Saturday, September 26, 2009

Fed the Magic Dragon

This article just reiterated my concerns about Fed policy.

I have been shocked by the summer stock market rally for about 3 months now. The Dow Jones was almost at 10,000 before it started falling this week. I can find no rational reason why it has or will continue to stay at anything above 8,000 to 8,500 levels. If I am right, a lot of investors are going to lose a lot money pretty soon.

The article linked above says the government is propping it up and the Fed is creating artificially high asset prices through its ludicrous, short sighted policy of printing money and holding Fed discount rates at 0% to 0.25%. If this continues not only are we going to see the stock market fall we are on the verge of another economic collapse. I sincerely hope that what I am seeing is wrong because this could have very negative social consequences. If the number of unemployed people grows to depression type levels we are in for a major upheaval, crime, and all other kinds of very serious problems.

Despite the Fed's magic tricks, you can't prop up a needed correction artificially. It will come if you maintain stable policies and let the market correct itself. I am starting to sound like Ron Paul. He seems to be the only political figure who is recognizing the ramifications of what the Fed is doing.

Another Healthcare "Myth"

People will go to jail if they don't pay the tax to ensure they have government healthcare.

Oh did I say "tax"? Obama said it wasn't a tax on last week's sunday shows. No, its just a moral thing that people have to now pay up to $3,800 a year to the government whereas they didn't have to before this plan. But it's not a tax. Definitely not a tax. To paraphrase Obama don't be so stupid people. Let's talk and be serious. C'mon people.

Friday, September 25, 2009

Are Conservatives for Keeping Free Healthcare Goodies?

I have been reading recently that conservative critics are arguing that one of the flaws of Obama's plan is that people will essentially have to pay more for their healthcare.

Here is a quote from the article: "According to the Congressional Budget Office, the average uninsured person or family will have to pay between 15 and 20 percent of his or their total income on health insurance (counting premiums, deductibles and co-payments) before any of the subsidy in the Baucus bill kicks in. Even in the more generous House bill, the tab that the uninsured must pay is very, very high."

After this mess plays its course, conservatives will need to move in the future towards having people pay more for their healthcare. Unlike Obama's bill they won't be taxed and pay the government. But they will need to pay the doctor and hospital instead of the government if sanity is to be restored to the provision of healthcare services.

Conservatives should not be arguing that liberals want to take away the free goodies and that's bad. The bottom line is that whether you are insured or uninsured, for the system to work fairly people do need to pay more for what they use. If they don't use healthcare services they pay less. If conservatives frame this argument as though the plans are bad because patients will be responsible to pay more, that will come back to bite them when the American political pendulum swings back and they are in charge again.

Thursday, September 24, 2009

Home Sales Drop. Duh!

I posted a few months ago that all the hysteria about the housing market was overblown because people buy homes in the Spring. Those numbers don't represent recovery. Today, existing home sales were reported to have dropped by 2.7%.

This is very likely to continue. I'm only surprised that most economists were surprised. You know what? Car sales are also going to drop over the next several months. The economy is on life support due to the technocrats at the Fed. Plus, yes, a nearly $800B government pork plan can't help but prop up some spending to keep the illusion rolling through the end of this year. So it won't be disastrous again until early to mid 2010.

You can fool some of the people some of the time. But illusions and Federal Reserve Bank magic tricks can't be played forever. Eventually, real people have to take real risks and invest. With this president's policies and the amateur night comedians he has put in charge of economic policy, I don't see a sustained recovery. Hopefully, I am wrong.

Tuesday, September 22, 2009

Superman Don't Need No Airplane

Today President Obama was in New York telling Israeli and Palestinian leaders to finally resolve their going on like 3,000 year feud. I guess it's only been 60 years now since the modern state of Israel was founded though. ... and I quote:

"Simply put, it is past time to talk about starting negotiations — it is time to move forward," Obama declared, displaying an unusual level of public frustration as he prepared to sit down with Netanyahu and Abbas for joint talks after meeting with each separately. "We cannot continue the same pattern of taking tentative steps forward and then stepping back."
Spanning over two hours all together, the talks found all leaders promising to work to resume peace negotiations but also often using language described as "blunt" and "direct." Both leaders kept stressing with Obama their own priorities and fears. Obama in return emphasized a need to take risks and give up some things for a bigger goal, said a senior administration official."

I suppose that I am pessimistic about the odds of success here. But who knows? Maybe Superman can come in and save the day.

The site of Obama lecturing these people reminds me of a Muhammed Ali anecdote - Ali gets on a plane. The flight attendant says he needs to put on his seatbelt. Ali replies "Superman don't need no seatbelt. The attendant replies "Superman don't need no airplane either".

At some point a man runs up against the limits of reality. I am not sure Obama's view and understanding of the world has fully achieved the balance between having hopes and dreams and being just plain realistic in what a man can reasonably hope to achieve through his efforts.

Here's to you Superman. May your dreams of peace in the middle east come to fruition. And may my dreams of winning the lottery, flying to Mars by flapping my arms, and eating Cheesecake factory cheesecakes without gaining weight all come true. A man can hope.

Wednesday, September 16, 2009

The "Just Say No" Party

Today Sen. Max Baucus came out with a healthcare plan, a year in the making. Two WSJ quotes from Republicans struck me:

1. "The bill was swiftly denounced by Senate Minority Leader Mitch McConnell, who complained it would cut Medicare, which provides insurance to the elderly, and impose new tax burdens on families and small businesses."

2. Mike Enzi - "Mr. Enzi warned that "if you have Medicare Advantage [the Baucus] bill could reduce your coverage."

I am not for new taxes. But these Republicans are complaining that Medicare will be cut? So the GOP is for a certain type of government healthcare but just not the Obama one? Why aren't these folks for cutting government whenever you can in one form or another, especially when a Democrat is proposing it?

I understand why the GOP lost and squandered the 12 years they had power and the 6 years they had both the presidency and the Congress from 2001-06. This party has no overall guiding principles. The motto appears to that whatever Obama is for we're against. Republicans should be advocating that we have to return to individual responsibility so that when you require a healthcare service you pay for it except in catastrophic scenarios where the out-of-pocket deductible is more than $10K or some other number. That's where insurance should kick in. We've divorced personal responsibility and any consequences from how we pay for and use healthcare. I've been conditioned to think I shouldn't pay anything at a doctors office more than my $10 or $20 copay too. But is it realistic to think that can go on forever?

Instead of restoring sanity and making people responsible and not just shielding them from every possible hardship that may arise, the GOP just continues to pander. If they can't live without Medicare and the bigger government it represents they deserve to be in the minority. There really is no place to go for an average conservative person.

Tuesday, September 15, 2009

Wall Street Moralizing

I have known my share of Wall Street people. While there's no one Wall Street job, generally the financial industry based in Manhattan is a tough place to work with lots of hours. People who work there are generally competitive and have a goal of making a lot of money. My first job out of college was as a trainee with a stockbroker firm. After about two days, I realized I didn't like it so it didn't stick. The folks who work there aren't necessarily brilliant people or uniquely special.

Obama's speech to Wall Street yesterday was loaded with the term "responsibility", "crisis", and "risk". My sense is that your average Wall Street financial guy hears what the president said yesterday and finds it somewhat condescending. They don't tend to feel that they are irresponsible to clients or take unnecessary risks. Although some really are awful people. Generally, most are not though.

Obama's problem is that he paints everything with a broad brush. Everything is a systematic crisis. He doesn't really get too far into the details to understand that there are specific things that need to be changed in healthcare, finance, or whatever else. You don't need to blow everything up or talk so broadly that nobody knows if what you're saying applies to you or not. I realize details aren't inspiring. But they're called for when things are complex and answers require nuance and sometimes subtlety. A big hammer or remaking America or offering a new framework isn't the answer to every problem.

Thursday, September 10, 2009

The Inspirer in Chief

In yesterday's Obama big wing ding thing of a speech, he made quite a pitch. He said we have to look beyond economics because healthcare is a moral issue. I agree to a point. Healthcare is both a moral and an economic issue. In this issue, as in much of life, they are very much connected.

First, it's an economic issue because it is allocated via transactions with people getting paid for a value added skill they have, people paying because they are in need of the service provided by that skilled person, and time being used. All of these are known as constraints in economic terms. It has all the hallmarks of your classic microeconomics models that you learn as an undergraduate. The money and the time are a scarce resource because we don't live in a world of infinite resources in terms of time or money. We have to choose to maximize the best use of the persons skills to benefit the greatest number of those in need of those skills. For this they pay cash and hopefully, it is efficient so that neither time, money, or skills are wasted.

Second, it is a moral issue. There is a right to LIFE, liberty, and the pursuit of happyness. Be happy people! The primary question is who is the arbiter of morality? In modern America, we look at the government as the only entity for these types of things who can help provide what is morally just or what we deem to be social justice. Why should the poor not get the same type of care that the rich get? This question is about as profound as the songwriter's question: Why do fools fall in love?

The goal of any healthcare plan should be to strike a balance between not literally handing things to people to actually rob them of their dignity while not so harsh as to cause them to steal bread because they cannot eat otherwise. The healthcare proposals do not necessarily achieve a right balance. What happens if people simply don't pay the individual 2.5% tax on income or $3,800 per year that they will now have to in order to comply with the plan? Is jail an option? What if they can't pay it? What about the employer who can pay it on paper because they're rich but they have to layoff a few employees because their cost structure just increased? Is it moral if it leads to greater job loss?

All in all, morality is never so black and white. It should be a little concerning to all of us when we look to government to help us and especially when a government invokes the cause of morality to do so. This has been a bad idea since even before the Christian Crusades. Obama recognized in his speech that we are inherently distrustful of government and said it was good to be. He turned it around though and essentially asked us all to trust him. We have to get over it in order for this moral man to do what is moral. Even if I trusted him, I would still not be able to trust what he's setting in motion. We would do well to listen to the author Joseph Conrad before we give up being the only advanced nation without universal coverage:

"The scrupulous and the just, the noble, humane, and devoted natures; the unselfish and the intelligent may begin a movement - but it passes away from them. They are not the leaders of a revolution. They are its victims."

Eventually, Obama will depart from the stage. And who will be making these decisions after he leaves? Will they be wise? A government program once started does not stop when the man who set it in motion exits. You can trust him? You should be very concerned where any major government program goes. Government in this country is well beyond the point where it should be. Starting another one only further entrenches it. Is this really what we want?

Tuesday, September 8, 2009

The Massive Debt President

Here's a quote from then-Senator Barrack Obama:

“Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren,” Obama said in a 2006 floor speech that preceded a Senate vote to extend the debt limit. “America has a debt problem and a failure of leadership.”Obama later joined his Democratic colleagues in voting en bloc against raising the debt increase.

Today, President Obama is asking the Senate to raise the debt limit beyond the $12.1 TRILLION dollar limit. For a president who spends more per day than most countries see in a year, this is delicious irony. Unless you're young and have to eat what he's serving up for you in the future.

Sunday, September 6, 2009

Michael Moore Say: Capitalism is Evil

I think this dude is getting dumber by the day. When Moore first started, I actually thought Roger and Me was pretty good in a 60 Minutes, gotcha sort of way. But it really went downhill pretty fast. The F-911 was a mindless Bush Bash with its constant "we're gonna smoke em'out" references to old western TV shows and interviews of hillbillies to make some mean points at the expense of a few southerners.

In his new movie, Mr. Moore apparently wants to replace capitalism with democracy. Despite centuries of political thought expounding on the link between the two, according to Mr. Moore, they are now mutually exclusive so that you can have one with the other. Is he suggesting that America is capitalist but not a democracy? I suppose we're more a Republic. So maybe the genius is technically right and America is not in fact a democracy.

The type of thought embodied by Mr. Moore makes clear why it is wise to spend at least some time during the course of your life doing a regular job without a lofty, noble purpose in it. Just doing something because you have to pay the bills. A career as a documentary filmmaker is probably fascinating. For Mr. Moore to arrive at the broad brush conclusion that "capitalism is evil" means his best years are long behind him. Maybe the hardwiring in his brain is set and the capacity for insightful thought is no longer there. This is a caution for anybody getting older to not fall into that trap. Your brain neurons do set and it gets harder to incorporate new information that doesn't fit within your existing paradigms. I'll make a note. NOTE TO RIGHTWING BLOGGING SELF: DON'T STOP CONSIDERING OTHER PERSPECTIVES.

Friday, September 4, 2009

A 9.7% Unemployment Rate

But we only lost 216K jobs in August. For football fans the jobs data over the last 3 months has been akin to a team going 2-14 last season and now playing at about a 4-12 or a 5-11 level this season. It is still awful, the schedule was soft because you were a losing team starting in a depressed position, but you have a few guys who can play so that it's not a total collapse.

Looking beyond the clutter and in the details of the BLS report that monitors job losses, there are two very alarming trends. First, the total raw number of unemployed persons actually rose by 466K and employment fell by 392K. Second, another 143K people dropped out of the labor force. These are in Table A in the following link.

The "unemployment" line and the "not in labor force" line tend to go in different directions. In August the unemployment line went up significantly, which means that people are looking for jobs and not finding much. If they go back to leaving the labor force that's bad too, although the rate wouldn't top 10 or go up much. It's a case the unemployed being hopeful in August and that's why the rate went up significantly. More people are counted in the unemployment rate in August.

All in all, we are still akin to a 5-11 team. Looking ahead you don't necessarily see the makings of a good team because there are still a bunch of weak players such as Obama, a Democratic Congress, etc. plus you have fundamentals such as low interest rates, coming tax increases, looming bank failures, a debt problem, a ridiculous healthcare agenda, stimulus pork that isn't working, and a Fed that can't pump money into the well forever. It's one thing to go from 2-14 to 5-11. We may even go to 7-9 at some point this year. It's quite another thing though to go to 12-4 and contending for a title. With a president and congressional leaders and current economic policymaking that doesn't understand basic free markets, incentives, and business cycles, I have a hard time believing we're going to be making a championship run anytime for at least several years when we get a new administration who hopefully understands how to build a team. Although that's not inevitable because you do have teams that lose for decades. I hope that's not the case for America.

Thursday, September 3, 2009

Will Somebody Please Think of the Children?

President Obama was going to give an inspirational message to school children. They're assignment was to write an essay about what they can do to "help the president?"

I actually find it a sad state of affairs when people are so distrustful of the president that anything he proposes is deemed to be sinister. There would be nothing shocking about this if it were Eisenhower, for example, asking it during the 1950s. The problem is that government has become such a central part of people's lives and its reach is being expanded that you can't help but think we're entering a period where our basic freedoms are being chippeed away. Were the government a relatively small part of our lives and not involved in everything from finance to healthcare to education to so many other things, this type of thing would not feel like yet another intrusion into our lives.

We are so beyond the point of government being too big that it's not even worth pondering new government "solutions" to whatever challenges we face. At this point people need to stop asking government to do things for them. The problem is that normal people are now relying on it for everything from retirement to insurance if there's a natural disaster to unemployment benefits and whatever else. The system is already beyond its scope. The only thing to do now is wholescale cut it down at every level. We all need to stop looking to the government to meet our needs. If we can't do that, we deserve to have our freedoms reduced. With freedom comes responsibility. You can't give childred unlimited freedom. We all need to be adults and stop looking to government as though it is our parents.

Wednesday, September 2, 2009

Obama is Going to Get Specific

President Obama has decided to start offering up his own details on healthcare. For the past several months, he's deferred to liberals in Congress to write his healthcare overhaul plan for him. He's now going to take charge! It's eye of the Tiger, Rocky Balboa time.

This is sure to enrage his fanatical liberal base. For them, a public option was merely an intermission before the real end of having a one-payer healthcare system run entirely out of the federal government. Obama will probably propose a Co-Op type of approach with no public option. This is still not optimal and does not go towards reducing healthcare costs overall. The best scenario is to have people pay more out of their pocket for what they actually use and to increase competition by allowing healthcare to go across state lines. Currently, you have co-pays, healthcare restrictions per state, and lawsuit threats that result in doctors ordering tests that may not be need. The reason doctors order tests is not so much to collect extra fees, as Obama suggested, but to cover their rears legally.

This new approach depends on him winning over independents. He's going to have to win more of them than he loses from his base. I think he's going to have a hard time doing that given his radical economic spending policies. They may already be gone because of the Obama credit card spree. A Co-Op is something that can be undone or modified down the road by future presidents. So it's not as big an irreversible disaster as anything with the term "public" in it. It depends on the specifics of the Co-Op though and if it is left to the private market as the mechanism for resource allocation. If not it's just a new name for the same piece of ... (chocolate bar in the pool).

Tuesday, September 1, 2009

George Will Say: Get Out of Afghanistan

A Leader Takes Responsibility

I learned a long time ago that you to have to take responsibilities for your actions, that doing is harder than criticizing, and that you can't blame others for your circumstances or make excuses for too long. Sooner or later you have to hone up to your mistakes and be thankful for your successes. Nobody inherits perfect circumstances no matter what your walk in life. We all wish we could change certain things. Eventually we all have to come to terms with the things we can and cannot change and determine, within those constraints, a way forward.

The following quote from the Obama spokesman in a Reuters article made me realize the core reason why I have a sense that the Obama presidency is going to fail so miserably. The quote is an indication of a type of character.

"The White House sought on Monday to pin the blame for the grave state of the war in Afghanistan on the Bush administration, which made Iraq its top military priority. 'This was underresourced, underfunded, undermanned and ignored for years,' White House spokesman Robert Gibbs said. 'The president is focused on ensuring that we meet measurable benchmarks. ... It's going to take some doing.'"

There's nothing particularly bombshell or out of character for that quote. I've been hearing the "it's Bush's fault" thing since Obama's campaign started well over 2 years ago. He owes Bush a great deal because in normal times there would be no chance a nobody like Obama could be president.

The problem for Obama is that it's now September 1. He's been president for a good amount of time now. He's building a track record. To blame Bush for the recent problems in Afghanistan is wrong and it's actually a lack of grace. The fact is that things happen in the world. It is not really Bush's fault that Afghanistan is heating up right now. Truth be told, it isn't necessarily even Obama's fault. Politicial leaders actually have less control over things than they think. It was cheesy and in poor taste to simply blame Bush. There was no need to blame anybody. Just deal with the situation as best you can. Why blame Bush, at this point?

The problem for Obama is that he doesn't appreciate that it's always easier to criticize as he did during his campaign. But after you're in office you begin, or should begin, to realize that it's actually a pretty tough job once you roll up your sleeves and make decisions within real constraints that don't lead to perfect outcomes. Obama should be realizing that by now. You would expect his appreciation for the constraints and real challenges Bush faced would humble him a little bit so that the nonstop criticism would at least be a little scaled back. But no. In the end, Obama is going to lose respect for this. Any man in any walk of life who endlessly criticizes deserves that fate.