Saturday Is For Art

Today's piece is finally finished. I may add another coat or two of high gloss acrylic varnish to the center piece. I started this little project last October and worked on it off and on for the last 8 months. The core is Styrofoam and it is covered with cardboard, cereal boxes, some paper mache, gesso and acrylic paint. Like other artists, I have icons that I use repeatedly in my work. Mother and Child, Level Playing Field, the Butterfly Flag are just three of the more common ones. I will post a pencil drawing, titled My Icons and the first Mother and Child I painted in the late 1980's early 1990's. That piece with the wood frame that I made measures 72 inches by 48 inches. Today, I was at the museum and took a few pictures for my next project. This new project might take me another 8 months to complete, but that is the nice thing about being retired, there is no hurry. I plan to photograph the top piece and even offer signed prints later. The market for my political satire is very thin. It consists of a few friends and family members. But, this is what I do, and I enjoy it. There are some contemporary artists that only think up the idea and have other artists execute the idea. For them, I guess that works. But for me, the fun is the whole process. Taking the idea and then working out the challenges to bring the idea to life.

Your Money Perpetually At Risk

The other day I heard on TV that the oil industry spends about $80 million on lobbying a year in Washington, D.C. $80 million should buy you a lot of access. If you listen to the comments on TV these days, we are to believe that the $80 million is spent so they, the oil industry, can enlighten the members of congress as to the difficulties the oil industry faces without the necessary helpful legislation provided to them by the congress in the form of tax incentives. This may be all true, but will we ever get away from importing foreign oil if the Federal Government continues to subsidize the oil industry? As I have said before, money talks and bullshit walks.

Now let us take a look at the securities industry. The financial geniuses on Wall Street are always thinking up new products to sell to investors. There are products sold that are aimed at the retail or smaller investor and there are products created that are strictly for the very wealthy and the institutional investors. With new products being turned out all the time, the investing public needs to keep up on just what they are investing in. I told a story in a previous posting about a fixed income product that was sold to the retail investor in units like shares at an offering price of $10 per unit. One round lot or a 100 shares was a $1,000. But, the underwriting commission for each broker that sold this product was 50 cents a share. This may not sound like a lot of money, but when you know that out of that $1,000 dollar investment $50 dollars is coming right off the top, you are now paying $1,000 dollars for an investment that is going to be worth at its best at $950 dollars. In bond language, you have just paid 5 points for this bond product. No mutual fund that I know of charges 5 points in commission to buy into a fixed income mutual fund. This kind of crap went on in the brokerage business 20 years ago. Whether the New York Stock Exchange has tightened up its rules on listing such crap, this I do not know. In the worst example of this kind of product, investors saw their investment go to zero in a period of six months. This kind of thing should not happen if proper oversight is exercised. In my opinion, without the NYSE listing this product would have never sold as well as it did. Where does the buck stop? We know the investors' buck stopped at zero.

What is the point? It does not make any difference which industry we are talking about, money that buys that industry access plays a role in the kind of legislation that comes out of congress. Every industry is pushing their agenda, and the industries that are well financed usually get their point across. Money talks.

In the case of the securities industry, I think the congress better do the right thing and use their own common sense. Without regulation, oversight and auditing, we are going to continue to have financial crisis all the time. Greed is like a weed that just keeps on coming back. Regardless of whether you pull your weeds or spray them with Roundup, they just keep coming back. The securities industry for the most part does the job it is suppose to do, but there are those members of the industry that do not care to play by the rules. As a result, if they are located in key positions, they can bring ruin to a whole sector of the securities industry. As I have said many time before, the mortgage bond market meltdown could have been avoided had there been proper oversight and auditing. Without the securitization of the mortgage industry, the sub prime mortgage bond business and the subsequent meltdown never gets off the ground.

When you realize that there are trillions of dollars invested in mutual funds as well as public and private pension funds on the line every day, the importance of regulation in the securities industry should become quite obvious. Yet, because money talks to congress and they listen, this vast number of dollars representing America’s savings, remains perpetually at risk.

Stay tuned.

Read The Post From April 10, 2008, Again

Today I am not writing anything new. If you want to read one of my most visited postings, read the one from April 10, 2008 about the inverse relationship bond prices have to bond yields. This single posting has received hits since I wrote it from all over the world, and I mean all over the world, not just the USA. Seems that there are people out there interested in the relationship a bond price has to its yield. At the end of the post, I mention talking about regulation in the securities industry, and since that post, I have talked about the need for better regulation, oversight and auditing by the SEC and now the Federal Reserve Bank. Many of the problems that we are now dealing with in the bond business are a result of greed and the lack of proper enforcement of the rules governing the securities business. The politicians are lobbied by the moneyed interests of the securities industry to keep the enforcement lax. As a result of this, the greed principle is given the opportunity to create the meltdown and crisis that follows. This is not like finding a cure for cancer, the respected minds in the field know what needs to be done, but the power of money keeps the proper enforcement away. Some shit happens, but a lot of this shit can be avoided. I wish I knew what it would take to draw people's attention to the fact that the mortgage bond meltdown could have been prevented by the proper use of the tools that are available. It just takes the resolve of enough people in the right places to make it happen.

Clean Up The Securities Industry

Sunday I read a well written article in The New York Times about the municipal bond business. It seems a large issuer of something like $750 million in municipal debt was not making their current financial statements available to the rating agencies and thus to the public that holds their bonds. The issuer, a hospital authority, received a BB rating for their debt after a reorganization and a name change, but not keeping the market current on their financials was causing investors and market makers a problem. As a result, where no information is available, the market makers have these bonds priced at a significant discount, like 83 cents on the dollar.

Over the last several months, I have called for better and more comprehensive regulations, oversight and auditing of the securities industry. Perhaps what is needed is just for the existing regulations to be enforced as this alone would prevent the losses that are occurring. The whole mortgage meltdown could never have gotten off the ground without the rating companies giving their AAA rating to mortgage debt that should never have seen such a high rating in the first place. If an investor wants to buy high yield debt and take the added risk, then that is their choice. But, placing a AAA rating on a piece of debt, a bond, that does not deserve that rating should be met with a serious response.

So much pain and suffering in the mortgage market and even the municipal bond market can be avoided if the people involved would do their job correctly. Perhaps it is time for the administration of justice to take a closer look at the efforts of some to mislead and in some cases simply defraud the investor because of their own greed.

Going back to the role that pension fund trustees could play to clean up some of the abuses in the securities industry strikes me as a good idea. But, as I said before, few pension fund trustees are knowledgeable enough to organize and bring pressure to the issues of proper enforcement of the securities industry’s regulations.

When information is with held from the public on an issue of municipal bonds that have been underwritten and sold, someone should be held accountable. If that means someone goes to jail, then perhaps that is what it takes to get those individuals responsible for the timely disclosure of financial information to take their responsibility seriously.

What the public should demand is that financial information as well as due diligence be carried out in a timely manner. There is unfortunately too much greed and attempts to defraud the investing public of the trillions of dollars of debt and equity investments in the public domain for timely financial disclosure to be dealt with so lightly.

The securities industry benefits from the ignorance of the investing public and the lack of organization among the public and private pension funds and other large fund trustees. What is needed is for someone to organize this group and use its financial muscle to bring about the kind of responsiveness and reform that would clean up much of the abuses that go on in the securities industry.

Additional reading for those interested in hearing it from a PhD in economics. The Sunday New York Times Magazine, August 17, 2008, "Dr. Doom" pages 26 to 29, is a nice read about an economist by the name of Nouriel Roubini and his thinking about the current economic crisis. Many economists have the academic training, but few have actually worked in the securities industry to understand the specific areas where better and more comprehensive regulation should be enforced. Those individuals that fight against better regulation permit the abuses to continue and the greed and fraud to go unchecked. Even with all the borrowing that we as a nation do, it is not the borrowing that has brought on the meltdowns, but the abusive practices associated with the borrowing that have brought about the crisis. A hammer or any other tool can be misused. In the case of the hammer, it is for hitting nails, not your thumb. Until we stop hitting our thumbs, we are going to continue to suffer a lot of pain.

Stay tuned.

Saturday Is For Art

Level Playing Pond

Truth, Lending & The American Way

Truth in lending? Why bother?

This week I have been watching a political campaign commercial about lending and borrowing money. It seems that here in Ohio, the forces of intelligent design, if I can use those words, would like to rope in some of the lending practices of these cash advance stores. The commercial starts out with the alert that 6,000 good paying jobs are at stake. And, if legislation goes through to prevent people from using these kind of lenders, then these 6,000 good paying jobs will be lost. In the commercial, we have this middle aged white guy wearing a baseball cap and standing next to a pick up truck telling us that if he needs to borrow $100 to fix his truck and then pays back the following week $115, that should be his choice. You know, at this point I agree. And furthermore, if he wants to borrow at that interest rate for a whole year, that should be his choice too. Let us see, $15 in interest charges a week times 52 weeks, gets this Einstein with the baseball cap and the scowl on his face up to at least $782 in interest charges for one year on borrowing $100. Why would anyone want to keep this financial wizard from doing this. This is America. People should be free to let themselves be taken to the cleaners if they want to be. Hell, why bother to help people?

Well, for one thing, this guy in the baseball cap and the pick up truck is an actor, and if he is not an actor, he should be. If this idiot wants to pays 15% interest per week, why should we stop him? How about people suckered into mortgages that they did not understand or could not afford? What do we do about all those people losing their homes? Perhaps the compassionate conservative thing to do would be to put them all against the wall and remove them permanently from the gene pool. Oh, that is not what is meant by compassionate conservative, I am sorry. You see, I am an old 1960’s style Liberal that thought we had a responsibility to help those with less gray matter, old age or some other disability.

The big difference between the Liberals and the Conservatives, is the Liberals have this idea that they can save people from themselves. You know, after all these years, I am beginning to question that. Why bother to have an SEC? Why bother to have rules governing financial transactions at all? If people can not ferret out the truth for themselves, then perhaps they should be taken to the cleaners by stock brokers, loan officers, mortgage originators and cash advance store clerks. Then, after we get rid of the SEC, perhaps we can start on the FDA. In time, perhaps only the sharks would be left, but that is not true because some how nature always makes sure that there will be enough marks for the sharks to feed on.

But, if we do this, can we take these people off the TV news when they lose their homes, their pick up trucks or the clothes off their backs. I do not want to see stupid naked people on the 11pm news just before I am going to sleep.

But, for all of you out there that believe in legislation to protect the consumer from being defrauded, then please disregard the above and vote for OBAMA in November.

Stay tuned.

Oil, My Mind And Paranoia

There were several factors coming together from around the world to push the price of oil to almost $150 a barrel just a few short weeks ago. But, even though I know that a single factor can not explain an event that has so many players involved, as the price of the commodity oil has, my Jewish-Russian ancestral paranoia nevertheless crepes into my thoughts about the movement of the price of oil and in turn the price of gasoline and diesel over the last several months.

Now that I have gotten that out on the table, I can feel better about where I am about to go with this. Gas and diesel over many years have been the best examples of inelastic demand when talking about inelastic demand in the classroom. At one time cigarettes were also used as an example of an almost inelastic demand, but that was before the Federal Government decided that cigarettes were bad for your health. Oil, on the other hand, is not only good for your health, but I can not begin to list all the things that we eat, wear and live with that have something to do with oil. If we were going to pray to a commodity, I think it would have to be oil. And yet, this indispensable commodity that we Americans depend on for so much of our life style and quality of life, do not forget the role oil plays in health care, that our leaders would drop the ball regarding its importance to our way of life is hard to believe. This is were my paranoia crepes in.

Was it really the coming together of several economic events including the fall in the value of the U.S. dollar that drove up the price of oil and in turn the price of gas, or was it simply political pay back time for the present administration? You have to have real paranoia credentials to put this one on the oil industry, but after this administration’s track record, I think it is entirely possible. Especially when you have former chairman and CEO Cheney running the administration. It will make for interesting reading some day after a few historians start digging into the documents about the present administration and the oil companies. Unfortunately, many of these documents will be sealed because of national security reasons, but eventually the truth will come out.

In the mean time, the price of oil and gas are coming back down. Could this have anything to do with the presidential elections and the Republican Party? At this point, I don’t care, I am just happy the price is coming down. Go Obama.

Stay tuned.