So you want shock and awe? How about the fact that Congress is about to give the major automakers $15 billion more in bailout money. Yeah, what I thought. A yawn.

It's not a surprise to anyone that the auto industry is getting the bailout money. A loan from us to them as Congress likes to put it. And it will be paid back as soon as February. Or so Congress wants to polispeak the spin.

But the real facts are simple. Congress is pulling out any stops on spending money. They are giving money away to basically every big business that walks up to them. I expect that airlines should be next.

So far we have given more than a trillion dollars in this year alone. Forget about the combination of nations that it would take to equal the amount that has been spent. The thing is that none of this is helpful, though Congress keeps saying they think this will do it.

Our money has been poured hand over fist to the financial industry, and we got fewer loans being made, more ownership and intervention from the Government, and a promise that in some far off day we will get paid back. Of course you have not heard a single word on how we will get paid anything back, or what will that money be used for since it won't be in our pockets. But the taxes to pay for it until we do one-day get repaid will come out of our pockets.

And we gave $25 billion to the automakers about a month ago. So the current $15 billion might make it to the end of the month. Then they will ask for more, blaming Congress for being stingy and not helping enough for them to get to do what they need to. But don't fear Congress will appoint a Governmental agent to watch over the auto industry.

I expect that will be someone like Treasury Secretary Paulson, or Fed chairman Bernanke, or maybe like Congressman Barney Frank. And you know all of them were right on the job, wide awake, making sure things couldn't get any worse. Oh damn, we are seriously in the crapper aren't we?

The worst part of this is the fact that a Government agent overseeing private industry, with the ability to mandate changes in their business practices that is solely motivated by politics, is a far cry from capitalism. It is yet another desperate attempt to avoid the pain needed to innovate and become more efficient. Which means it is ultimately a failure of massive proportions that will be passed down the line a bit for someone else to deal with. Hopefully not the politicians in office currently.

For all the bluster, and there were loads of it especially from the financial oversight genius Barney Frank, the fact is this is the worst case scenario and we all knew it was going to happen. From the moment that Congress sat to listen to the auto makers we knew it. The only questions were how much and when. Now we know.

The fact that our politicians lack courage is bad. The fact that they are protecting their political supporters (the UAW as one example) above helping the nation is worse. But the fact that our elected officials have no clue what is going on is the most troubling of all.

So there goes another $15 billion. Compared to the $500 billion+ stimulus plan for 2009, or what has already been spent in 2008 it's not a big deal. Until the snowball of what Congress is doing moves just a bit closer, faster, larger. And then they won't be able to print the money fast enough.

Labels: Barney Frank, Ben Bernanke, car czar, Congress, credit crisis, mortgage bailout, Polispeak, Treasury Secretary Paulson, UAW

I had some extra time today so I decided to take a look at what has happened this year. I wanted to go back and take a look at the various buyouts and bailouts that the Government has backed, and the promises made so far. And the numbers are horrendous.

The main focus so far is on the $1.5 trillion that has been authorized and/or spent thus far. $700 billion for the bailout of mortgages and the credit crunch, and now another $800 billion for mortgages and consumer loans. But those numbers are not the full amount of cost this year.

The year started with the bailout of Bear Stearns. It cost $29 billion to allow JPMorgan to buy that failed brokerage house. And we were promised that would fix everything. Then there was the $150 billion stimulus package that was promised to fix the sagging economy, which failed. Then came Fannie Mae and Freddie Mac, which Representative Barney Frank publicly pronounced as healthy and secure, that cost $120 billion each (not including the $600 billion that is now part of the $800 billion bailout package). And the numbers are still not done.

AIG cost $120 billion by itself. That though was said to be included in the $700 billion authorized by Congress. That means of the 1/2 of the funds given to Treasury Secretary Paulson only $230 billion was available for everything else needed. Not counting the tens of billions given to banks, or the money spent to buy bad loans at unknown valuations.

Of course there was also Citigroup. This cost $20 billion plus $306 billion for guarantees of their bad loans, for a total of $326 billion. Now that is a problem because if the funds came out of the same pool as AIG, we are in a bigger negative than the spending is already creating. A double negative of sorts. And yes I know that guarantees are not the same as cash, but a guarantee must be backed by something besides words. Which means cash from somewhere.

But let us not forget the $25 billion given to the auto industry. And that has nothing to do with the additional $25 billion that is being asked for now, just roughly 5 weeks later. Which is separate money. And that precedent is going to lead to the requests of the airline, credit card, home building/construction and other industries. If the Government is handing out money to businesses, it would be folly not to get in the line.

So the total is $1.94 trillion dollars. Which does not include Citigroup or the additional amounts from the auto industry. Including that figure we get $2.27 trillion in money that never existed and must be repaid. To be exact that means that every American, each of the 300 million citizens, owes $7,567 to the Government.

It is expected that some of these loans and stock purchases will eventually break-even or turn a profit. The expectation is that will happen in 10 - 15 years. Though it is absolutely unclear how the public will be repaid, though the Government will collect all the money. Thus it is possible that the Government will receive money from the public and hold repayments from loans - effectively being paid twice. And it is very likely that any repayment will be funneled into Government agencies instead of the public, as was attempted by Democrats with the first version of the mortgage bailout bill.

But even if 40% of the loans were to make a 50% profit, the bulk of the debt incurred will still be greater. And that does not cover the direct cash infusions made without a loan or repayment provision - which is about 70% of all the funds so far as I can gather.

And the fun does not end there. Remember that President-elect Obama, pushed by House Speaker Nancy Pelosi, has promised a now $700 billion second stimulus plan. The exact details of this plan are unclear, but some amount will be given to the public and some will be used to fund public works. Or so the loose plans state so far. That would mean that in 1 year the cost is $2.97 trillion.

And President-elect Obama still is pushing to add over $800 billion in new spending for new and/or expanded programs. That makes it $3.77 trillion. Or in terms of cost to you and I - $12,567. That's for every man, woman, and child alive right now - working or not.

Put in different terms, this money could have completely funded the entire NASA budget (roughly $419 billion unadjusted for inflation) since inception nearly 10 times over. We could have funded 1,000 moon landings ($36 billion unadjusted) including all the research and development.

Let me make it more personal. That amount is more than the entire net worth of Oprah Winfrey, Bob Johnson, Tiger Woods, Michael Jordan, Tom Cruise, Bill Gates, George Soros, and Warren Buffett combined and multiplied by 10. It's enough money that every single American citizen, of any age, could go to the average college for 2 years. It's enough money to give every American alive today a 10% down-payment on a $120,000 house.

And there is no guarantee, in fact there is reason to highly doubt, that it will get better.

Labels: AIG, Barney Frank, Bill Gates, Citigroup, Congress, Freddie Mac, mortgage bailout, Nancy Pelosi, NASA, Oprah Winfrey, Tiger Woods, Treasury Secretary Paulson, U.S. economy, Warren Buffett

This year Christmas has come before December, especially if you are a money center bank, a brokerage house, insurance company, or car manufacturer. For regular people though the holiday may not arrive at all. Such is the way things happen when the Government gets involved.

The news is out now that Citigroup will receive another $20 billion, with guarantees for $306 billion in assets, before the holiday season ends. In fact they should have the money, your money, in hand before the holiday season officially starts this Friday. Santa it seems has a 401k.

The good part of this is that Citi should not fail. Thus money will be stable in over 100 countries around the world, for the time being. Another bonus that New York City officials must love is that Citi will not be sold off in parts, and thus tens of thousands of additional jobs should be secure. And there is a better than 50% chance that many of the major bonuses that help the Big Apple float will be paid out (contractual obligations don’t end when the company gets a Government bailout). And in all honesty that is a good thing for the U.S. economy too, as long as they spend the money and not hoard it in fear of future layoffs.

The bad thing is that none of the officials tasked with resolving the financial crisis the nation is in foresaw this event. Chriss Dodd and Barney Frank didn’t see it coming, not because they were asleep at the wheel like when they promised Fannie Mae and Freddie Mac would be ok, because they were too busy blaming anyone but themselves for missing the problem. Treasury Secretary Paulson missed it. Fed Chairman Ben Bernanke missed it too.

Not one of these men, each tasked with identifying this continuing problem, envisioned this problem. They have dozens of staffers and hundreds working behind the scenes crunching numbers. Yet they all missed the chance of this happening. And the public is left to assume that it was so sudden they couldn’t have known.

Not true.

“I believe that the move to junk rating of ACA, the probable $6 - 12 billion loss at JP Morgan [significantly higher than expected], eventual losses from Citigroup - which reinsures itself, oil breaking $100 a barrel, and the multiple overseas investments will all hit the market in mid-January 2008. Thus I think a move to 11,000 is more than probable.”

I said that in December of 2007. That’s without being a stockbroker for years, without financial racords, conversations with CEO’s, discussion of the Fed, data from international sources, or Congressional committees. Just me reading the news and analyzing the public information.

I in fact went on to say

“Will those experiencing deflation outweigh the inflation fears? And if more people lose their homes how much of our financial institutions are we willing to sell to avoid the harshest realities of a crash?”

I knew Citigroup was in trouble a year ago. I knew there would be a major crisis from the mortgage industry, and that a bear market would hit the stock market. And I defined it several times, months in advance, in detail. The main thing I have been wrong on is the severity and speed at which all these things happened.

My point about this is simple. If I can figure out how bad things were, and most likely will continue to get, then what the hell were all these people whose only job is to figure this out doing!?

If they can’t get off they political posteriors, open their Government entrenched eyes, and understand the degree of a problem that is apparent to a guy on a computer in Binghamton – without even a stock ticker – they why are we giving them control of $700 billion and more? How can we expect that a single dollar of that money will be put to a use that is effective?

Case in point. Citigroup is in big trouble. They insure themselves internally. They are failing. So what is the value of the $306 billion in assets today, what was it yesterday? Are we guaranteeing a value that was intially set for these assets, the current market value of these assets, or are we getting to pick up the debt and bad loans of Citigroup mixed in with actual assets? The difference is very important. And I doubt if Barney Frank and Chris Dodd are even aware that this question should be asked.

I asked how much are we willing to sell to avoid a problem a year ago. Today I am looking forweard and I have to ask a different question. How much of the American capitalist system the nation functions on are we willing to lose to avoid the pain of this crisis? And if we are willing to comnpromise the basis of our economy, how do we prevent losing the freedoms a solcialist nation cannot tolerate?

Labels: Barney Frank, Ben Bernanke, Chris Dodd, Citigroup, Federal Reserve, financial news, mortgage bailout, New York City, Treasury Secretary Paulson

I just love the way that Congress is trying to look tough these days. An auto industry bailout? Hold on, we need details. Right.

Come on, this is the same group of people that handed $700 billion to Treasury Secretary Paulson without a plan. It was the same group of people that fell asleep when Fannie Mae, and Freddie Mac were in trouble (someone wake up Barney Frank). And it was these very same people that gave away $25 billion to the auto industry about a month ago.

Does anyone seriously believe that they won’t bailout the auto industry, and receive neither repayment terms, nor assurances of industry improvement. They couldn’t even create a bailout for the financial industry that could prevent Paulson from moving the money around however he chooses, and that was a concern of House Republicans from the start. With even more Democrats in Congress, and the continued misleadership of Harry Reid and Nancy Pelosi is a better outcome likely?

I’m reminded of a quote from Ben Franklin I believe.

“Doing the same thing over and over, while expecting a different result is the definition of insanity.”

I apologize to Franklin is I got the quote wrong. But the point stands. And it will stay in place until the mid-term elections in 2010. Won’t the damage be interesting to see then.

The fact is that the U.S. automakers need to fail. Let several go bankrupt. It won’t be the end of the world. It will actually be the best thing that could happen.

When large companies fail a couple of things always happens. Several smart businessmen rummage through the wreckage and find bits that they can create new companies with. Those new companies will in part of the gap the old company had, but mismanaged. That spurs growth as a new corporation grows in that niche.

Also the old behemoth of a company slims down. Much of the old baggage is discarded, and the company refocuses on whatever they do best. Renewed energy flows and the company normally creates profits the old company could never do.

This is all good for the economy, though the jolt during the process is unpleasant. But it creates a stronger economy than the one existing before it. And more people are employed after these events than before.

The worst aspect of the auto bailout is the fact that it will be followed by an airlines bailout, and a retail bailout, and probably another financial markets bailout. The Government has made a precedent of stepping into the markets and private industry, because they are afraid of the pain. And in each case it has proven one thing. The Government has no idea what it is doing.

The more socialized things become the more the Government is compelled to step in. The more money is thrown around to avoid feeling bad, the worse everyone feels. Because the Government is incapable of fixing anything, nor can they regulate bad decisions out of business. And they shouldn’t. Bad decisions are normal business and are resolved in the marketplace over time.

Only in America is the concept of perfect markets feasible. It’s stupid and regrettable. But it also seems inevitable. Were that not so, the auto industry execs would never have taken separate corporate jets to fly to D.C. and speak with Congress. They did it because they know they will get the money.

I stated that the Dow Jones will hit 7600 in 2009. But if Congress throw more money at the problems in the markets, and involves more politicians that sleep when they should be watchful (Frank and Chris Dodd) I could be very wrong to the upside.

Labels: auto industry, Barney Frank, Congress, Freddie Mac, Harry Reid, mortgage bailout, Nancy Pelosi, Treasury Secretary Paulson

Just one month ago Nancy Pelosi was advocating a mortgage bailout bill that would give nearly $1 trillion to Treasury Secretary Paulson and use any potential profit or repayment for pro-Democratic groups including federally indicted ACORN instead of the public. Also in that initial bill was a quiet attempt to add $50 billion dollars as a stimulus plan for normally pro-Democratic segments of the nation.

Nancy Pelosi was shot down in her first attempt, but she did not give up. Though ACORN is now recognized as a bad choice for more federal funding, especially as a substitute fro repaying the public bailout of financials, Pelosi is still trying for her stimulus plan. And you have to give her credit, she has increased the amount she wants to spend to $150 billion now (or more if she can get it). And she is now getting support from Fed Chairman Bernanke and the White House it seems.



Long-time readers will be familiar with the fact that I thought the first stimulus plan was a waste of money. It was a complete failure in every objective it was hoped it would deal with. It did not stimulate anything, it did not bring stability to the housing markets, it did not prevent the failure of several banks and brokerages, and it did not alleviate the credit crunch.



Another stimulus plan will have the same effect. Nothing. Any funds being used to give to the public will be used to pay down bills and debt, again. Even moreso now with such uncertainty.

And we need to get this into perspective. Nancy Pelosi has presided over the worst Congress ever. It was her Congress that failed to see the crisis from the start. It was her Congress that as late as July denied any problems, in the words of Barney Frank. It was Paulson and Bernanke that have been playing catch-up. It is the current fiscal plans that are causing real inflation to grow, and business to slow – which is the only reason oil prices have dropped. And they want to make it worse by doubling down.

Pelosi is confident that she will get another stimulus plan, if Obama is elected. She plans to wait til then to really push for this useless plan.

“But we can get something signed — please, God — when Barack Obama wins the election.”

That is just blatant polispeak. But what it also means is this. An Obama Administration will bring in $832 billion in new spending, we are spending $700 billion on the bailout, we have spent over $200 billion on prior bailouts, and we will be spending another $150 billion or more on another stimulus plan while businesses will be saddled with 10% higher taxes, and investments will be shutdown with another 15% in capital gains taxes.

Given these facts, I cannot see how anyone will not have their taxes increased. And I don’t mean the 3% increase that Obama and Democrats have voted for and tried to pass in March of 2008. If anyone thinks that business will not slowdown further, and jobs will be lost while inflation grows under these economic plans, they have never done well in basic math – in my opinion.

Nancy Pelosi is decidedly a partisan and underhanded politician. She promotes wind energy without disclosing her substantial stock investment in wind energy companies. She has refused and block discussion on domestic drilling. She has wasted the taxpayers money on trying to point blame on Republicans, admittedly where no laws have been broken. She has had a Congress that has accomplished the least ever, while maintaining a majority in both Houses. And now she wants to make things worse.

I hope people in California wake up and vote her out of office. But the fact is she will hold power long enough to cause damage that will last years. And considering that she has enabled a Congress to willfully damage the nation via inaction and inattentiveness, I can only have nightmares about the damage she will be able to inflict on the nation with a Democratic, left-wing, President as banks and healthcare is socialized.

Labels: Ben Bernanke, Congress, Economic Stimulus Plan, financial news, Nancy Pelosi, Polispeak, Speaker of the House, Treasury Secretary Paulson

Considering everything that is going on in America today I’m just not sure what is the most troubling thing happening.

Of course the major media is hyping the mortgage crisis bailout, which has now become dubbed a ‘rescue plan’, and politicians are making the most of this coverage to promote their political party’s Presidential candidate while blaming all the woes of creation on the other Party. But it’s the other things the major media isn’t talking about that has me equally as distraught.

There is the fact that the Bush Administration has quietly approved a $25 billion loan to the auto industry. There is the fact that Senator Obama is feared to be incapable of winning the election in just over a month, not because of his political views or plans for the nation but because he is Black. There is Barney Frank and Chris Dodd screaming that anyone and everyone else but their banking and finance committees are to blame for the current crisis, or for not seeing the impending problems as late as this July. And there is House Speaker Nancy Pelosi.

Nancy Pelosi is special. In a kind of special needs kind of way (and I don’t want to insult those with such needs by associating Nancy Pelosi with them).

She is the most powerful woman in politics right now, if you can believe it. She is 2nd in line for the Presidency if anything happened to President Bush before the election. Yet she has run an extraordinarily expensive budget in her position as Speaker, with a Congreess that has achieved the least in at least recent memory. She presides over a Congress that has the lowest approval rating since ratings have been kept.

But that is not enough. She has tried to block any discussion of domestic drilling, like Pharoh forbidding the name Moses from being spoken. Which is fantastic for her since she makes money on that delay because she owns stock in alternative energy companies. She also helped to write a bailout plan that allowed the Treasury Secretary to wield sole control over virtually a trillion dollars. When that failed she helped write another plan that took any repayments and gave them to a Democratic pet project, ACORN, which is under federal investigation. And now we learn that paid her husband just under $100,000 from political donations – which she voted to ban in 2007.

“Financial Leasing Services Inc. (FLS), owned by Paul F. Pelosi, has received $99,000 in rent, utilities and accounting fees from the speaker's "PAC to the Future" over the PAC's nine-year history...

FLS is on track to take in $48,000 in payments this year alone - eight times as much as it received annually from 2000 to 2005, when the committee was run by another treasurer [which is now her husband].”

So we have Democrats that won’t cross racial lines, asleep while watching the nations money, pushing to give people homes they can’t afford, spending money they don’t have without control, blocking the near-term solutions of America’s energy needs for personal profit, and violating laws they are supposedly trying to pass, while doing the least work in Congress possible. You have to admit it is an impressive cluster of failure all at once.

And Senator Obama has no intention of not spending another 800 billion dollars in new spending, nor failing to raise corporate taxes in a decidedly negative economy. But he will speak with Iran about not building nukes – pretty please. And he will tell Russia that they are being bad when they invade other nations, after he thinks about it for a while.

Honestly I don’t mind Obama’s inexperience that much. In combination with his other plans for the nation means that things will get worse though. But the supporting cast that would come with him, especially if Democrats were to win the Congress again, really spells “Danger Will Robinson, danger!” (Those older readers will get the reference).

But I wonder for those that don’t follow politics everyday, that aren’t up at 5am reading the latest political news, what bothers you most?

Labels: Congress, financial news, mortgage crisis, Nancy Pelosi, race in America, Senator Barack Obama, Treasury Secretary Paulson

The bailout deal that was rejected on Monday by the House of Representatives was a bad deal. And the result was a Congress divided, a media blitz, polispeak galore, finger pointing, and a 777 point drop in the Dow Jones Index.

Most focus on the drop in the Dow Jones. The media love to play that up. I even heard the number increasing as the night went on. Some newscasters call the drop “a nearly 800 point drop”, or “nearly a 1000 point fall”. Talk about exploiting the facts to gain viewership.

The fact is that nothing that happens will stop the drop in the market. The second that short-sales are allowed back into the market, bigger drops will occur. All that stopping these trades has done is increase the power of the drop. Because while the numbers look big right now, the actual affect is not nearly as big. That’s because of the current value of the Dow Jones Index. But as the Dow drops, these big sell-offs become more meaningful and powerful. And they feed a bear market like honey.

But the bailout, now trying to be spun into a “loan” by pundits and politicians, is horrible. Because it fails to answer 2 simple questions. How much is being assumed in bad debt, and how do taxpayers get repaid?

The first problem goes like this. Under the deal laid out on Sunday, at least 3 separate payments would be given to Treasury Secretary Paulson to buy bad loans. The value of what he pays for the loan is unknown. Would he pay the original price of the loan, the current value, the real absolute value? No idea, nor was one required by the legislation. Thus he could buy all the bad debt at the top price, ensuring taxpayers could never break even or be repaid.

The second problem is that there has been nothing said on how taxpayers get the money back. The money is coming out of our pockets. We know that. To the tune of about $10,000 per person. And it will likely be collected from higher taxes for EVERYBODY. But how are we to be repaid. Will we get tax credits in the future? Or a check? Or guaranteed lower taxes (though how much lower and lower than what level is yet another question)? If you can’t say how we will get repaid how can we believe we ever will.

To deal with these 2 major issues the politicians that were trying to rush this version of the bailout proposed this bit of eyecandy. Executives would no longer get ‘golden parachutes’. Yea! It’s nice that the Government is in effect starting on the path to regulate how much money anyone should be paid. It’s very socialist of them. Still I can agree that paying someone that bankrupts or severely damages a company millions is folly. Though I see no problem paying them is they create a bigger stronger more profitable company than they took charge of. But the legislation is unclear if a great executive doing a great job is free of the same stipulations and restrictions.

And all of this says nothing to the power suddenly endowed to the offices of Secretary of the Treasury and Fed Chairman. They get control of more money than 1/3 the countries of the world make combined. And if you think that Congress can watch over those positions and keep them in check remember that it was the brilliant and attentive eyes of Banking Committee leader Barney Frank that said in July of 2008 that Fannie Mae and Freddie Mac could not fail, and that he saw no problems in the financial markets.

And another unseen problem of the bailout deal that was thrown out is its effect on the nation. This deal would have effectively kicked out the last leg holding New York as the financial center of the world. And it still might happen. And with that loss of status means tens of millions of dollars lost to the nation and New York State.

This is not a game with obvious consequences. Some things have to be thought about. And because some of those most responsible for this mess don’t want the blame, they are insisting on the most speed in passing the buck and a deal.

The bailout will cost over $1 trillion by the time it’s all said and done. The stock market will fall as the dust settles and every industry with debtors lines up to be next to be paid. And eventually things will improve. Such is the nature of markets and trade.

But if the main questions I have asked are not answered in future bailout proposals, because of the rewording of what the deal is called, or political favor to a Presidential candidate, or rushing to soften the ultimate downturn of the bear market, or just because no one was smart enough to ask, then the real cost will be far worse than just the money thrown away.

Labels: American economy, Barney Frank, Congress, Dow Jones Index, Federal Reserve, small business, stock market, Treasury Secretary Paulson

You have to be impressed by the Congressional Democrats. They have balls. Not brains, just balls. Because that is the only way they can make the claims they do about the bailout deal.

In listening to the Democrats, Barney Frank in particular you would think that the Republicans are staging a massive political coup. That the Republicans are the only reason why the bailout deal that was voted on today failed was their votes. That this is all about politics and the upcoming election.

But if you stop listening to the polispeak in Congress and look at the vote numbers and you see another picture.

The vote was 228 – 205 against the deal. That includes 94 Democrats, which could have easily made the difference and passed the deal no matter what the Republicans did. But they chose to go against their Party and Treasury Secretary Paulson, and President Bush.

Why? Because the deal was horrible. Because there is no confidence in the deal. Because the rush to pass the deal makes you wonder what is in it. Like the fact that a previous version included a stipulation that if this bailout actually got any money repaid that money would not go to taxpayers but would fund a Democratic initiative called ACORN (which has federal problems currently).

Or how about the fact that I have yet heard how the public, that will be buying these assets (bad mortgage loans) could or will get the money back. We will spend $10,000 each, out of our pockets, and if this ever makes break-even or profit there has been no discussion how we get that $10,000 back in our pockets directly. And under the current plans you never will. That is not a political problem, that is just a bad deal.

If this were as political as Democrats would like it to be, then this bad deal would have passed, Senator Obama would have the credit for it (or at least Senator McCain would have the blame) and they would use this to win the election. That didn’t happen.

If this were political, Republicans could have voted for this deal claimed it was because of Senator McCain’s influence and used that to win the election. It’s just that simple.

But Senator McCain, the Republicans, and 94 Democrats are not being political. They are doing their jobs. They are trying to structure a deal that works for taxpayers like you and me. They want to answer (I hope) the question of how the money comes back to you and me, if it ever makes money.

If we want to really be political about this, we can ask why Barney Frank and Chris Dodd could not see the impending problem as late as July of this year yet they are the heads of the Banking and Finance Committees in Congress. They were informed by supposedly brilliant minds on the exact status of the problem, and they crafted laws and regulations to control what happened. They also made enormous amounts of money from the very people they were (supposedly) watching.

Look, here is the reality. Senator Obama and McCain are Senators. One of them will be the next President. They are effectively the leaders of their respective Parties. They need to get into this fray (well at least Obama does as McCian is) and do their jobs. They need to forge a deal, stand together and say they endorse the deal. At that point it will have to pass. And to forge the deal they need to answer the question that I feel is most important, how I get my money back.

Everything that is short of this is polispeak. Every moment that Obama avoids this problem, every moment that they don’t answer the key question, every moment we have no deal endangers America and makes our near-term future that more bleak. And no matter how many Democrats blame Republicans, or how many deny their failure to do their jobs, the outcome remains the same.

Labels: Barney Frank, Chris Dodd, Congress, Democratic Party, Presidential election race 2008, Republican Party, Treasury Secretary Paulson, U.S. economy

There is no deal on the bailout of the U.S. financial markets as of this moment. Treasury Secretary Paulson is in the White House as I type trying to create a new plan. The Congress is busy trying to make their own plans as well.

That is the situation that the world markets will be facing tomorrow. And in the wake of this revelation I expect that the Dow Jones Index and other markets will retreat in the face of an unsure weekend. Which means that this is a great market for mining stocks.

I have already mentioned that I feel that coal mining is a great area for the future, based on the need of alternative sources of energy to crude oil. But when the markets are in turmoil, and with direct talk from the likes of Warren Buffett stating that the potential of failing to get a bailout deal done is akin to a financial Pearl Harbor, well there is just 2 place you can bet people will go – gold and oil.

Gold is the traditional hedge in worrisome times. And crude oil has gained in popularity as a hedge as demand has increased in China and other developing nations. Both of these items are limited commodities, and require mining to bring them from the earth that surrounds them.

In the immediate short-term gold will have to fluctuate to handle the demand for safety. Which means that the gold supply will diminish and mines work harder to make up the difference. In the short and long-term oil is both required for energy needs and depleting the finite supply.

And I have to say that mining stocks look great because of all these factors. Why?

There was an old saying from when I was a stockbroker

“You may or may not get rich looking for the gold vein, but if you own the picks and axes you’ll never go poor.”

Companies with proven assets in coal, gold, and oil are the picks and axes of this market and on into the future. The world needs these commodities for safety and energy. No matter the financial outcome, and perhaps because of it, these valuable commodities have to come up to the surface. And mining companies are the means to do so.

With the decreased liquidity in the capital markets, competition is reduced and weaker companies will be forced to merge with bigger and stronger companies. Thus supply will be centralized into fewer hands. With demand up, profits will increase.

Now some would say that this is a temporary blip. And were this the spring I would agree. But with winter and cold weather approaching, and the fact that a slow 4th quarter is all but guaranteed in the U.S. this small blip should last for 6 months from this point.

Plus the fact that a Democratic President has usually been met with a lower market day one. In this case, Senator Obama has yet to declare that the current bailout of $1 trillion (including AIG and Fannie Mae and Freddie Mac) will disallow his initiatives on healthcare and other social programs. So the damage, unless he changes his stance, will even be worse.

When you consider all this, I come to the conclusion that mining stocks are one of the few safe havens in this tumultuous market. If you disagree, please do let me know why.

Labels: alternative energy, coal, commodities, crude oil, Dow Jones Index, gold, mining stocks, stock market, Treasury Secretary Paulson

I just can’t step away from the most pivotal issue in the election and the lives of Americans right now. The spin in the media is that Senator McCain is avoiding Senator Obama on a debate of foreign policy – something McCain has experience at for decades and Obama has a speech in Germany. And many are calling the deep desire of McCain to serve the nation, as was called for by Harry Reid yesterday, a political stunt. Though they ignore the school boy-esque scolding that Obama received when the President called him to the White House today.

But I am tired of hearing Democrats and some media pundits running around blaming every economic woe of the nation on Republicans. There is certainly more than enough blame for all the politicians in Congress, which is why it has the lowest approval rating ever. Republicans have screwed up and spent more than they should. But Democrats have been no better, in fact those that are critical to the finance of the nation have been particularly blind. Mr. Magoo could have foreseen more with their level of information and influence over the years.

But lest my words be seen as partisan, which to an extent I am sure they are as with any pundit or blogger, I present talking heads from across the spectrum of the cable news media and pundits, as well as politicians themselves. Listen to those that we have elected, and their votes and assurances. Then tell me this is only a Republican caused problem.

And please explain to me why we should believe that those that planted the seeds for this problem, and fostered it to the debacle we are required to deal with today, should be believed when they say they have a solution

History of mortgage crisis back to 2003


Fannie Mae and Freddie Mac contributions – Sept 18 2008


Chris Dodd was watching closely but did nothing – August 2007


Treasury Secretary Paulson progress made – February 2008


Barney Frank – Improving regulation of Fannie Mae and Freddie Mac July 14 2008


Obama accuses McCain of opposing reform


Have Republicans tried to do anything?


S. 190 [109th]: Federal Housing Enterprise Regulatory Reform Act of 2005 - A bill to address the regulation of secondary mortgage market enterprises, and for other purposes.

So I also ask this, If Senator McCain did not go to Washington D.C., if the President did not call Senator Obama to the White House, are you sure there would be a resolution to the bailout crisis? Would that resolution be in the best interest of the nation?

Is a debate, that could be easily rescheduled, more important than the potential of 4 out of 5 Americans losing their homes and jobs?

And lastly, isn’t it a bit hypocritical that Democrats claim that the debate must happen because America wants this; yet they defended Senator Obama when he refused for 2 months every request that was made for Obama to join McCain in speaking directly with Americans at town hall meetings across the nation?

Labels: Barney Frank, Chris Dodd, Congress, Democratic Party, financial news, Freddie Mac, mortgage crisis, Senator Barack Obama, Senator John McCain, Treasury Secretary Paulson