Thursday, July 31, 2008

We Need A Discussion of The Issues, Please

Years ago, when I was studying history in college, I became interested in reading on the philosophy of history. The historian must pick from the many pieces of information usually available and edit those materials to produce a finished product. Documents, letters, newspapers, video and photographs can make up much of the source materials that go into writing a history of contemporary events. These are all materials directly related to the events under review. But, what about all those things that do not directly get analyzed?

The culture of a people speaks volumes about their country and their societies. The music, art, literature, films and TV are also windows into understanding the culture of a people. In the United States, we have many cultures thriving at the same time. But, with the election year it is interesting to me how the campaigns try to appeal to the people. Some campaigns emphasize the positives while other campaigns pursue a negative course.

John McCain’s campaign, in my opinion, is so bankrupt that they can do no more than talk negatively about Obama, rather than talk positively about what John McCain can do for the country. Given the number of problems facing this country and the next president, you would think that the people would demand a better accounting of the issues that separate these two candidates. Hopefully, the presidential campaign will return to issues of substance and less of personalities once the national conventions are behind us. The American people are entitled to a presidential campaign of the issues, and there are enough of them to debate. I would like to see the level of the debate raised and for each candidate to state clearly their plan for getting our domestic economy back on track.

Wednesday, July 30, 2008

A Visible Hand Is Needed

Invisible hand is the term used by Adam Smith to describe the natural force that guides free market capitalism through competition for scarce resources. According to Adam Smith, in a free market each participant will try to maximize self-interest, and the interaction of market participants, leading to exchange of goods and services, enables each participant to be better off than when simply producing for himself/herself. He further said that in a free market, no regulation of any type would be needed to ensure that the mutually beneficial exchange of goods and services took place, since this "invisible hand" would guide market participants to trade in the most mutually beneficial manner.

Adam Smith (baptized June 16, 1723 – July 17, 1790 [OS: June 5, 1723 – July 17, 1790]) was a Scottish moral philosopher and a pioneering political economist. One of the key figures of the intellectual movement known as the Scottish Enlightenment, he is known primarily as the author of two treatises: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations, commonly known as The Wealth of Nations (1776). Smith is also known for his explanation of how rational self-interest and competition, operating in a social framework which ultimately depends on adherence to moral obligations, can lead to economic well-being and prosperity. His work helped to create the modern academic discipline of economics and provided one of the best-known rationales for free trade. He is widely acknowledged as the "father of economics".

The above two paragraphs I borrowed to make a point. Adam Smith was a Scottish moral philosopher who lived in the 18th century and never saw the likes of Wall Street. Had Adam Smith lived to see what technology has permitted markets to do today, I seriously doubt that he would have insisted that no regulation was necessary because an “invisible hand” would guide market players to trade in the most mutually beneficial manner. (And this was before Adam Smith knew that some day there would be a Senator Phil Gramm who would sponsor legislation, that would be known as the Enron Bill, that would negate that assumption.)

I am happy that President Bush signed the new housing bill and did not veto it. While it probably is not perfect, at this late hour, perfect is out of the question, let us keep as many families in their homes as possible. But, unless Congress tackles the harder questions of regulation, oversight and auditing, we will have eventually more of the same.

There is a joke about people that do the same thing over and over again expecting different results being idiots. Well, unless Congress puts some teeth into regulation as it pertains to our capital markets and how they operate, we are going to have the same crisis again and again until we learn our lesson.

The housing bubble and the mortgage meltdown would never have got off the ground, I repeat, would never have got off the ground, without the triple-A ratings handed out by the rating companies. Without the AAA rating, pension portfolio managers and everyone else managing million dollar and billion dollar funds would never have purchased those mortgage bonds for their portfolios in the first place. Without the billions of dollars in mortgage bonds being rated triple-A, the mortgage bond market does not get off the ground, and, the housing bubble never gets started.

Yes, there is a high-yield bond market sometimes referred to as the “Junk Bond Market”, but the percentage of junk bonds found in the average pension fund portfolio under the fixed-income portion of the pension fund portfolio is easily less than ten percent. No major corporate or state pension fund would invest a significant portion of their fixed-income assets in unrated mortgage bonds. Without buyers for the mortgage bonds, the mortgage bond underwriting business does not get off the ground. The whole mess is predicated on the mortgage bonds receiving the triple-A rating. Again, without the triple-A rating, this train does not leave the station.

Unless something is done about the companies that rate mortgage bonds, the United States is looking at another meltdown in the future. It is my opinion, that if Adam Smith could come back and see how the capital markets operate today, and given the size of the markets today, that he would say it is time for the “invisible hand” to become visible.

Stay tuned.

Tuesday, July 29, 2008

Half Trillion Dollar Deficit

The holy trinity of economics in the United States is: the consumer, the corporate sector and the government sector. Keyensian economics basically says that the government sector can be a force in the economy by using resources and labor to build, improve and repair the infrastructure of the country. Unfortunately, the other key point, that when the economy is going well, the government should pull back from spending so much as not to over heat the economy and bring on a fresh round of inflation is not remembered. Too many dollars chasing too few goods leads to an increase in prices. But John Maynard Keynes was only an economist and not a psychologist. If he had been a politician or a psychologist, he would have burned the idea of Keynesian economics before it caught fire. Oh, it took a little time, but eventually the ideas of John Maynard Keynes took off. Even Einstein had to wait a few years before his theories were recognized and he was awarded the Nobel Prize.

Now fast forward to 2008 and listen to the talk that our government will run a deficit of about one half trillion dollars in fiscal 2009. The Democrats, the party of tax and spend, do not have any right to that title. In the last seven years, the Bush administration has taken your government from a budget surplus to a half trillion dollar deficit. How about that?

It has been demonstrated that if a lie is told often enough that people will think it is the truth. Advertising can attempt to repackage anything, even a political lie. The next time you hear or read about the half trillion dollar deficit or the tax and spend Democrats, ask yourself who has been in the White House the last seven years?

Monday, July 28, 2008

What Is A Political Trans Fat?

The idea that people will act in their own best interests makes a basic assumption that people know what is in their best interest. Unfortunately, advertising can and does distort, blur and simply misrepresent that which advertising is selling.

As the presidential election season heats up, the party of business is swinging into high gear. Understanding your target market, and who you are trying to reach, is basic advertising and the Republican Party has that knowledge down cold.

Take a look around you and see how many people have not made the best of choices. Take a look at the number of mortgages that are in foreclosure and think about all the poor choices made by home buyers as a result of mortgage brokers pushing people into the wrong mortgage, house or both. Take a look at the problem of obesity in America today and think about all the poor choices people make with regard to their diet and exercise.

A lot of people are moved by advertising that is directly opposite to their own best interest. Obesity and mortgages are just two that come to mind.

Now comes the Republican political machine and their knowledge of their target market. Have you ever heard of a political trans fat? Well, if you missed the 1988 presidential election or the one in 2004, you are about to see the political equivalent of America over run by political trans fats. It is coming to a TV near you, so be watching.

Political trans fats are about as good for you as trans fats are for your body and health, the only difference, you don’t put on any weight, but your wallet becomes a lot lighter.

The presidential election year always starts out with calls by the Republican Party candidate to make it a campaign of issues and not personalities. That is their standard opening move. But the game changes rapidly, the advertising edge of the Republican Party swings into high gear and issues disappear to be replaced by smear tactics, lies and the out right misrepresentation of facts. These are the political trans fats that their target marketers aim for.

The Democrats, who do not really understanding business or winning, continue to present issues to an electorate wanting to swallow a diet of the political equivalent of French fries with chili and melted cheese followed by more of the same.

With the price of gas coming down below $4 a gallon, it will be interesting to see how long it takes for the political trans fats to start to kick in. By the end of October, the turkeys should be ready for Thanksgiving, and the American electorate ready for another 4 more years of stupidity. And who says people act in their own best interest? We will see.

Stay tuned.

Sunday, July 27, 2008

Goldfish Sunday

Three goldfish with under-paint.

Saturday, July 26, 2008

Saturday Is For Art

Today I am posting two pencil sketches of goldfish. These two drawings then get transferred along with a third drawing to canvas. After the goldfish are completed, I hope to post them on a Saturday.

Friday, July 25, 2008

Taking A Break

I am taking a break from my blog Moneythoughts. I have a serious art commission to paint three goldfish. So, either when I have something to write, or simply just need to paint, I will post comments off and on. I will continue with Saturday Is For Art. In fact, tomorrow I will post a couple of goldfish drawings. Have a safe weekend and

Stay tuned.

Wednesday, July 23, 2008

Define An Economic Crisis

It looks like the price of a barrel of oil is coming back down. There were several factors which drove the price of a barrel of oil up to nearly $150 a barrel. Fear and the fear of a dislocation in the movement of oil along with the financial crisis taking place in the United States on not just Wall Street, but on Main Street. A crisis comes and goes. A crisis by definition does not hang around forever, because if it did, would it be a crisis?

The housing and mortgage crisis are still with us, and it will take some time before those misadventures work themselves out. I tired to write my Congressman Steve Chabot about my suggestion to extend fixed rate mortgages to 40 years from 30 years, but just received the standard canned letter so many of us receive from our representatives. With car loans now running longer and people living longer, I thought it was worth a try to suggest a 40 year fixed rate mortgage to give the housing market a chance to get its bearings. The length of the average mortgage is between 7 and 8 years as the vast majority of fixed rate mortgages get paid off before they are due because people buy a new house or need to relocate. The critical factor, as I see it, is time. Time for people to regain their confidence in the housing market. As I stated, a crisis is not a crisis if it lasts forever.

Our economy will make the necessary adjustments and we will all deal with the higher price of gas. Articles about how other countries pay more for gas per gallon, and how they have had to adjust to the rapid increase in the price of gas as well, show us what a sudden spike in price can do to any economy. It is the sudden change in price of gas that has created the problem for so many. Had there been a national energy policy in place that would have taxed gas to discourage it usage, and caused many people to reevaluate their options, we may have been paying a higher price for gas all along. But since there was no crisis after the 1973 oil embargo the idea of energy independence melted away. Now 35 years later, our dependency on foreign oil has grown and little if any thought at the national level was given to the economic implications of a similar type oil embargo. The spike in the price of gas is not without end. As inelastic as the price of gas was, the continuous price increases have shown that even gas has a point of price elasticity.

It looks like government will do more to shore up the financial markets than they will to deal with the price of gas. I guess if we had a choice, most would agree that without a sound financial system, everything else would come apart. Each individual can make their decision about how much they can afford to drive, or where they need to cut back. Unfortunately, the banking system is not that simple. But, because it is not that simple is reason enough for the Congress to take a hard look at better and more comprehensive regulation. Do not let the old line of its costing the banks profits deter you from the necessary regulation and oversight. We, the tax payers of this country, are tired of bailing out the smart ass bankers.

Stay tuned.

Tuesday, July 22, 2008

Intellectual Capital: A Commodity?

For all of us who thought that who was president did not mean much, this last seven plus years have changed all that. The historians will have a field day if they get into what could have been if other avenues were taken by the present administration. Everyone will want to talk about the “war” in Iraq, but the most important blunder of this administration has taken place in the last several months. With gas and diesel prices at the pump nearing $4 a gallon, the president could have opened up the oil reserves and used them to beat down the price of crude oil per barrel. This would have taken some risks, but the damage that $4 a gallon gas has presented to our domestic economy will not be fully felt for several months. Just as there is a lag effect when the government spends money in the private sector to stimulate the economy, so too is there a lag effect when money is taken out of the economy as well. American families are hurting more than they realize and the suffering that we are seeing in our economy may not have reached bottom yet. The “tax” that $4 a gallon gas has placed on the American consumer, as I have written before, has taken a lot of air out of our domestic economy.

Much of this could have been avoided had we had a president that understood just a little about economics and markets. By the government being a player in the oil market, some of the smaller players might have been moved to the sidelines. As we have seen recently, the price of a barrel of oil goes down as well as up. But, such an action by our government would have meant the use of their intellectual capital and that is a commodity they are in short supply of already.

Stay Tuned.

Monday, July 21, 2008

Why Instant Replay Cameras?

Isn’t it interesting that in American football, we have not only added officials over the years to better referee the game, but we have also added instant replay cameras so that we get the calls right? Why isn’t there the same interest in getting the calls right in the world of business in the United States? To be precise, I am talking about business regulation and oversight by governmental agencies.

The asshole right wing idea that regulation should be done away with because it costs business is just so much crap. How much are the bailouts going to cost us all? The mortgage and housing crisis that includes Fannie Mae and Freddie Mac is going to be back stopped by someone and guess who that someone is going to be?

When they build a skyscraper they dig a deep hole and put in a footer and a foundation and build up keeping in mind the weight that the building will support. Why would anyone with half a brain think that we could build a trillion dollar mortgage market without building a foundation of regulation and oversight? What do lobbyists know about building anything except a mess?

The big guys making the big bucks get the bailout while American families struggle to keep a roof over their heads after they were sandbagged by bad, and perhaps illegal, business practices. Now, the politicians get into the act and want to know how much the taxpayer is on the hook for, like they give a rat’s ass about the little taxpayer picking up the check so the big executives of the mortgage meltdown can continue to enjoy their rich lifestyle.

Perhaps some day when money and lobbyists lose their advantage in the political arena, regulation will come back into vogue. The argument that regulation costs business profits may be true, but what are we looking at now? How many trillions of dollars in bailouts is the taxpayer expected to be good for? When enough members of congress get their pink slip this November, perhaps the new members will give more thought to what is necessary in the way of regulation and oversight when trillions of dollars in mortgages are in play, and the economic survival of a nation is at stake.

I never hear any right wing zealots calling for the elimination of the instant replay camera as too much regulation of professional football games. Why does the NFL have instant replay cameras in the first place? Hell, isn’t it only a game? Why not just put one zebra on the field with one weak whistle and let’s see what happens? And, let’s get that green dot off the back of quarterbacks’ helmets too. Aren’t all men created equal? What in the hell is so special about the quarterback’s head?

If there is some great philosophical lesson to be learned from less regulation, why not incorporate that same philosophy in our sports. How about one referee in the NBA instead of three? Think of all the money that the NBA could save for the bottom line with just one referee doing a game. And, while we are at it, Major League Baseball just needs one umpire standing behind the pitcher calling balls and strikes and the bases as well. Think of all the money MLB can save on their budget as well.

When you take supports out of a structure, any kind of structure, the integrity of that structure to support whatever the structure is suppose to support is compromised. I am sure Boeing could build a plane with fewer supporting pieces in the wings and the fuselage and save some money in the process, but would the plane support a payload and a couple of those GE jet engines mounted under the wings?

How bad do things have to get before people start to think about what it takes to properly regulate an economy the size of the United States’ economy. All those that embrace laissez-faire economics in the complex 21st century, in my opinion, are dangerous idiots. I just hope that some of the brighter members of congress wake up before we are all living in tents.

Stay tuned.

Saturday, July 19, 2008

Saturday Is For Art

Have you ever thought about the word icon? The dictionary gives five definitions or explanations of this word. Icon comes from the Greek word meaning to resemble. The dictionary gives its date as 1572. What new uses has this word acquired in the last 400 years? Here are the five listed in the dictionary: 1. pictorial representation: image 2. religious image painted on a small wooden panel and used in the devotions of eastern christians 3. object of uncritical devotion 4. emblem, symbol 5. a sign whose form suggests its meaning, a graphic symbol on a computer display screen that usually suggests the type of object represented or the purpose of an available function.

So, in the period of 400 years, the word icon has gone from a religious symbol of uncritical devotion to a secular symbol of what function is available on a computer. Artists use icons in their paintings and have for many years, and yet the dictionary does not even mention that artists created icons before there were computers. Street signs are icons that tell the motorist in one simple image that in seconds they are approaching a hairpin turn. The three-ball sign hanging outside a pawn shop is an icon. Icons can be political symbols such as the hammer and sickle of the former Soviet Union.

I paint icons of icons, and I even create my own icons. Today I will post a few pieces of art work that incorporates my use of icons.

Friday, July 18, 2008

Free Rides For The Wealthy?

The economy of the United States has many problems that it is trying to work itself through in 2008. That an old problem has recently hit the news again reminds me of my early years in the municipal bond business. The Federal Government of the United States is “leaking” tax revenue. Well, perhaps the use of the word leaking may not be the correct word, but I like the way it sounds. Let me explain.

Back in the 1960’s, when I was just getting started in my career as a municipal bond salesman, I would read any articles in newspapers or magazines that had anything to do with money or investing money. One article that caught my eye I remember was about how organized crime, as it was referred to then, moved money out of the country by gentlemen dressed in suits and ties and attaché cases filled with bundles of one hundred dollar bills. I believe that it was figured that at least a half million dollars could be transported in one of those thin attaché cases.

This is the way it worked. Money that was collected by organized crime from their many business ventures was then converted from smaller bills into one hundred dollar bills and then bundled into 50 bills to a bundle, just like they do it at the bank. If you are wondering how many bundles make a million dollars, the correct answer is 200. Today a million dollars does not sound like a lot of money, but in the 1960’s a million dollars went a long way. So, what ended this very simple courier system for organized crime?

Plane hijackings brought this simple, yet efficient method to a halt. After a few Cubans hijacked a few jets, the airlines and the government decided that they needed to take a peek in those attaché cases. That ended that method.

Men in suits with attaché cases filled with hundred dollar bills would fly to any of the islands in the Caribbean and deposit the cash in a private bank that would then wire the money to a numbered bank account in Switzerland. By doing this, organized crime could move the money they earned and avoid paying federal income taxes on their earnings. Once the money was safely in Switzerland in a numbered bank account, the money could then be used to buy stock in American companies back in the United States. Investing in American companies was an easy and efficient way to invest in legitimate businesses and recycle their money into the American economy. A good plan does not have to be complicated. Simplicity has its own beauty.

Now, let us fast forward to 2008, and we find that ordinary citizens are moving millions of their dollars to Liechtenstein to avoid paying federal income taxes. This is nothing new. I have read advertisements in The Wall Street Journal offering people offshore accounts for years, so why the big deal now?

It seems that a disgruntled employee of one of these banks in Liechtenstein turned over a list of names to the United States Government and now the government is looking into why these nice people are trying to avoid paying taxes on their money. Evidently, even if you earn money outside the United States, and you are an American citizen, you need to pay your taxes on money earned in overseas ventures. This is only fair as the good life that people enjoy is preserved by the efforts and at the expense of the United States Government. No free rides for the wealthy. If they want a free ride, let them run for political office.

Stay tuned.

Thursday, July 17, 2008

The Electric Car: We Need Them Now

While our country’s leadership during our economic crisis of 2007-2008 is woefully inadequate, there are enough intelligent and resourceful people in the United States to turn our domestic economy around. Vested interest have prolonged the suffering, but now even the vested interests can not hold back the opportunities they have created for those resourceful enough to take advantage of the opportunities the vested interests have created. The people who have solutions will have their day. One of the bonuses of a free market economy is that problems can get solved. The downside is that problems have to get to such a drastic condition before the attention of the masses presents an opening. I think $4 plus a gallon gas is just that opening. The huge transfer of wealth from this country, that has taken the air out of our domestic economy, is now being realized. The lines of battle are forming. The enemy, once clearly identified, will see the real strength of a free country’s economic response, and hopefully in spades. They have run the table at our expense, but now is the time we will find out whether this country still has the resilience to right itself and take itself in a new direction.

This morning on CNN, I watched and listened to their report on the electric car and how we should have been driving them by now as they have been economically viable for some time. GM literally crushed this opportunity and now they themselves may find themselves crushed. In the old days the expression was, those that live by the sword, die by the sword. GM will either make the necessary changes or else they will disappear like so many other companies that failed to serve a need.

We will need oil for a long time, but the question of the day is, how much oil will we need and for how long? People are already cutting back on their usage of gas and finding they can make it if they conserve and trim their budgets. Working the problem of $4 a gallon gas from several angles is one way Americans will solve this problem for now. But the leadership in Washington still rides down Pennsylvania Avenue in their gas powered carriages oblivious to the sounds of the people’s stressed out budgets. Solutions, such as the electric car, can not be held back forever. The car companies and the oil companies may want that day never to happen, but free market forces will take us in that direction. Electric cars are coming. The days of our dependency on foreign oil is still with us, but an awareness that this needs to come to an end is just beginning.

Stay tuned.

Wednesday, July 16, 2008

How Do You Explain It?

How do you explain such poor political leadership at the national level in the United States over so many years?

We can try to place blame on several factors, but the one fact we can not dodge, is that we get the leaders we elect, at least most of the time. If the American electorate demanded more from its leaders, then perhaps we would have better leaders, but we are not careful buyers of our representative's services. When things are good we let things slide. This November, the American people may not be so willing to give a pass to their elected representatives as life for many Americans has seen new struggles injected into their quest for survival. Will we elect entertainers or individuals that are more statesman like and knowledgeable?

While we have no kings and queens in our political system, the concept of divine right to rule dies hard among the human condition. Once elected, they might very well have been placed in their position by divine right. Congress is several steps removed from the benefits enjoyed by the vast majority of the people. A separate health plan, as well as a separate retirement plan, plus many perks, can give one the feeling that while they were elected by the people, they rule by divine right.

The conservative philosophy has a place in political discussions, but what has masqueraded as conservative political thought has been little more than an attempt to sideline necessary regulation and oversight. Permitting easy marks, such the old and less educated, to go unprotected in the market place by the conscious efforts to gut regulation, has produced many of the problems that now dot the financial landscape. Is it not nice to know that political conservatives today stand for shooting fish in the barrel, stealing the low hanging fruit and knocking over the elderly with scams of every description? The business of America is business.

While the Americans relearn survival skills, perhaps they can also learn to be more critical in their thinking when it comes to the political-economy.

Stay tuned.

Monday, July 14, 2008

The Trouble Is Not In Your Set

The trouble is not in your set, the difficulty is in my computer. Monday's post is a non-post. I will post two stamp paintings that speak to two of our current problems, mortgages and housing and the energy crisis. Both of these paintings were completed before 1992.

Saturday, July 12, 2008

Saturday Is For Art

This is an unfinished art project that is made of Styrofoam (the core), cardboard, cereal boxes, a little paper mache, glue, gesso and paint. The painting phase is in progress. This is simply an progress update as an early post showed the stages of development from core to painted surface.

Friday, July 11, 2008

Stop Your Whining: Its Mental

In our big country there is room for a lot of diverse opinions. With a population of 300 million people, the United States can have at least 100 million different opinions as to what is going on with our economy. One former Senator from Texas said that America is in a “mental recession”. He arrived at that statement by saying you have heard of mental depression, well this is a mental recession. I find it interesting that someone with a Ph.D. in economics could come up with such a statement, but his next remark gives us insight into his first remark. The former senator and professor of economics went on to say that Americans are a nation of “whiners”. These two comments taken together pretty much sum up where this man is coming from. Let me put my spin on it now. What he is really saying is, I have mine and I don’t give a rat’s ass that you don’t have yours. Stop whining about the sorry state of the economy and go out and get yours. If you can not get yours, drop dead because we don’t have a place at the table for you.

Now this is the interesting part, this former senator and professor of economics is one of the economic advisers to John McCain. John McCain quickly disavowed the remarks and made a weak joke about the former lobbyist-senator-professor being a candidate to become the future ambassador to Belarus. How funny is that?

Given the economic problems facing the majority of American families on July 11, 2008, I find it interesting the distance there is between the haves and the have-nots. Those that have a great deal of money are so far removed from what is happening to so many American families that their words demonstrate just how much out of touch they are with the majority of the American people. Words from the former senator should perhaps not be so surprising given the problems we find this nation in today. The disconnect is real.

In my last position before I retired, I worked in my state’s capitol, Columbus, Ohio, and I saw a little of what goes on in state government as I worked for the state. Many decisions are not made on the basis of what is best for the people at large, but what is going to help the friends of the people that contributed to put the people in power in office. It really is that simple. All the hoopla is merely a distraction from the real business at hand, giving your political friends the keys to the vault . The Issues that get the rest of the people all worked up, but do not have anything to do with their economic well being are carefully crafted to win votes. In 2004, the issue of “gay marriage” was on the ballot in Ohio. It was voted down and yet the economy tanked anyway. The poor uneducated voter is manipulated by some very clever political strategists and the sad part is that they don’t even know it is happening to them.

Now in 2008, with gasoline over $4 a gallon, jobs leaving our state (and the country), unemployment up, the housing market and new home construction down, and food prices up, perhaps issues closer to the bone will become the substance of what this November’s elections will be about. We will know we are close to the bottom when food, housing and jobs become the issues that will drive this year’s presidential election. Given that the price of oil is back up over the $140 a barrel this morning, on its way to $150, the thought that the fall elections will turn on something on the order of gift wrap rather than substance is hard for me to believe. I hate to see families suffer, God knows we have enough suffering in this world, but I sure hope that the American electorate can see through the bullshit thrown at them this time.

Stay tuned.

Thursday, July 10, 2008

Mortgages And Applesauce: Ingredients Count

Today I would like to talk about applesauce and mortgages. If you have been reading the news, you know that the number of foreclosures was up from the month of June 2007 from the month of June 2008 by 53%. Despite belated efforts being made by the Congress to keep people in their homes, millions of people are losing their homes because they can not make the mortgage payments or can not get refinanced into a mortgage payment they can afford.

Last week I decided to buy some applesauce as I was shopping at my local Costco. Naturally, you can not buy just one jar of applesauce, they only come in a package of three. So, not having bought applesauce in quite a while, I put a three-pack in my cart and walked on. What a surprise I had when I opened and tasted the apple sauce of today. First, the stuff pours like baby food because it has so much water in it that it just runs. But, when I read the ingredients, I found that after apples the next two ingredients were high fructose corn syrup and water. This is not applesauce, this is pure crap. Whatever happened to quality products? Everything today is run by business school MBAs, who could give a rat’s ass about quality. Everything is about the bottom line. Put enough water in the apple sauce per jar and you can cut the cost of the main ingredient apples! Then add high fructose corn syrup to make it sweet because you have watered down the apple’s natural sweetness. It does not take a genius to figure out that if you can stretch the apples by watering them down and then adding sweetener, you can cut your cost per jar and make more money. Well Mott’s, this is the last apple sauce I plan to buy from you. You got me once, but you will not get me again. I am sure there are enough people out there that will buy watered down apple sauce that they can go on making it that way for some time. But, I still remember when you ate applesauce with a fork and did not drink it.

Putting people in the wrong mortgage should be a crime, but unfortunately it is not. The whole mortgage industry needs better regulation and oversight. The present disaster was man made and could have been avoided. I am not saying ever family could have been saved from losing their home, but I am saying that the mortgage industry needs new guidelines and perhaps it would not be a bad idea if mortgage brokers and their associates be licensed as real estate brokers and stock and insurance sales people are licensed. The day when people will care about each other the way we would like to think society should be organized does not exist in the real world. Everyone is bottom line oriented. The business schools have banged that thought into everyone’s head. Unless there are guidelines and codes of ethical conduct, this same mortgage disaster will take place in a few years.

The second part of the mortgage equation and the disaster that now has engulfed just about the whole nation is the creation of mortgage bonds. Like most things in life, a new tool can be used properly or can be used to create trouble. Again, unfortunately, mortgage bonds, a great idea, got abused. Something must be done about the rating agencies. Without the rating agencies’ complicity, the whole sub-prime mortgage mess would have never gotten to first base. The fact that no one at the highest levels of government want to talk about this single fact, makes me wonder who is in bed with whom. No pension fund, foundation fund, insurance fund, mutual fund or any other type of fund would have invested in mortgage bonds without some kind of bond rating. The AAA rating is the same as a green light in traffic, without it you are not going anywhere. And yet, the quiet from this point of view is deafening. If there are no changes in the rating agencies and the way they are run, then, again, it is just a matter of time before we face the same exact mortgage bond related problems. You can count on it.

So, in conclusion, whether you are dealing with applesauce or mortgages, the product is only as good as the stuff that goes into it. You add high fructose corn syrup after you water down the apples and you have crap. You water down what a AAA rating means and you have a disaster in the mortgage bond market. Everyone wants to maximize profits, cut costs and live the rich live with huge salaries and even bigger bonuses, but eventually the chickens will come home to roost. Scams don’t go on forever unless your the government, and even then, governments that govern poorly get over turned.

Stay tuned.

Wednesday, July 9, 2008

Running Out of Money And Gas

Yesterday I called an old friend to wish him a happy birthday, he is 90 years old. A veteran of World War II, a retired pharmacist, and one of the best analysts of the market that I know or ever met. He is, despite his advanced years, still as sharp as ever with a nose for asking the right questions. Many of his generation are special people that loved this country and knew what they had when they came home from the war.

I read this morning that a survey of Congress finds that 9% of those surveyed believe Congress is doing a good job. They went on to point out that this is the first time since the survey began that the approval rating fell to a single digit. With a plus or minus 3% error, that is still a very poor level of confidence the 1,000 people surveyed on July 1, 2008 have in the performance of our Congress. What do you think of our Congress’ performance in the face of so many economic problems? Did they sell the average worker down the river? For who’s protection are the laws written? The worker or the corporation?

Where do we go from here? Yesterday, my posting spoke of the individual in the United States will ultimately lead us out of our present condition as it relates to new sources of energy. The government has not tied all of our hands, but that is not saying given the opportunity they would not try. There is still a little freedom to act on the part of individuals to solve the energy problem.

After I posted my piece yesterday, I watched T. Boone Pickens, an old and one of the most knowledgeable oil men in the world, talk about his involvement with wind and natural gas on CNBC. Later in the day, I saw his commercials that he is running talking about the fact that while he is an oil man, we can not drill our way out of our energy problems. The presentation, which only took a few seconds, was very well done. Perhaps one of the most important things said in his commercial was that the transfer of wealth of $700 billion dollars a year to foreign governments for the purchase of oil is the largest transfer of wealth in the history of the world.

Over the last several months, since the middle of February to be exact, I have used my blog MONEYTHOUGHTS to try and explain the relationship between the importing of foreign oil, the decline in the value of the US dollar on the foreign currency exchange markets, the slow down in the economy, the increased domestic unemployment, the trade and budget deficit, the lack of adequate regulation and oversight in the security markets and the influence that foreign governments have over our Congressional representatives. While I have enjoyed reaching a few people, what I saw yesterday on the TV makes me feel that there is light at the end of this tunnel. Barring men like T. Boone Pickens being thrown in jail, our energy problems and our lack of a comprehensive energy policy will be addressed. Individual Americans will come up with solutions to our energy problem.

Many times in our history, it has been the private sector, not the government, that has solved this nation’s problems. At the beginning of the last century, newspapers and books woke people up to the conditions where change was needed. THE JUNGLE (1906), a novel by Upton Sinclair described the meat packing industry in Chicago and eventually lead to the establishment of the Pure Food & Drug Act of 1906. But now, even the Food & Drug Administration (FDA) has become politicized under the current administration. TV and the Internet will break the hold that money has had over the electorate. There are still enough good people in the United States to correct the problems and abuses that we suffer under. Unless foreign money and foreign governments further corrupt our system, the American people will find a way out of our importing of foreign oil and the ruin it has brought and is bringing to our domestic economy. We can not continue down the road we are traveling, eventually we will run out of money or gas or both.

Stay tuned.

Tuesday, July 8, 2008

The Individual Will Solve Our Nation's Problems

Lately I seem to be taped out for anything new to talk about. The same major problems are still with us in the United States today, as is our lack of leadership in this country to solve them. I remember one lecture in particular from one of my history professors at the University of Cincinnati about 20th century England. Dr. Vogel was making the case that England had lost so many of its future leaders in World War I, that when Hitler came around in 1933, there was not the leadership available to deal with the problems he presented for all of Europe. As I have said before, analyzing history must take several factors into consideration, as a single factor, while it may be very significant is seldom the whole story.

Vietnam cost the United States many of its future leaders as well. While the U.S. did not suffer the losses of the magnitude of the British losses during the First World War, the United States nevertheless lost a lot of good men. These good men would no doubt have filled many of the leadership positions in our government today.

Here we are starting the third quarter of 2008 and the economic problems this nation is dealing with are almost too much to believe. How could a country that was growing so nicely, with its share of bumps in the road during the 1990’s turn on a dime and head off in the wrong direction. Certainly the energy problem has been with us for a long time, but the more recent political events, such as the “war” in Iraq, has changed the market’s perception as it relates to the flow of the supply of oil. Add to this the increased usage by emerging economies and with that growth the demand for more energy. The leadership in the United States with regards to the energy policy of this country has been a no show. While the government sits on their collective hands, or points to the other party, people, ordinary people will make the necessary changes to reduce our dependency on oil. Man power in the form of bicycles is taking a bigger role in some parts of the country. Scooters, that get 70 miles per gallon of gas, are also taking a bigger piece of the transportation equation. Perhaps the country will get a health dividend by more bicycle riders as the elevated heart rate from riding a bike will certainly make those individuals healthier people.

The housing crisis is back in the news with Congress actually trying to do something to keep people in their homes. But not too fast, politics must play out this drama as well. Can any bill be spared the add-ons that have nothing to do with the main purpose of the bill? Not in your lifetime they can’t. So, while families try to hang on to their homes, the politicians play politics with the lives of ordinary people. Pass the fucking housing bill and do the right thing for once without all the extraneous bullshit add-ons that having absolutely nothing to do with housing.

The Chairman of the Federal Reserve Bank spoke this morning about the need to put in place better systems to prevent the financial panics that we recently had on Wall Street. Banks and investment banks need more and better supervision from the Fed. Naturally, Wall Street’s first reaction is to say this will cut into profitability. It may, this is true, but what is the alternative, more financial disasters? It reminds me of a pickup basketball game on the playground where fouls get out of hand until someone gets seriously hurt, and then everyone starts pointing their finger at where it all began. Computers have changed Wall Street. Computers have changed what can be done today in financial markets. Regulation and oversight by a central bank ready to deal with the creativity of the financial markets in the 21st century is not an option in my opinion. This is an issue on par with our national security. The rest of the world has already changed the authority of their central banks to deal with the changes that have made over-the-counter trading such an enormous world wide phenomena. In short, we do not need another major financial crisis, at least not right away.

In the final analysis people, the individual, will bring us through our crisis as it relates to our economy. Government has a bad reputation when it comes to getting things done quickly. They deserve the contempt that the people show towards it because they do not put the good of the people first. But, that said, we still need to talk and write what we think should be done. We may not get everything we want, but with effort, we will get some of the legislation that is needed to bring about a solid recovery and prepare the country for its future.

A word to our friends in Saudi Arabia. The United States is not perfect, but we have been there for you when you needed us. Think of us as the decimal point in a line of numbers, separating the positive numbers from the negative numbers. All the numbers may be Arabic numerals, but without the decimal point you have nothing. Keep that in mind the next time you count your money.

Stay tuned.

Monday, July 7, 2008

Saudi Arabia: Be Careful What You Pray For

History books are filled with examples of the adaptability of the human species, but we really do not want to go there. We in America live the good life as viewed from the perspective as a nation. Yes, we know about the pockets of poverty and how these pockets of poverty are growing and spreading across the country. But, taken as a whole, the United States is a long way from the kind of disaster that covers so much of the world. While our economy is under many types of market stresses today, the individual is still the unit that will decide what choices are taken.

Oil will remain a major problem, and there will be a lack of leadership as far as our energy problems are concerned, but ultimately the consumer will make the hard choices. This energy crisis took years to eventually produce the grip it has on our economy today. Congress for a multitude of reasons did not do the right thing by the people. The automotive industry, that was once the engine that drove the economy along with home building, made their feelings known in the halls of Congress as to how they felt about mileage requirements. Threats to shut down auto plants caused more than just a few votes to be placed against CAFE standards, and lead to more than a few nails being pounded into that coffin. We, the people, drove the gas guzzlers and did not question what happens when the well runs dry. Can we ask more of Congress than we ask of ourselves? We are the Congress in a democracy.

The United States has wasted opportunity after opportunity to take control of its economy. But, a combination of greed and a lack of caring about the rest of the country and how the less fortunate would get along has lead to our present situation. Ultimately people will vote with their pocket book, and at that point, when that is reached, the price of oil will either drop or the economy will slip into a depression. Does our friends the Saudis really want to see the United States’ economy slip to such a point that their security is put on the line? We may not have the most level playing field in the world, but I think they are smart enough to know that the United States is one of the stronger players with a leveler playing field than those that would take our place. The Saudis have some choices to make. Be careful what you pray for Saudi Arabia, you just might get it.

Stay tuned.

Saturday, July 5, 2008

Saturday Is For Art

Today I am going to put up a few photos of a piece I have been working on (off and on) since September '07. The inspiration for this piece comes from the Taft Museum of Art here in downtown Cincinnati. If you ever find yourself in downtown Cincinnati with a couple of hours of free time, walk over to Fourth Street and head east until you walk into a big white house with a sign on the gate that says Taft Museum. You will not be disappointed if you love Old Masters and an interesting collection of Chinese ceramics from the Ming Dynasty, plus much more. The piece I am working on now is inspired by an Italian piece made of wood (the frame) and glazed ceramic (the center piece). My piece is made from Styrofoam, cardboard, cereal boxes, and a little paper mache. The core of this piece is Styrofoam and duct tape. The rest of the piece is made from cardboard and ceral boxes. Then it is covered with gesso and then paint. I am now in the painting stage of the process. The piece is not finished, but I thought I would post a few photos showing how the project is progressing.

Friday, July 4, 2008

July 4, 1776: Independence Hall

Today is a day of Thanksgiving, but not the turkey kind of Thanksgiving. July 4, 1776 is not just an important day for us Americans in the United States, for it is an important day for all those people who lead a revolution in their own countries in the years following the American Revolution. We rose up and revolted against an English King that represented the conservative ideology of his day. Kings, with the approval of the church, ruled by what was referred to as "the divine right of kings." The radical or liberal view of that time was that God gave man certain inalienable rights, that among these were "life, liberty and the pursuit of happiness." We Americans are only a few short years down the road of history since our day of independence. What is 232 years when compared to the thousands of years that ancient Egypt had dynasties? The old historian Oswald Spengler believed that every civilization had a birth, a life and then a death. There are several historical examples he was able to choose from to make his point, but no where in history are those words carved in stone. As of late, we Americans have hit a few bumps in the road. Some might say there have been more than just a few. Let us remember to respect our constitution and each other. Have a happy and safe 4th of July.

Thursday, July 3, 2008

Time To Give It A Rest

Fourth of July 2008 is just a few hours away. What an irony I find in it this year as we Americans get ready to celebrate our national day of Independence. How independent are we? How do we measure our independence in 2008? Certainly we are not as independent as we were 125 years ago. That would put us back to July 4, 1883. What is so special about 1883? Well, for one thing, we were not dependent upon foreign oil in 1883. We still have our basic freedoms in 2008 of speech, the press, religion and the rest, but economically the United States is no longer independent. In fact, we are being held hostage. Oh, I do not mean we are tied up and blind folded and sitting on the floor of some house in the middle of nowhere, although that may be a fitting description of our leadership in this country on July 3rd. What I mean is that economically were are being held hostage in our dependency on foreign oil, foreign manufacturing and now foreign governments decisions. King George III, of England, must be laughing in his grave as he watches his former 13 colonies, now 50 states, deal with our own ineffectual George W. and the issues of economic independence. Stamp Act! Hell, this makes the Stamp Act look like child's play. What we have today is an Energy Act placed upon us with no representation and our leadership will not raise a finger. The Founding Fathers that risked their lives and their possessions for our Independence can not be looking down on us with much pride in 2008. Is this what they risked their lives for and fought our war of independence?

Since we are back to faith and faith based stuff, I have decided to start my celebration of Independence Day 2008, at sundown tonight. In my religion, we start all our holidays and even the sabbath at sundown the night before the first full day. This religion, Judaism, that I was born into, is an old religion dating back over 5,000 years and started well before cell phones or Rolex watches. So, I am going to post a painting, Fourth of July, from The Envelope Collection that I am proud to say now hangs in Philadelphia, the place where it all began. I would like to wish all my readers and my friends a happy and safe Fourth of July 2008. Stay tuned.

Wednesday, July 2, 2008

A Little Talk About Time

Time is relative, and sometime time just takes too long. Time is money. Time makes present value what it is. Time can buy us more time. And Einstein said, time is so everything does not happen at once.

Our economy needs to buy itself some time. Time to adjust to the spike in the price of gas. Time to adjust to the monthly payments of an adjustable rate mortgage that has been reset at a higher rate. Placing people in a fixed rate mortgage for 40 years instead of 30 years would keep a larger number of families in their homes and off the streets. Mortgages in the United States have an average life of about seven to eight years. All those families given a 40-year mortgage so they could make the payments that would cover principal, interest, taxes and insurance would buy them time until the present economic crisis is behind us. Empty houses do not make mortgage payments. But, I guess this idea is too radical or complex to be looked at seriously. What is so holy about a 30-year term for a fixed rate mortgage?

Now let us move on to the price of gas and diesel. Believe it or not, but eventually gas prices will stabilize. People will drive less and demand will come down. Prices may stay the same. But, if the government would start dumping oil on the market temporarily, the effect would be to buy us some time. With time and in time the consumer will be able to adjust to the sudden spike in the price of gas. The government could play a role in buying the American consumer and the domestic economy some very precious time. Time to recover from the relatively sudden spike in the price of oil that has affected our whole economy.

That is my moneythought for today: buy us more time. It takes money to make more time, but it is worth every penny of it. Every family and person that can be kept in their home, is one less house on the market. At this point in time, the real estate market is sitting with too many empty houses. As a result, the value of homes have come down in price in many many parts of the country. Home values are an important source of the confidence people have in the economy. Confidence in the economy gives people the motivation to make new purchases. Once the fear of a downward spiraling economy is broken, the sooner the recovery can begin. It takes time to recover the lost purchasing power that was burned up in the increased price of gas. But, with time and in time, the healing process will occur.

The problem now is: do we have the time to sell the ideas about the use of time to the leaders of our country in time to avoid more pain and suffering? Stay tuned.

Tuesday, July 1, 2008

Is There Only One Kind Of Terrorism?

Today is a new month, July 2008. This Friday, we Americans celebrate our independence from the English that dates back 232 years. In that 232 years, the United States of America has grown and developed into a modern nation of great wealth. Protected on each coast by two oceans, the United States with great natural resources had the luxury to grow and prosper for almost 400 years. Aside from the American Civil War, all other major wars have been fought on foreign soil. After the Second World War, the United States was a world power as Europe and Asia had been the battlegrounds of WW II. What happened to the United States in the last 60 plus years since the end of WW II?

After the terrorist attacks on September 11, 2001, terrorism has been tossed around by politicians to the point where we hear words like “soft on terrorism” in political speeches. Nothing in America is too sacred not to be used by politicians whose main objective is to get elected or reelected. But, is there only one form of terrorism? Are we as a nation not experiencing another form of terrorism today? What about economic terrorism?

Our economy is in serious trouble today. Oil the life blood of our economy has risen to such a high price that just about every American, except the wealthy, is facing a kind of economic terrorism in their everyday life. Terrorism is usually sudden, but terrorism can be slow and unrelenting. The price of oil has been going up sharply for over a year, and the politicians and our leadership have done nothing to address this crisis. This one thing, the price of fuel, has taken a lot of the air out of our economy to the point that it has complicated all the other economic problems we face. The price of gas and diesel has directly affected the country's ability to meet its mortgage payments and its credit card debt. This has further impacted the financial crisis that has already complicated the nation's economic recovery.

The Democrats are often accused of being the “tax and spend” party. But, the “war” in Iraq does not come cheap. With the most recent bill passed and signed by the president, the “war” in Iraq is costing the United States well over $600 billion. Fighting a war in Iraq to make Americans safe from terrorism of the sudden kind, while the terrorism of the slow moving kind continues to eat away at the families that we say we are protecting.

To listen to the political discourse, you would think Iraq was on par with the former Soviet Union as a challenge to the security to the United States. The nonsense never lets up especially in the year of a presidential election. While the rhetoric about terrorism is thrown about much the same way communism was the “terrorism” of the Cold War. How bad are the Chinese Communists now if we are doing so many billions of dollars of trade with them?

This 4th of July, wake up Americans. You are being feed a bunch of fear about terrorism while at the same time you are being strangled economically at the gas pump. Whether you realize it or not, your family and your budget, your job and your home are facing a kind of economic terrorism that has not been seen in this country since the Great Depression.