Friday, September 30, 2011

The stalled trade agreements

In one of his many economic commentaries in recent weeks, President Obama mentioned the employment benefits of new trade agreements with South Korea, Columbia, and Panama.

They all sit unsubmitted on his desk. It is estimated that the agreement with South Korea alone could lead to over $10 billion in new exports for the U.S., and these are industrial jobs, infrastructure development jobs, and upscale consulting jobs. A Columbia agreement could create over $1 billion in new export revenue of like kind. Panama, who knows, golf course mowers for our military that hides there in riskless jobs and expats who enjoy a better life than here in this heavily taxed and harried country.

All of this sits on Obama's desk because he refuses to break any actions into pieces that can be digested by the House of Representatives. In this case it is a job retraining stipend that he will not allow to be voted on separately. Most of the jobs that this is associated with are call center jobs which have nothing to do with the kind of higher paying productive jobs that could be produced by the trade agreements.

Job retraining expenditures are a laudable concept, but let's face it. With 99 weeks of unemployment insurance, with the housing "depression" that prevents mobility, and I use quotes because that's exactly what it is, and with the many lame bureaucrats that run these job retraining programs, they produce little benefit.

One could wonder whether Barack Obama and Michelle Obama's minds are focused on only personal bias, or political positioning, or wonder upon wonders the actual benefit to the public and job creation.

There are aspects of Obama's administration that I admire, but this roadblock to new good jobs is not one of them. His open lie about supporting these initiatives is just awful. He should get on with it, submit the proposals, and then let the House of Representative which was elected by U.S. citizens decide on the next step. In the interim, good jobs will be created, exports will expand, and he will have lived up to his word.

Sunday, September 25, 2011

Florida's Republican straw poll - Cain makes his mark

Straw polls in primary states are mostly meaningless exercises with relatively small groups of voters with individual agendas. Rarely, however, has there been a surprise like yesterday's resounding win by Herman Cain.

He is certainly considered a fringe candidate. He is politely ignored by the other panelists in the debates. Yet he has ideas, a well timed sense of humor that shows a real personality, and he is the only candidate to advocate a complete overhaul of the tax code and not haircuts around the edges.

His double digit trouncing of Perry and Romney, combined with Bachman's 1% support, was a laughable treat, short lived with almost no doubt, but still some welcome unpredictable news. So much of today's politics seems scripted sentence by sentence, quip by quip, and this certainly broke that mold for at least one day.

Is any follow up possible, or was this more of an indication that these straw poll voters are not enamored by any of the "media anointed" candidates. At least Cain will not be edged out of the debates anytime soon.

Saturday, September 24, 2011

The fragile side of globalization

Look at the parallels between today and 2007.

In 2007 it was generally accepted knowlege that approximately $2 billion of sub-prime mortgage loans were in serious trouble. That was alarming, but $2 billion was only a fraction of the overall mortgage market. It looked like some companies and investors would take some hits, but nothing was viewed as calamatous.

What wasn't generally known was that credit default swaps of 60 times that amount had been written against the securitizations holding these trash mortgages. The concern mounted and moved into the so-called Alt-A mortgage market, a step above sub-prime. Then the construction market stalled, new buyers vanished, new financings stopped, and much of the prime mortgage market became suspect as well.

Mortgage securitizations that had been sold broadly, to everyone from supposedly sophisticated global institutions to clueless U.S. retail investors, became toxic and subject to the attacks of the bond vultures. Employment suffered, consumers pulled back, Lehman, Bear, and Wamu were overexposed and collapsed, and without the uninformed largesse of Wachovia and Bank of America, Golden West and Countrywide would have gone down as well. Global credit markets nearly froze up, and a serious recession was underway.

The point is that what looked like a small containable event at the outset ballooned into a massive economic disaster from which no one can say that we have even yet recovered from.

Looking at today, in 2010 it became apparent that a small country of seaside resorts and historical monuments had debts beyond its capacity to repay. Greece has almost no real industry other than tourism, olive oil, a large shipping industry that has much of its wealth offshore, and goods that are mainly for domestic tastes and consumption like ouzo and retsina. The country also has a tradition of tax evasion, patronage, and restrictive work rules that would be viewed as corruption in many countries but is almost a source of pride there. It's part of the culture.

Due to its inclusion in Euroland the country was able to issue debt in amounts that would never have been possible had the drachma still been its currency. And almost amazingly, many banks and institutions did not look through the facade of the Euro and funded huge amounts of debt to support Greek profligacy.

But as in 2007, this is one small country in a prosperous Europe. With some work, shouldn't it be containable. And as in 2007-2008, the answer is no. With one crack in the wall, little Iceland imploded, Irish banks were unmasked as completely irresponsible real estate lenders, seemingly viable Portugal became a bond vulture target, and even Spain and Italy, real important members of Euroland, are now under pressure.

Having a region as important as Europe under financial stress has impacted the rest of the world. Brazil growth retracted 27% in the most recent period, India's growth is slowing, and China is under pressure on several fronts being lower exports and more pressure by workers for better treatment and wages.

U.S. commentators constantly mention Europe as the drag on our economy, but any idiot knows that is only one piece of the puzzle. Political gridlock could be a polite term to describe the approach of Congress to unemployment and economic slowdown, and an insular xenophobic idiocy could be another way of saying it. The U.S. Congress is incapable, mentally and culturally, of looking constructively beyond its borders. They seem to be blind to the fact that the political dysfunction in the world's largest economy undermines confidence in the rest of the world.

So for now, little wonderfully attractive tourist destination Greece, a small fraction of the global economy, has set in motion a chain reaction of events that threaten a global recession. In 2007 it was a minor subset of the U.S. mortgage market that did the trick. In 2011 we are retracing the momentum of a seemingly small problem becoming a global phenomenom.

We can only hope that lessons learned from 2008 and 2009 are somehow remembered despite the challenges in Europe and the rigidity of U.S. politics such that a collapse of liquidity is avoided and potentially viable countries don't lose any sense of political control.

What's the bright side of all this. Every day brings interesting news. Watching investments eliminates too much watching television or reading crime novels. Wealth is being diminished and portfolio allocations are changing automatically. It's an unnerving time, but maybe for those with balanced portfolios and some savings it's a time to appreciate what we do have - and of course look for opportunities that become absurdly oversold.

Thursday, September 22, 2011

Apotheker must be out at HP

We learned in recent days that CEO Leo Apotheker was hired sight unseen by much of the Hewlett-Packard board. We know that he has no sense of how to communicate to the investment community, which may be ok in Germany but does not work here. His radical ideas for the company may or may not be prescient, but he convinces neither his employees nor investors. He's out, a terrible choice for which board heads should be chopped as well.

Hewlett-Packard is a stand out brand, their damn toner sales could sustain them, and with a capable CEO they could attract the talent to revive their already substantial p/c division.

Fire Apotheker immediately, and the risk/reward on this beaten down stock may not be so bad.

Saturday, September 10, 2011

An idea

Of course what I am saying is that what I have been writing has been proven right. Obama is a nice guy who knows nothing about finanical markets, does not listen to advisors who do, and acts on long held resentments. We do need nice guys, but the extreme right wing is on a tear.

My suggestion --- Jamie Dimon should run against Obama for the Democratic nomination. His advantage is that he is smart and understands economics and that he did not come from a rich background. His obvious disadvantage is that he made money on so called Wall Street.

Thursday, September 08, 2011

Obama's job plan

Short thoughts -- too much information from the President:

His Start -- reflecting on a long gone jobs era where companies guaranteed life security and pensions like in Danville at the lost textile mill(modest golf course that had a guy that beat Jack Nicklaus at the Tour of Champions event in a playoff and came in #2 at the Masters) or playing myself in Dayton at Armco's exceptional course( where as a banker I helped them stay on life support as we joked and drank our way around their beautiful surroundings) until they could no longer function or compete or manage, well Obama's reflection back to that era was just stupid. The CEO's at those companies still lived liked kings because everything had not been inflated. Looking back at those days was such a toss by Obama to labor. He didn't mention the many companies thrived in that era, but I thought of what a modest life my family lived by any means with my father being a corporate accountant at the Danville mill. It was fine, but that's not the current marketing life of America or the globe. We should all be vastly prosperous as we watch our televisions or dig into our computers. It will never happen.

My family did not just live a grand life, and that's false understanding from the start. A sandwich was two slices of white bread, mustard on one side, mayo on the other, a slice of bologna in the middle, that was lunch. For all I knew it was a great life. What was there was not bad, sports, neighbors, friends, but it was it was many good trade offs for one week vacation one year, two the next, one the next, and never more. Obama harks back to a life that did not exist. We, many of my friends and I, worked and tried to get good grades, have a decent time, make friends and eventually found jobs. That's the only deal now, Jobs.

Other than initially harkening back to a time that really did not exist, Obama tried to be creative and positive but did not say too much of substance. If he can't break all of this into smaller possible passable actions that the Congress and even me can understand, nothing will happen. It was noticeable that Boehner rarely stood or clapped even if part of constituency did.

There were mentions of the tax code, small business, school vouchers, infrastucture projects, all good stuff, BUT THIS NEEDS TO BE BROKEN UP INTO PIECES OF LEGISLATION THAT IS NOT BUNDLED INTO ONE REGULATORY MANDATE. This could be done if the President cared about it in any real way. In a bundle it will not pass, in pieces maybe it can!

Only other observation at this point was that in the first two thirds or so of the presentation the President said "we" and in the last part he said only "I".

The Republican "debate"

Last night I watched one of these, the first that I had seen. All of the commentators have had their say, but some of what is said here may not have been said, regardless of its merit. I had never seen Perry but generally found him to be alternatively repulsive and resilient, purposefully ignorant, and completely capable of winning the Republican primary.

The one thing that I missed in all of the media commentary was the most appalling event of the evening. When Perry was asked about the 234 executions under his reign as governor of Texas, the audience applauded more loudly than at anytime during the droning one hour and forty five minutes, even before he responded. When he did respond that he never missed a minute of sleep about this, the applause was resounding. Who are these people. Who is this man. Who are these Americans?

A month ago in Costco I saw a pile of paperbacks of John Grisham's "The Confession" on sale at $5.59. Grisham is a good story teller but it had been at least 15 years since I had read one of his books, even on airplanes. This one had the same one dimensional characters but was, as the Washington Post said, "a superb work of social criticism in the literary troublemaker tradition of Upton Sinclair".

To revert to what may be book review cliche, it is a "compelling and scathing" tale of the Texas judicial, penal, and execution system. It is fiction, but it is a well researched book and Grisham is no off the wall leftie. Read it, skim it, whatever, and you will have some idea of what Perry is proud of and what this ignorant audience applauded. I can't imagine that Nancy Reagan felt comfortable there, and she was only pressured to be present to respect the honor to her husband. She certainly did not look pleased to be part of this group. Maybe it's just age or grief that I saw, but her work in the total anti-tea party stem cell research area over recent years would certainly not put her in that camp.

Short comments:
---I like Huntsman
---Paul was as predicted but interesting, and his comment that "putting up a barbed wire fence and machine gunning people who tried to cross is un-American" was refreshing, despite his other Monty Python like beliefs.
---Cain has no chance of course but said a few interesting things. His 999 plan for taxation may be unfair and unworkable, but it had some radically interesing aspects if reworked and further explained. I had never heard of it. But the real true thing he said about the taxation system is "that we can no longer work around the edges". It needs wholesale change.
---Gringich was a clown and enjoys the role, but makes some good points when he is not showcasing himself.
---Bachman is a phony as a politician, to the right of Genghis Khan, but may be a wonderful person otherwise. She is certainly more credible than Palin if we would ever need to get into comparing women candidates.
---I don't know if Romney can ever overcome his sort of perceived "elitist" evasive presentation style. As said by a few, the word "elitist" once had some connection to being smart but now to many Americans it is just a curse word. My opinion, he should be the "Democrat" opposing Obama. Switch parties, and get out of these crazy people who in the South will be spooked, word intended, by the "Mormon" phrase. Let Huntsman take on that burden and see if Perry just self-combusts himself with his comments on Social Security, legal killing, complete isolation imprisonment for years before any judgement, and his extreme denial of any responsibility for the health care and education and feeding of the poor within his juridiction, much less his complete lack of knowledge on global issues.

Given the repeated applause at the execution rate comments, I am completely disheartened. Maybe Ron Paul is right. Don't let those fences go up because they may be used to keep us in.

Wednesday, September 07, 2011

Obama's huge challenge tomorrow evening

Notwithstanding my Friday post, every word of which was meant with the exception of one embarrassing misspelling that has since been corrected and I hope that no one noticed, it must be acknowledged that Obama has a challenging mission tomorrow. Does he dare cut spending in an economy under pressure. Does he dare raise spending on programs that will make no difference and just perpetuate the current state, fingers crossed that more support of state shortfalls and ineffective housing programs will buy enough time for the economy to revive. Could he even think of raising taxes without creating a poltical brouhaha.

Tax reform broadly and public/private infrastructure projects are nice ideas but are not overnight or even one year solutions. Those words still might be nice to hear.

My biggest fear is that he will direct the majority of his comments to partisan words and finger pointing, that he will use this speech as a political platform. The majority of Americans might even like to hear him take this approach, but the majority of Americans don't move the stock markets and make major capital investments. Without a better market environment, nothing will improve. I am not even sure that he understands this and what alienating the people, like 'em or not, who make investment decisions of any magnitude could cause.

It not an easy speech to make, maybe having as much danger as opportunity.

Friday, September 02, 2011

Obama loses all credibility

The news that the federal agency that oversees Freddie and Fannie will sue all of the major banks is a travesty with huge implications. Fannie and Freddie were run by a Congressional committee and dictated their mandate by the Clinton and Bush administations. Strong financial institutions are fundamental to any recovery. Obama seems to want crisis as he and his family try to emulate a Kennedy life, vacations, vacuous words, and simulation of a vibrant spirit. He sees his 2012 chance as an opportunity to provide no choice. Crisis and blame, and economic damage --- the Boeing plant in South Carolina, the ATT/TMoblile block, these are political moves to secure his election in 2012 and are insuring a weak economy.

If only there were a Democrat who would challenge him. If only there was a Republican who wasn't an obvious jerk. Huntsman is the only exception and he appears to have no chance.

Thursday, September 01, 2011

Power back on, mental health recovering

Finally last night our power was restored. Resetting timed devices is still underway. Sprinkler system is on for no reason, but no harm done as we are allowed to water on the odd days, like the first.

Five days without power was no treat. I went into Manhattan several days to eat fresh food and read in cool places, but that's not the safest way for me to live. Worked out ok, perhaps. Bought too much good take out food than was prudent, took it home and didn't always make the right choices, so some spoiled and my good intentions were ridiculed. What's new.

The financial markets did what they were going to do without me, and tomorrow looks like a mess. At least I can now watch the carnage.

All things said, everyone is safe, all trees are intact, the house is fine, and our favorite take out places are back open - not a bad outcome given some of what happened around us!