Archive for November, 2010

 
With our debt doubling to $14 trillion in just seven years, the time to take action — cut spending — reform taxes — start acting like the world economic leader we are — is now, before it’s too late.
 
I hope it’s not already too late.
T. Boone Pickens did a great piece on natural gas on Tues.  He summarized:
 
     It’s cheaper, it’s cleaner, it’s abundant, and it’s ours.
 
Honestly, can it get any better than that? 
 
It’s hard to watch oil prices without also being aware of natural gas.  Someone recently said the price of natural gas today is the equivalent of $22 a barrel oil… or that’s 1/4th the actual price… and, best, the price of natural gas isn’t influenced by currency, gold, emotion, stock market, etc…
 
… just good old fashion supply and demand
 
… and in that regard, we have supply in spades.
 
We import almost 2/3rds of our oil — read that, we send almost a trillion dollars to the middle east every freakin’ year.
 
And, 2/3rds of all oil we use is for transportation.
 
Like T. Boone, I’m stupefied that I even have to ask the question: 
 
     Why the hell aren’t we buying natural gas mobiles…
 
… so we can stop our dangerous dependency/obsession on middle east oil once and for all…
 
… so we can keep an extra trillion bucks in our country and not let it accidentally fall into the hands of terrorists…
 
… so we can burn a cleaner fuel and SAVE THE PLANET… ?!
My stepfather was a 20-year intelligence officer with the Army (speaks fluent Russian, does crossword puzzles in ink, etc.).  He used to have a phrase, "it’s good enough for government work."  Half the time it was a compliment… the other half a jab… it was up to we kids to be smart enough to know the difference.
 
 
It’s hard to disagree with the spirit of his piece.  Warren does a great job reminding us how scary it really was… and how important fast-action was, if not practically, emotionally.
 
However, hats off to Barry Ritholtz of Fusion IQ… he did a rebuttal that was so deadly accurate that I suspect even Buffet is blushing a bit… certainly something my stepfather will appreciate!
While TARP wasn’t a bailout… the money thrown at the auto companies… including GM… totally was.
 
Given how hot the GM IPO is right now, some people are now cheering that these auto company bailouts were, in fact, really terrific investments.
 
Not so fast.
 
It is wonderful that we’re going to get some of our money back.
 
    

     At G.M., the government injected about $49 billion to stabilize the company and help it through bankruptcy.

     G.M. has repaid $7 billion, and the government will receive $12 billion more this week from its share of the stock offering, assuming the shares are priced in the upper range of expectations, from $31 to $33. Even then, the Treasury Department could be sitting on a $7 billion to $9 billion loss.

 
Even in the most optimistic scenarios, I still don’t see any way we — the American taxpayers / investors of last resort — will make any money from this. 
 
People say that there was a qualitative benefit that I’m not taking into account… in that GM didn’t have to file bankruptcy, lay off tons of people, bad morale, etc. 
 
My response is, "huh?  they did file bankruptcy… and none of those bad things happened."
 
The only bad thing that happened was the American taxpayer / investor of last resort grossly overpaid for our ownership stake.
Bailouts are not investments… meaning, you never see your money again in a bailout… but you potentially do in an investment.
 
 

     The Troubled Asset Relief Program [TARP] wasn’t really a bank bailout after all, but instead was the “most successful government financial program ever,” banking analyst Dick Bove said.

It’s terrible to be in a position to have to be the "investor of last resort"… but, as stated before, that’s a money making role to play.  Thinking about TARP as a bailout is just plain wrong.
 
P.S.  Now, using investment to pay ridiculous bonuses to people that nearly bankrupt a company… now that, on the other hand, is something to take offense with!
Obama — essentially the CEO of a money-losing government — is rewarding government employees?!
 
 
*  Federal workers earning double their private counterparts:  Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.
 
*  The number of federal workers earning $150,000 or more a year has doubled since President Obama took office.
 
And — check this — Obama is still planning on giving a 1.4% across-the-board pay raise to 2.1 million federal workers.
 
This kind of thing boils my blood.  As a shareholder (taxpayer), Obama should be fired for this kind of irresponsibility. 
 
If Obama wants to keep his job, he should — like we in the private sector have had to do:
 
(1)  Fire 10% of the government workers
(2)  Cut salaries by 10% until the country starts producing surpluses again
(3)  Cut exec salaries by 20%
 
This is what you have to do when the proverial shit has hit the wall.
 
If Obama doesn’t want to do these things, he should resign and let someone more responsible take over.
Everyone wants a weak dollar… because they say it makes our exports more attractive.
 
What exports?  The few areas we have superior automation doesn’t nearly off-set the many areas where our labor costs kill us.  (Tough to compete with 3rd world sweat shops.)
 
Ironically — even sadly — for the exports that we do have a clear "value added" advantage… well, why in the world would we want to make those items cheaper?  We should be getting more, not less.
 
From a corporate perspective, most big U.S. companies derive about 50% of their revenues from overseas anyhow… so isn’t this all just a big corporate wash at the end of the day?
 
It may be a wash for a corporation… but not for U.S. consumers.  Here’s the awful truth:  A weaker dollar means a lot of the stuff we buy will be more expensive.
 
But it gets worse:  Since the world pegs oil prices to the dollar… a weaker dollar contributes to higher oil prices… and for regular readers of this blog, you know that means the price for absolutely everything we buy will be more, too.  A double whammy for us.
 
We know that Americans — the largest consuming engine on earth — have a breaking point.  Do we really want to test that again? 
 
Give me a stronger dollar any day.
 
 
 
Update:  Quote from Jim Rickards, sr. managing director at Omnis, a market intelligence firm:  "People buy a Boeing

aircraft because they are good planes," he said. "Not because the dollar is weak.  EXACTLY.