be pretty funny.

[JonInMiddleGA]

re: the SEC -- Anybody know what their caseload:investigator ratio is like? I wonder if they're in a similar situation to the FCC where there simply isn't anything remotely resembling enough bodies to investigate the number of cases that are generated. "Uncle Charlie" certainly has more than its share of village idiots & isn't immune to criticism by any stretch of the imagination but I know that their lack of speed does have a pretty understandable reason behind it. There is, quite literally, only so much one person can do and I just sort of randomly wondered whether the SEC was as understaffed in the enforcement end as the FCC is.

I figure some of our more inside-the-business posters here will have at least a general answer about that.

[Mizzou B-ball fan]

re: the SEC -- Anybody know what their caseload:investigator ratio is like? I wonder if they're in a similar situation to the FCC where there simply isn't anything remotely resembling enough bodies to investigate the number of cases that are generated. "Uncle Charlie" certainly has more than its share of village idiots & isn't immune to criticism by any stretch of the imagination but I know that their lack of speed does have a pretty understandable reason behind it. There is, quite literally, only so much one person can do and I just sort of randomly wondered whether the SEC was as understaffed in the enforcement end as the FCC is.

I figure some of our more inside-the-business posters here will have at least a general answer about that.

I think I saw in a recent article where the FBI is currently involved in 60+ major financial fraud investgations. They've certainly got their hands full.

[SFL Cat]

Interesting story from a friend. I hadn't talked to him in a couple of months. He just informed me that he purchased a home in Vegas that had been foreclosed. 4,000 sq. ft., 5 bedroom, 7(!) car garage for $350,000.

Cripes. I had heard that market was rough, but that's unbelievable.

That almost makes me want to yell, "BULLSH*T!" :D

[Buccaneer]

In reading Buffett's latest doom about falling off a cliff, there is still something I am not grasping. Consumers are spending less and presumably, incuring less debt. Is that such a bad thing? Less consumerism means less resources being used (that's a good thing, right?), while less debt means a more stable financial situation. Someone mentioned about a lowered standard of living as the result. Is it heresy to suggest that having less debt actually raises your net worth, thus your standard of living? I have always thought that driving a 9 year old car that is paid off is a better standard of living than having a new car with a $15k debt. Is this economy so dependent upon people maxing out their credit line?

[Flasch186]

As Ive said repeatedly, I dont think me and my ilk are saying that more saving and the 'lower' standard of living is a bad thing, what Im saying is that the unwind needs to be orderly. Thus far it's been about as orderly as can be AND they even took a chance at seeing what 'disorderly' looked like (see Lehman) and said that that wasn't acceptable considering the aftershocks that reverborated through the entire year.

[JonInMiddleGA]

Is this economy so dependent upon people maxing out their credit line?

Yes.

Glad I could help.

[duckman]

What recession?

[JPhillips]

In reading Buffett's latest doom about falling off a cliff, there is still something I am not grasping. Consumers are spending less and presumably, incuring less debt. Is that such a bad thing? Less consumerism means less resources being used (that's a good thing, right?), while less debt means a more stable financial situation. Someone mentioned about a lowered standard of living as the result. Is it heresy to suggest that having less debt actually raises your net worth, thus your standard of living? I have always thought that driving a 9 year old car that is paid off is a better standard of living than having a new car with a $15k debt. Is this economy so dependent upon people maxing out their credit line?

The problem is speed. Going from a slightly net negative national savings to around twelve percent in under six months pulls a shit load of cash out of the system so quickly that it crushes businesses. We need to save more(me included), but taking twelve percent out of the economy right now won't help us recover.

[JPhillips]

re: the SEC -- Anybody know what their caseload:investigator ratio is like? I wonder if they're in a similar situation to the FCC where there simply isn't anything remotely resembling enough bodies to investigate the number of cases that are generated. "Uncle Charlie" certainly has more than its share of village idiots & isn't immune to criticism by any stretch of the imagination but I know that their lack of speed does have a pretty understandable reason behind it. There is, quite literally, only so much one person can do and I just sort of randomly wondered whether the SEC was as understaffed in the enforcement end as the FCC is.

I figure some of our more inside-the-business posters here will have at least a general answer about that.

My wife worked at the SEC a couple of years ago. I don't know about investigators, but the legal staff handling violations is too small and the ease at which defendants can extend cases slows down the entire process.

I should add that all the political pressure, and this comes from both parties, is onreducing penalties and investigations. There's no money pushing more enforcement.

[Galaxy]

My wife worked at the SEC a couple of years ago. I don't know about investigators, but the legal staff handling violations is too small and the ease at which defendants can extend cases slows down the entire process.

+1

Kind of the same idea with government spending. Spend when your down, save when your good (in economic terms).

[digamma]

re: the SEC -- Anybody know what their caseload:investigator ratio is like? I wonder if they're in a similar situation to the FCC where there simply isn't anything remotely resembling enough bodies to investigate the number of cases that are generated. "Uncle Charlie" certainly has more than its share of village idiots & isn't immune to criticism by any stretch of the imagination but I know that their lack of speed does have a pretty understandable reason behind it. There is, quite literally, only so much one person can do and I just sort of randomly wondered whether the SEC was as understaffed in the enforcement end as the FCC is.

I figure some of our more inside-the-business posters here will have at least a general answer about that.

The SEC doesn't publish data on investigations, but they do publish data on enforcement actions initiated. If I recall correctly, the number of enforcement actions is up significantly (40% comes to mind) from 2008 to 2007. I believe there was a similar increase from 2007 to 2006.

I have no doubt that the staff of the enforcement division has a full agenda, however, I think the larger problem may be the organization of the SEC into the various divisions and the seeming lack of communication with the divisions. Most investors' interactions with the SEC are with the Division of Market Regulation. Those in the financial industry may deal with the Division of Investment Management. Issues that arise in these divisions must then be referred to the Enforcement Division for handling. Anecdotal evidence suggests this referral and transition process is less than efficient.

[flere-imsaho]

I'll bet the SEC is just as appropriately staffed as the FDA is. Which is to say: not at all.

[Galaxy]

Citigroup CEO says bank operating at profit - U.S. business- msnbc.com (http://www.msnbc.msn.com/id/29611953)

[sterlingice]

I wonder how bad they had to cook the books to get to that conclusion

SI

[Flasch186]

it's before their marks so that number he's looking at could be BILLIONS off...

that being said I think that this will be the first cog in a run of better than expected news for awhile before settling in for the grind to 600 on the S&P.

(So Contra-flasch people should see a nice long term rally :) )

I got a nice $/avg on GE now so hopefully it'll stay up here and start to chew some gains before I can get out with the first profit in a stock in a long long time. I have enough carry over loss to last decades.

[Flasch186]

DOLA

Looks Like B. Frank dropped a nugget that they might reinstitute the uptick rule in a month. This is a very good thing and maybe Im right in that the next few weeks will see a bunch of good news coming out to alleviate some pressur eon the stock market and the capital raising/needs.

[sterlingice]

Strange how all of these regulations from the 30s (Glass-Steagall, uptick) actually made sense and that getting rid of them causes horrible problems.

As an aside, people wonder why we say "things used to be better" politically and the response is always "this is how it has always been- politics has always been partisan and nasty". Well, yes, up to a point but sometimes good stuff got done whereas it seems now nothing can be done that isn't at least partially screwed up.

SI

[Fighter of Foo]

In reading Buffett's latest doom about falling off a cliff, there is still something I am not grasping. Consumers are spending less and presumably, incuring less debt. Is that such a bad thing? Less consumerism means less resources being used (that's a good thing, right?), while less debt means a more stable financial situation. Someone mentioned about a lowered standard of living as the result. Is it heresy to suggest that having less debt actually raises your net worth, thus your standard of living? I have always thought that driving a 9 year old car that is paid off is a better standard of living than having a new car with a $15k debt. Is this economy so dependent upon people maxing out their credit line?

Long term, it's a very good thing. Short term it's terrible, because when we all cut back, more of us lose jobs, there's less $$$ floating around, and so on.

The current economy was indeed built on massive amounts of excess debt. The people yelling loudest for a return to that level are the ones who were benefiting the most.

[SportsDino]

I blame America's general acceptance of political corruption for those regulations being removed and all hell breaking loose. If you make it too easy for people to be crooks you will find plenty that go that way.

I trust Citi about as far as I can throw them, which if they keep shedding jobs I might indeed soon be able to throw them. So I guess I'll trust them when some of those asses finally get fired. I think the Citi bounce will run a bit because they are practically a penny stock now, but I'm watching them for a downturn at some point if the stock goes too gangbusters.

I think my pulling the trigger on GE at 6.0 (well 6.17) was the right move. I think as long as the news is majority decent they should do fine, although it really is long term play (I think they will be back over my old 11 within a year).

Liquidated my SDS and SKF on Friday during day, again, yippee!

Personally I am hoping for very boring news days for like a month. Market jumps like a bunch of morons on every tidbit of news, and Christmas time and first quarter always seem like people are stir crazy from winter or something. Even though I make more money off the shorting of crazy ass market volatility I'd rather do something else than time sells and covers. Not to mention I've got too much GE in my long portfolio now so I'd rather start hunting for other long term rebounders.

Ack, too much happiness. Economy is still screwed up folks if we don't fix some crap. Plenty of chances for it to keep going down, especially if Flasch's whole idea of a deflationary spiral is true (versus my idea of a cost cutting price anomaly). In this case we really want Flasch to be wrong, if that period was truly deflation a recovery is farther off, if it was economic panic cost cutting... there is the potential some businesses will get cut this year (perhaps a few more banks, maybe even one of them big), but the opportunity for others to start rebuilding in the wreckage.

Also jobs are still terrible, ya the market monkeys are all psyched about some hot air out of Citi and what not... but they'll get depressed next time an article hits about unemployment rate. There is no market bottom until jobs recover (note the bottom may statistically precede the job recovery because of the forward predicting nature of the market, i.e. the prices of stocks rebound before the actual hires occur, but it is because the company has regained its outlook of growth and is planning expansion, so it gets priced in).

[Arles]

I haven't been following this thread of late, but I figured it was a good spot to mention that the company I work for nearly tripled their orders from February to March. We were expect an increase, but we didn't think we'd be at this level until May at the earliest. Not that it means a ton, but semiconductor manufacturing is usually a leading indicator (by about 6-8 months usually). So, that could be a good sign for the fall.

[SportsDino]

I am hopeful we are going to see the other side of the frenzy when people realize they like making money again! But I don't want to say anything even remotely like a prediction. I will say the company I work for has an uptick as well. Unfortunately I'm afraid the FED of doom will decide to early on that they want to play games again, mess with things, and stall the whole process. It really is a bad thing to have power wielded by a special interest, because they have a tendency to make really bad decisions for the overall picture to satisfy that interest. In this case I'm afraid the FED will play with rates to try to give the banks more profit on their recently white-out covered balance sheets, and not quite cause a credit freeze, but divert more recovery dollars to making the banks look rosy and slow down investment as a side effect. Unfortunately the FED members themselves have too big a stake in the stock price of banks, they are hurting, and I think they are gonna take care of 'friends' first and gimp job creation to a pace slower than it could be.

[Galaxy]

I've been thinking the same thing for quite a while, but Meredith Whitney believes that the next credit crunch is coming with credit cards:

http://www.reuters.com/article/newsOne/idUSTRE52921M20090310

Whitney says credit cards are the next credit crunch
Tue Mar 10, 2009 8:38am EDT



(Reuters) - Prominent banking analyst Meredith Whitney warned that "credit cards are the next credit crunch," as contracting credit lines will lower consumer spending and hurt the U.S. economy.

"Few doubt the importance of consumer spending to the U.S. economy and its multiplier effect on the global economy, but what is underappreciated is the role of credit-card availability in that spending," Whitney wrote in the Wall Street Journal.

She said though credit was extended "too freely over the past 15 years" and rationalization of lending is unavoidable, what needs to be avoided was "taking credit away from people who have the ability to pay their bills."

Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.

"Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy," Whitney said.

Currently, there is roughly $5 trillion in credit-card lines outstanding in the U.S., and a little more than $800 billion is currently drawn upon, she said.

"Lenders, regulators and politicians need to show thoughtful leadership now on this issue in order to derail what I believe will be at least a 57 percent contraction in credit-card lines," she said.

Over the past 20 years, Americans have also grown to use their credit card as a cash-flow management tool, she said adding that 90 percent of credit-card users revolve a balance at least once a year, and over 45 percent of credit-card users revolve every month.

Whitney said the five lenders which dominate two thirds of the credit-card market need to work together to protect one another and preserve credit lines to able paying borrowers by setting consortium guidelines on credit.

(Reporting by Ratul Ray Chaudhuri in Bangalore)

[Flasch186]

well at this point it's hard to argue with her since she's been spot on thus far....unfortunately.

I dont know how the CC mentality is for regular people since I dont use one thereofre it's hard for me to have any anecdotal feelings on it or evidence to draw from. Do a lot of people view their CC limit as a part of their wealth equation?

[Galaxy]

well at this point it's hard to argue with her since she's been spot on thus far....unfortunately.

I dont know how the CC mentality is for regular people since I dont use one thereofre it's hard for me to have any anecdotal feelings on it or evidence to draw from. Do a lot of people view their CC limit as a part of their wealth equation?

I pay mine off every month, so I with you on that count.

[sterlingice]

well at this point it's hard to argue with her since she's been spot on thus far....unfortunately.

I dont know how the CC mentality is for regular people since I dont use one thereofre it's hard for me to have any anecdotal feelings on it or evidence to draw from. Do a lot of people view their CC limit as a part of their wealth equation?

I think a lot of people do. That "I'm in debt up to my eyeballs" commercial was out there because it resonated with people.

Personally, I just use mine for convenience and to rack up some reward points. Around the time I got out of college, however, I was living off of it and it took a while to pay it back so I don't ever plan on doing that ever again.

I'm worried that everyone's credit ratings are about to be battered when they start canceling or butchering everyone's credit lines indiscriminately. Then again, they were passing out money (credit) like drunken sailors so it's not like they're going to be responsible now.

Oh, and Capital One- I just got my reward from you last month. After jacking up my rate for no reason to 29%, I'm using one of the other cards I have now.

SI

[Galaxy]

Credit cards are managed by banks and lending institutions, correct, in terms of loan and setting the limits?

[Flasch186]

I think and it's a shot in the dark that when we're through this mess, on the other side, the gauge as to what is below, average, above FICO scores will have to be adjusted, for better or worse.

Japan Wholesale Prices Slide, Deflation Beckons
Topics:Inflation | Nikkei | Stock Market | Economy (Global) | Japan
By: Reuters | 10 Mar 2009 | 09:34 PM ET
Text Size

Japanese wholesale prices marked their biggest annual fall in nearly six years in February, prompting warnings that Japan faces broader deflation than just the one-off effect of sliding oil prices.

Japanese Yen
Photo by: Jesse Braun
Japanese Yen

In another gloomy sign, core machinery orders fell 3.2 percent in January as companies cut spending in response to a global downturn that is pushing Japan into the worst recession since World War Two.

Wholesale prices fell 1.1 percent in February from a year earlier, accelerating sharply from the 0.3 percent annual drop seen in January.

"Price declines are spreading from materials to other goods, and consumer prices are likely to start falling," said Azusa Kato, an economist at BNP Paribas.

"Japan is likely to enter a mild deflationary period. Other countries may not follow Japan into deflation because their level of inflation was originally much higher than Japan's."

Japan's economy is on course for its longest recession in modern times as a collapse in export demand is prompting companies like Toyota Motor [TM 60.18 2.50 (+4.33%) ] and Sony [SNE 18.31 0.73 (+4.15%) ] to slash jobs and scale back investment in factories.

RELATED LINKS

Current DateTime: 06:37:55 10 Mar 2009
LinksList Documentid: 29624214

* Citigroup Sparks Big Rally
* Citigroup Stock Rebounds On Pandit's Upbeat Report
* US Consumer Confidence Edges Up in March
* More Asia Pacific News

The Nikkei 225 Average [NIKKEI 7338.16 283.1802 (+4.01%) ] gained almost 4 percent in early trade Wednesday, with banking shares rising after Citigroup's chief executive said it was making profits, boosting Wall Street.

But shares are still lurking around 26-year lows and the Japanese government, which has already proposed its biggest budget ever to revive the economy, faces calls from ruling party lawmakers to take additional measures to support growth.

Falling oil and other commodity prices have eased costs for Japanese firms, but have stoked fears that price falls and weak demand could feed each other in a vicious deflationary spiral.

The final price companies charge each other for goods fell 3.1 percent from a year earlier, the largest decline since February 2001. Economists view final prices as a rough guide to likely pressure on prices in stores, and many see consumer inflation turning negative.

"Wholesale prices will continue to fall toward next year as companies are facing growing pressures to cut prices of consumer goods such as electronic items, heightening the risk of deflation," said Takeshi Minami, chief economist at Norinchukin Research Institute.

The annual slide in wholesale prices was the biggest since June 2003, although it roughly matched economists' median forecast of a 1.2 percent fall.

While the drop in core machinery orders in January was slightly smaller than a median forecast for a 4.5 percent decline, few analysts are optimistic about the outlook for capital spending.

"The pace of decline in core orders was somewhat narrower than expected, but the data still confirmed that companies keep cutting capital spending as their profits deteriorate," Minami said.

I know it's Japan and it's very very different than here but we ARE seeing signs of deflation and I truly hope Im wrong that it'll last a while because my money is bet otherwise :) and I hope it's a one-off.

[JonInMiddleGA]

Do a lot of people view their CC limit as a part of their wealth equation?

We used to not figure it that way. We do now to some extent, not much choice lately to be honest. Not so much part of any "wealth equation" as a "twist-tie used to knot a fraying rope" but I think that's in line with what you were asking about.

Anecdotal oddity here btw, since I knew most of what that article quoted about the shrinking credit lines already, we got a credit limit increase from Discover today out of the blue.

[sterlingice]

I'm annoyed with the credit score problem as we're likely going to be looking for a house about then, particularly with prices down a bit, and will have enough money saved up under today's rules.

SI

[sterlingice]

Ok, the timing on this is just eerie for me personally. I realize the NSS MSNBC story we were talking about maybe 50 posts ago has been out there a few months, but I just ran across it over the past week.

Well, now Jon Stewart and Jim Cramer have started up this little fued where Stewart makes Cramer look like a total ass for, well, recommending Bear Stearns a couple of weeks before it went from $60 to $2.

So, what does Cramer do? He goes on the Today show this morning to attack Stewart and, well, gets made to look like an ass with the clips of The Daily Show. (Then he goes on Morning Joe and Joe is a tool and makes fun of Stewart for not being able to predict the economy. Honestly, this looks a lot like the leadup to that Crossfire interview where he drops the line "The lead-in to my show is puppets making crank calls, what's your excuse?")

Cramer's handlers need to tell him this is a battle he can't win.

And, frankly, if this escalates any further- Cramer gets a real spotlight shown on him because, frankly, everyone loves giving free press to The Daily Show since it's a funny 2 minutes of news that they don't have to do anything with except ask CC for permission. (Secretly, I'd love to see the NSS story blow up on there, but, seriously, it's The Daily Show- news doesn't and shouldn't break there.)

SI

[Flasch186]

yeah Cramer should let this one go, Like Santelli did. no win sitch.

[larrymcg421]

What's odd is that he wasn't even that harsh on Cramer. Unless there was another segment I missed? I mean, other people in the same segment got hit much worse, I thought.

And also, Cramer is an ass to people who are wrong. The last time I watched the show he was making fun of people that told him Washington Mutual was going to be fine. I'd expect him to be a guy who could take it and dish it out.

[sabotai]

Jim Cramer is going to be a guest on The Daily Show Thursday night.

That should clear up why they are doing this now.. :)

[sterlingice]

What's odd is that he wasn't even that harsh on Cramer. Unless there was another segment I missed? I mean, other people in the same segment got hit much worse, I thought.

And also, Cramer is an ass to people who are wrong. The last time I watched the show he was making fun of people that told him Washington Mutual was going to be fine. I'd expect him to be a guy who could take it and dish it out.

That was the original segment. Cramer made some comments in an online editorial so Stewart put on that mean hat tonight and hit hard last night and then again tonight. Check the intro segments from today and yesterday on TheDailyShow.com.

SI

[flere-imsaho]

I don't think it was particularly mean. Cramer said that he never told people to buy Bear Stearns 6 days before it collapsed (technically, he told people not to sell Bear Stearns at this point), so Stewart conceded the point. And then showed clips of Cramer telling people to buy Bear Stearns anywhere from 1 week to several months prior to Bear's collapse. :D

[sterlingice]

I'm not saying it wasn't deserved. I'm just saying, there are a few days where Stewart hits harder than others. He gets a little mean edge to his commentary and this was one of those times (check out his stuff about Limbaugh last week- same thing- but I hadn't seen him really do that for a few weeks before)

SI

[Flasch186]

damn, GE's rating got cut this morning. Im still wading through all the info and hope that this is priced in over the last 3 weeks where I swam against the current.

Looks like preliminarily the markets like the 'stable' comment that came with it.

[DaddyTorgo]

if cramer can't take what he dishes out than he should stfu

[lungs]

if cramer can't take what he dishes out than he should stfu

According to one blogger I read, he shouldn't take it from Jon Stewart because Jon Stewart was wrong about the surge!

[Galaxy]

You guys are taking this Cramer-Stewart thing serious. He's a comedian, Stewart, that always stages fights with other people.

[sabotai]

You guys are taking this Cramer-Stewart thing serious. He's a comedian, Stewart, that always stages fights with other people.

Right. Cramer has been a guest on the Daily Show (and Colbert Report) several times in the past, and if Cramer "couldn't take what he dishes out", he wouldn't be going on the Daily Show tonight. It's not like this is some talking head on TV that Stewart doesn't know and suddenly decided to pick a fight with.

[Flasch186]

looks like the nice timing of the 'better than expected' news plus the ratings cut leads to anice upside on GE today along with the broader markets. Ive been fairly busy so I havnt seen what Gold's been doing and the credit markets so Im not sure if this is showing up in other markets but perhsp, just perhaps, I might be right about a nice relief rally. although I'd be shocked if we didnt end some pretty substantial upsides with a big fat retest of the lows here in April.

[SportsDino]

When it comes to the media and GE, just plug your ears, again they are just spouting noise to try and explain things after the fact, have not had heard one who adequately explained how it can go up after a downgrade, but plenty try.

The correct answer is: it doesn't matter, don't even try to explain it. Prices fluctuate because they are prices, thats just what they do! Underneath everything, GE has plenty of financing, plenty of outright cash... so the debt rating is hardly going to sink them.

In other news, evil short monster tried a speculative BUY last week Friday, trading SDS and SKF for BAC and JPM, you can probably guess what I'm doing tommorrow (it rhymes with hell). I don't trust banks farther than I can throw them. But a one week play for 50%+++ (if there is no downtick tommorrow it could be 65%) is nothing to sneeze at. Citigroup was similarly low and risen, but they have been in the news too much.

I've had lucky timing with the speculation, but am backing away from it at the moment and focusing on long buildup. I remember this time in 2008 was a tricky one (fiscal years do matter in day-trading I swears, although I do not understand exactly how, and the average fiscal year ends in December-February...).

[sterlingice]

My god. Stewart ripped him a new one. That was no softball- that was an ambush

SI

[cartman]

Stewart get dismissed many times as a comedian, but when he decides to go serious, he can really get his point across.

[sterlingice]

Like I said earlier in the week- this feels a hell of a lot like the Crossfire incident.

SI

[cartman]

Did you notice how defensive Cramer got when Stewart brought up the point about the media pundits being in cahoots with some traders? Straight out of the Deep Capture accusations.

[RainMaker]

Wow.

Stewart absolutely destroyed Cramer. I figured he'd get a few jabs in, but that was incredible. I actually felt sorry for Cramer at the end.

[sterlingice]

Did you notice how defensive Cramer got when Stewart brought up the point about the media pundits being in cahoots with some traders? Straight out of the Deep Capture accusations.

That was one of the videos features on the Deep Capture site:

Jim Cramer Channels DeepCapture | Deep Capture (http://www.deepcapture.com/jim-cramer-cowly-hints-how-he-broke-the-law-2-mar-2007/)

SI

[Edward64]

Well, not a bad week at all. Around a 10% rebound, lets hope this continues.

Any bets for next week?

[SportsDino]

FUN (Cedar Point) is up from its low by about 43%, still only at 8.63... after they announce what they are going to do with the dividend (cut in half). Like I said in Top 5 Stocks, uncertainty over dividend is one major factor, debt from acquisition is another.

Put my money where my mouth is (about even cutting the dividend in half being a good deal) and bought at 6.20 Monday, still a net loser for me overall after that one week 40%.

Lets try a new pick, hmmm....

Eh, don't laugh too hard, but I'm digging for oil again. They are already up on the week, not part of my Monday buys.... but throwing some bets that way.

XOM
PCZ
BP

Will be grabbing up bits of all three on Monday.

Likely split the positions in half.

50% to sell in 3 months or at 30% up.

Other 50% selling on any spikes, and buying when deep under my 'line'.

We'll make a game out of it, I'll announce what I get it at and where I sell.

Overall I expect the trend to be going up for these companies, but it involves enough assumptions that I strongly suggest (as with all my inane blathering) that you do not consider this investment advice and purely an entertainment value scenario! It really does have a great deal of gambling involved.

Mostly the underlying premise relies on my thoughts on production, the bloodbath of a fourth quarter, and which companies I think are going to have some lucky timing (lucky in certain actions and consequences, of their bad and good decisions will be lined up so overall this fickle market won't go to far out of my guess). Any one or all of these presumptions can be completely and absolutely terrible (such as my thought of oil being good for 70 a barrel)... so I rate this as pure speculative asshattery although it is taking the form of a buy. I may very well make more off the volatility trading portion than the 3 month long bet.

This is only vaguely connected to the thread, I know, but it slightly relates to the notions of oil demand curve being tied to 'recession fear'. My earlier statements along the lines of 'you can panic cut the price down all you want, but eventually its time to either stop selling oil entirely or getting back to business' are pretty much reflected in this little stock game.

[SteveMax58]

Well, not a bad week at all. Around a 10% rebound, lets hope this continues.

Any bets for next week?

I'll throw out my uninformed and completely useless speculation of the market in general.

I think the market might actually hit 8000 sometime this spring/early summer, but likely drops back into the low 6000 range by October again.

As far as the next week? Geez...who knows...I'll say it approaches 7400 early in the week and drops to 6900 by the end of the week.

[Flasch186]

+1

[SportsDino]

I'm sensing a joke at my expense! Fine I'll stop speculating particulars, and keep to general theories on the recession. Probably safer that way anyway.

[Flasch186]

Liquidated my GE trade today while I liked it Long term simply for solvency sake it's hard to not take a 20% gain in 10 days or so...lucky yes but it feels good to see green at the end of a trade so I took it. Not because I dont think it could go higher but simply to take an actual profit on something, anything, this year. I actually would like to reload some cash here and then in about 2 weeks start averaging into the SDS as I would expect us to crack back towards the lows we set about 2 weeks ago. I also need to be ready to average again into GOOG since Iw as way too high on that one and like the beta on it to perhaps be able to recoup on it and maybe even break even on it.

[Fighter of Foo]

I'll throw out my uninformed and completely useless speculation of the market in general.

I think the market might actually hit 8000 sometime this spring/early summer, but likely drops back into the low 6000 range by October again.

As far as the next week? Geez...who knows...I'll say it approaches 7400 early in the week and drops to 6900 by the end of the week.

Bear market rally. Woohoo. Just be really, really, careful whenever it loses steam (and it could be weeks/months before that happens, obv. no one knows), because the drop will probably be stupidly large and quick.

[sterlingice]

Well, Flasch- AIG basically fessed up to doing what we were talking about in the other thread. They're the intermediary paying out big taxpayer bucks as insurance on credit default swaps.

A.I.G. Lists Banks It Paid With U.S. Bailout Funds - NYTimes.com (http://www.nytimes.com/2009/03/16/business/16rescue.html?_r=1&hp)

I don't know if I can possibly put to words how angry a lot of this makes me. Again, we're still trying to reward the companies that put us in this mess and all they are doing is taking that cash and hoarding it, trying to grab their share while the ship goes down.

I don't give a damn about the $1B in bonuses. Just like everything else during this whole process- people get distracted by the absolute stupidest things- flying corporate jets, $400M for the Mall as part of a $700B bailout - stupid ass windowdressing. This outrage should be focused on the big picture, not on the stupid little things. I mean, we're pissing and moaning about less than $1B on an ill conceived plan that's already over $150B and is going to go up.

SI

[SportsDino]

For game purposes:

In XOM at 67.2
In PCZ at 23.0
In BP at 38.2

First spike sell on all three is autoset for 10% gain (i.e. half my shares in XOM will be sold at 74, and so on).

I'll admit, its tempting to take a net 35% on my GE plays (averaged) today, however, I'm trying to stoke up a real long portfolio so I'll bet it all on Contra-Flasch I guess! :) Obviously this is subject to change if I know news is coming and want to lock in returns before a down-bump (particularly if it goes over 13 short term and any news is coming). Can always get back in for the long position, all I lose is a little bit of the upswing... gotta pick the risk I want to take.

I'm out of banks for a while, cleaned up BAC and JPM on Friday, technically would still be making money on them... oh well, I like locking in one week gains. That is why I can't fault your GE move, never a dumb thing to lock up sure gains really, all you are losing is opportunity cost (which is worth its weight in nothing!).

I personally still have it out for the banks, more likely to hit up SKF than SDS... maybe later this week after 120. I'm touchy with shorts in rallies and no bad news to rely on coming soon.

[lordscarlet]

Login required. :(

[SportsDino]

AIG is a candidate for completely wipe out and replace with government control until the business can be parcelled out to competitors. We are literally paying billions for them to redistribute millions to their owners and 'excellent employees that must be retained even though they don't understand how risk works'. Ya they are covering the insurance they sold with vast portions of the money, but we could have done that without the actual company itself, and cheaper.

[DaddyTorgo]

Bear market rally. Woohoo. Just be really, really, careful whenever it loses steam (and it could be weeks/months before that happens, obv. no one knows), because the drop will probably be stupidly large and quick.

Yeah. That's why I personally am holding out until the fundamentals start to get better. This is all speculative, sentiment-driven peaks and troughs.

[DaddyTorgo]

In other news - Barclays is looking to sell iShares.

http://www.pionline.com/apps/pbcs.dll/article?AID=/20090316/DAILYREG/903169997



The iShares division reported $325 billion in assets under management, about 22% of BGI’s total assets under management, as of Dec. 31, according to a note to clients from Alex Potter, an analyst at brokerage Collins Stewart. “The sale talks are somewhat of a surprise as (Barclays) management had indicated this business as being core to the group for several years now. However, tough markets evidently lead to tough decisions being taken.”

According to analysts, Barclays has been under pressure to raise capital for at least two reasons: bank officials are considering participating in a U.K. government insurance program covering toxic assets but they want to pay for it in cash rather than handing over a stake of the bank, which would require more capital; and the bank’s Tier 1 capital ratio — an indication of its financial strength — is below some of its peers, including HSBC.

[Fighter of Foo]

Yeah. That's why I personally am holding out until the fundamentals start to get better. This is all speculative, sentiment-driven peaks and troughs.

But you're missing value if you do that. I knew we were in a bubble in 2000, but that didn't keep me from dumping money in and riding the wave. The trick is to hop off early, not late ;)

[Flasch186]

Well, Flasch- AIG basically fessed up to doing what we were talking about in the other thread. They're the intermediary paying out big taxpayer bucks as insurance on credit default swaps.

A.I.G. Lists Banks It Paid With U.S. Bailout Funds - NYTimes.com (http://www.nytimes.com/2009/03/16/business/16rescue.html?_r=1&hp)

I don't know if I can possibly put to words how angry a lot of this makes me. Again, we're still trying to reward the companies that put us in this mess and all they are doing is taking that cash and hoarding it, trying to grab their share while the ship goes down.

I don't give a damn about the $1B in bonuses. Just like everything else during this whole process- people get distracted by the absolute stupidest things- flying corporate jets, $400M for the Mall as part of a $700B bailout - stupid ass windowdressing. This outrage should be focused on the big picture, not on the stupid little things. I mean, we're pissing and moaning about less than $1B on an ill conceived plan that's already over $150B and is going to go up.

SI

Outside of the bonuses which I think we can all agree are retarded I am not against this bad bank play. It is the orderly unwinding I had been talking about.

[DaddyTorgo]

But you're missing value if you do that. I knew we were in a bubble in 2000, but that didn't keep me from dumping money in and riding the wave. The trick is to hop off early, not late ;)

you're right i am. i just need to basically take the plunge back in and get my feet wet.

honestly right now i'd prolly just go staples+healthcare overweight with solid names, a couple plays on commodoties (maybe a commodoties ETF), and short the broad index.

frankly, for all that I work in finance now and I understand the markets, I have never personally been a big investor, so part of it is a commitment of time necessary to get things up and running and the time needed to follow it daily.

[Buccaneer]

State governments that contract jobs paid for with stimulus money will be required to pay workers on construction projects union wages rather than market rates -- good news for workers but good news for not as many of them.

The Office of Management and Budget included in the $787 billion stimulus bill the Davis-Bacon provision, a 1931 law typically only used on federal highway projects. But under the new spending plan, Davis-Bacon will apply to all state and local jobs on energy, housing, agriculture or construction.

Higher costs per project mean fewer projects completed, especially since some "shovel ready" projects were bid as non-union jobs. Some local officials and economists say the union wage mandate means taxpayer dollars won't be stretched as far as otherwise was planned.

"All this recovery money being spent, you have a lot of hands out," said economist Jack Kyser. "And so people have said OK, this has to conform to Davis Bacon, which means prevailing wage. And so you get hung up. So as I say, you're going to have projects, but you're not going to have the money go as far as you'd wanted it to go."

Los Angeles County officials who received $8 million in Community Development Block Grant money to weatherize homes for low-income people said they typically bid the job low and pay about $15 an hour for a worker to caulk windows. However, under union scale, that job pays $25 an hour and $5 in benefits, so instead of repairing 100 homes, they might do 50 homes for the same price.

Elsewhere, the union wage for a plumber in Long Island is $45 an hour, the market rate is $30. In Las Vegas, the Davis-Bacon wage for a glass worker is $57 an hour, a job the Nevada State Housing division currently pays $15 to do.

On the flip side, organized labor says it is about time workers were making higher wages, and people should not have to work three jobs to live a middle-class life.

"That's plantation capitalism, how do you justify working two or three jobs? Is that what we want is that what a middle class is all about, is that what this stimulus money supposed to be used for?" asked Maria Elena Durazo, executive secretary-treasurer of the Los Angeles County Federation of Labor, AFL-CIO.


Oh goodie. Yet another example of massive government spending benefiting the relative few. To the typical nuthouse AFL-CIO executive - the point of the middle class (and the stimulus) is to get/retain as many people as possible into that class - not to reward fewer number of workers when unemployment is so high. So how is Obama going to get 3 million people working with this stimulus when there is already significant restrictions on who can get the job and the timing of getting the jobs (there are only so many big contractors of highway and energy projects). Fuck the labor unions and their elitist, feudalistic ways.

[Galaxy]

Outside of the bonuses which I think we can all agree are retarded I am not against this bad bank play. It is the orderly unwinding I had been talking about.

The problem is I have:

1) Doesn't the government due any homework? Handing over billions to billions of dollars without any strings? You can't turn around and blame them for being greedy, when your stupid enough to allow it to happen?

2) The contracts are binding (before the bailout, I believe)? So how does the government overturn those contracts in the court of law?

[Flasch186]

2) The contracts are binding (before the bailout, I believe)? So how does the government overturn those contracts in the court of law?

I believe what I heard the AG of NY say today was that by taking the bailout $ the company was admitting to insolvency and therefore the contracts from before became non-binding....who knows, its ridiculous though.

[DaddyTorgo]

I believe what I heard the AG of NY say today was that by taking the bailout $ the company was admitting to insolvency and therefore the contracts from before became non-binding....who knows, its ridiculous though.

put enough lawyers into a room and they'll come up with a way out of the contracts

[JPhillips]

Chuck Grassley is my new BFF.

"In a comment aired this afternoon on WMT, an Iowa radio station, Grassley (R-Iowa) said: "The first thing that would make me feel a little bit better towards them if they'd follow the Japanese model and come before the American people and take that deep bow and say I'm sorry, and then either do one of two things -- resign, or go commit suicide." (...)

Nobody else has suggested hara kiri for AIG executives, and Grassley's spokeswoman tried to make clear the senator didn't really mean it."

[Flasch186]

fricking idiot.

[JonInMiddleGA]

fricking idiot.

+1

[flere-imsaho]

2) The contracts are binding (before the bailout, I believe)? So how does the government overturn those contracts in the court of law?

This is an insurance company, right? Take the same lawyers who figure out how to not pay for someone's fully-covered emergency brain surgery, put the in a room, and I guarantee you they'll find a way to make these contracts non-binding.

In other news, this is pretty awesome: (http://www.npr.org/templates/story/story.php?storyId=101947625)

Fair Haven Ministries, a church in recession-battered Michigan, is trying to juggle a drop in offerings with an escalating need to help people in the community.

So it created its own stimulus package by drawing inspiration from a New Testament parable in which faithful servants took money given by their master, invested it and brought back more.

A robust crowd streams from the sanctuary of the 2,000-parishioner church in a suburb of Grand Rapids after a recent service. But when the church's pastor, Tom DeVries, gives a tour of the church's back offices, it's clear that all is not well.

The office of the pastor of celebration arts is empty — he was laid off along with three other church staff members. And DeVries says that's nothing compared to what his congregants are facing.

"This is about as bad as I've seen it," he says.

Michigan's unemployment rate tops 11 percent, a casualty of the auto industry crisis and one even closer to home. Furniture-makers Steelcase and Herman Miller, the major employers in Grand Rapids, aren't selling much furniture.

"We're seeing people losing their jobs; we're seeing people get upside down on their homes where they end up owing more than it's worth — and so it does impact their life, and it impacts their giving," DeVries says.

That's why Fair Haven has cut $400,000 out of its $2.7 million budget. They've slashed ministries by 15 percent. They've switched to a health care plan with higher deductibles, and the staff will take a week of unpaid leave in June.

The church is hardly alone, says Phill Martin at the National Association of Church Business Administrators. He notes that churches feel the pinch of recession later than other nonprofits.

"Only when the recession becomes so deep and so difficult do they pull away from the congregation," Martin says. "I think the church tends to be the last place that people — who are committed to their faith — that's the last place that they will stop giving charitably."

Still, nearly 60 percent of the group's members say they are seeing fewer dollars in their collection plates. And so with more demands and less money, churches are learning to be creative.

Take The Money, And Multiply It

On Jan. 25, worshippers at Fair Haven were greeted with a little surprise. DeVries preached about Jesus' parable of the talents. At the end of the sermon, he stood in front of the pulpit and pulled a wad of $100 bills out of his pocket — worth $5,000.

"I want at least 25 volunteers to make their way on down," DeVries announced. "And we're going to do this right now, and we're going to see what God has in store through us and with us."

The pastor asked his congregants to take the money and multiply it. The proceeds would be used for ministries serving the poor in Grand Rapids.

"I think at first they were stunned," DeVries says. "Then they were fearful because they had to come up front to get it. But as they began to think about it, they came up with all kinds of crazy ideas."

The ideas ranged from a chili cook-off and a music extravaganza, to a doggie day spa and a jewelry-maker.

"People can bring their dogs in and we'll wash 'em, dry 'em, and they pick them up later in the day," said Mark Tuttle. And it looks like business will be good.

"It's really muddy out here this time of year, in spring. The dogs are really dirty. So $15 is a small price to pay to get your dog washed," he says.

Kelly Bosch is making silver necklaces for a $15 donation. "These are all custom-stamped on metal, and you pick your favorite Bible verse, so they're custom-made just for you."

Bosch was one of two dozen people displaying their projects at a fair held between church services on a recent Sunday.

Raising Money For 6-Year-Old With Brain Cancer

The night before, Julie Bordewyk stood on the spongy floor of Gymnastix Unlimited. She was trying to get the attention of the 250 kids and parents at the game night that she had put together. But they were too busy jumping on the trampoline, getting their faces painted or writing down bids for the silent auction.

Bordewyk and her friends spent their $100 on admission tickets. Everything else — food, auction items, the gym itself — was donated.

"People want to give," she said. "It's such a hard world, and seeing so much sadness, it's nice to be doing something for God. To have some hope in the world, you know."

The money raised this weekend will go to 6-year-old Ryan Ter Haar, who was recently diagnosed with brain cancer. Bordewyk selected him because she knows the medical bills will be a huge burden for his family.

"My husband was in the hospital for four days, and we still are paying bills," Bordewyk said. "I can't even imagine what the costs are with a child in hospital for as long as he is. And I will do anything in my power to help this family for the rest of my life."

Ryan's parents, Mindy and Todd, tried to hold back tears as the gym filled with more and more people. The gym's owner, Rhonda Wynsma, said she had no idea how much money they would raise.

"We know that God's bigger than us," Wynsma said. "And I think he wanted to show off this weekend."

In fact, the $100 investment raised more than $12,000. And that's just for one event. Fair Haven expects to give more money to the poor during this recession than it's ever given before.

[DaddyTorgo]

that's a cool idea

[digamma]

Well, Flasch- AIG basically fessed up to doing what we were talking about in the other thread. They're the intermediary paying out big taxpayer bucks as insurance on credit default swaps.

A.I.G. Lists Banks It Paid With U.S. Bailout Funds - NYTimes.com (http://www.nytimes.com/2009/03/16/business/16rescue.html?_r=1&hp)

I don't know if I can possibly put to words how angry a lot of this makes me. Again, we're still trying to reward the companies that put us in this mess and all they are doing is taking that cash and hoarding it, trying to grab their share while the ship goes down.

I don't give a damn about the $1B in bonuses. Just like everything else during this whole process- people get distracted by the absolute stupidest things- flying corporate jets, $400M for the Mall as part of a $700B bailout - stupid ass windowdressing. This outrage should be focused on the big picture, not on the stupid little things. I mean, we're pissing and moaning about less than $1B on an ill conceived plan that's already over $150B and is going to go up.

SI

Honest question: what has you so riled up here? If it is the fact AIG was bailed out at all, then I understand the general point--we shouldn't bail out poorly run businesses etc.

But, if your complaint is specifically that they used the money to pay some bills due to other banks, I'm not sure I follow. Isn't that what the bail out was for? To prevent them from defaulting, cross-defaulting, and defaulting again on all sorts of derivative and other financial contracts?

Now, maybe the argument is that they should have done a better job negotiating reduced payments to these other banks. Put yourself in Goldman's shoes, now. You're aware that your counterparty just got a very large cash injection. Why do you have any incentive to settle for less than 100 cents on the dollar?

AIG filing for bankruptcy would have been an absolute disaster. You have the complexity of the Lehman Brothers bankruptcy because they were a counterparty in addition to the fun of sorting through all sorts of insurance regulations. That said, I think it's a viable argument that that sort of "medicine" is what a failing economy needed--and that takes me back to the first question. If your beef is with the bail out of AIG in general, fine. I respect that. I just disagree with the outrage that portions of the money ended up going to other banks.


As an aside, the bonus issue is a bit of a side show. The financial services industry has made its own bed here. Salaries for traders and others in the industry are relatively low and the bulk of individual compensation usually comes from the bonus. Payment of a "bonus" is always going to generate outrage in times such as this, even if it is someone's salary by another name. (Not defending AIG here, as I have no insight into their comp structure. Just noting that this may be a red herring.)

[DaddyTorgo]

As an aside, the bonus issue is a bit of a side show. The financial services industry has made its own bed here. Salaries for traders and others in the industry are relatively low and the bulk of individual compensation usually comes from the bonus. Payment of a "bonus" is always going to generate outrage in times such as this, even if it is someone's salary by another name. (Not defending AIG here, as I have no insight into their comp structure. Just noting that this may be a red herring.)

i don't think it's a sideshow at all.

Equity Derivatives Trader Salaries in New York City, NY | SimplyHired (http://www.simplyhired.com/a/salary/search/q-Equity+Derivatives+Trader/l-New+York+City,+NY)

The average salary for a derivatives trader (as an example) in NYC is $160k. That's doing quite alright, even in New York City (let alone the fact that many of them live out in the burbs where real estate may cost more but the cost-of-living is less and their real estate appreciated considerably). The argument that they merit any type of additional payment, call it a bonus or a retention award or whatever, let alone one paid for by the taxpayers, after the devestation caused by their mess has destroyed so much taxpayer equity, is ridiculous.

Really, is anyone going to shed a tear for the poor derivatives trader who has to "scrape by" on 160k a year and all of a sudden has to send his kid to public school in the suburbs instead of private school?

Frankly they should feel thankful that they still have jobs given their ineptitude.

Note: I have no problem with them receiving bonuses when the firms are doing well and bringing in revenue. But to give them million-dollar bonuses with taxpayer money when the firms have been bleeding money and seeking government bailouts for months is patently ridiculous.

[digamma]

i don't think it's a sideshow at all.

Equity Derivatives Trader Salaries in New York City, NY | SimplyHired (http://www.simplyhired.com/a/salary/search/q-Equity+Derivatives+Trader/l-New+York+City,+NY)

The average salary for a derivatives trader (as an example) in NYC is $160k. That's doing quite alright, even in New York City (let alone the fact that many of them live out in the burbs where real estate may cost more but the cost-of-living is less and their real estate appreciated considerably). The argument that they merit any type of additional payment, call it a bonus or a retention award or whatever, let alone one paid for by the taxpayers, after the devestation caused by their mess has destroyed so much taxpayer equity, is ridiculous.

Really, is anyone going to shed a tear for the poor derivatives trader who has to "scrape by" on 160k a year and all of a sudden has to send his kid to public school in the suburbs instead of private school?

Frankly they should feel thankful that they still have jobs given their ineptitude.

Note: I have no problem with them receiving bonuses when the firms are doing well and bringing in revenue. But to give them million-dollar bonuses with taxpayer money when the firms have been bleeding money and seeking government bailouts for months is patently ridiculous.

Three quick points...

1. You sort of made my first one. Side show may have been the wrong word, but I think red herring applies. Bonuses are an easy target for public outrage.

2. And the financial industry has made its bed by paying folks largely in the form of a bonus. Sure, you'd still be a little ticked if a guy made a $500,000 salary, but it doesn't carry the same sting of learning that someone made $250,000 in salary and GOT A QUARTER MILLION DOLLAR BONUS. (Whether they deserve jobs, salary, bonus, etc. is a different debate entirely.)

3. You're talking about one tenth of one percent of their bailout money. Again--it's symbolism. Plain and simple. As I think about it more, it's probably a good spot to vent and take out frustration, but it really is a penny down the wishing well.