Tuesday, September 30, 2008

Jack and the Beanstalk

I was reading an article about lawmakers who voted for the bailout, when I came across this:
Some of those who voted for the bailout said they did so in possible conflict with the districts they represent.

McNerney, a wind engineer and political neophyte before his election to Congress in 2006, said his district opposed the bailout but he felt it was best for the economy.

"People's jobs are a great deal dependent on this," he said, as well as "their home loans and all of their livelihood." Yahoo Biz

I hate to break it to you, but you are not our daddy. You were not elected to decide what is best for us. You are a representative. You were elected to represent.

Get it?

You don't make the decision on your own.

You don't decide what is in our best interest.

You represent the will of the people in your district.

It's like Jack in the Beanstalk syndrome. Your momma sends you to the market to sell the cow. But instead of doing what you are told, you decide it would be a much better idea to buy a handfull of magic beans.

And maybe that works out in fairy tale land. But, in the real world, when officials do what they please IN SPITE OF the will of the people, they become tyrants.

And it doesn't rightly matter if you believe that you are doing it in 'our best interest.' You did not get elected to decide my best interest. You got elected to represent my will, and the will of the people in my community.

So, to all the representatives out there that think they know what is best for me. Pretty please with sugar on top, stop thinking and start listening.

If your constituents are telling you not to vote for the 60DD4MN3D bailout, then don't vote for it.

Sunday, September 28, 2008

Oppose the Bailouts

I have already contacted all my representatives. Now, I am contacting everyone else I can to help oppose the bailout plan.

Our politicians are not leaders. They are cowards that have been bullied by the spectre of Fear, Uncertainty and Doubt. The Treasury and the Fed are using the threat of massive devastation to get these spineless politicians to spend yet more of our money.

And yet, the Treasure and the Fed have NO CLUE what the market will do. If they did, we would not be in this mess. They are the ones that GOT US HERE in the first place.

It is the definition of insanity to keep doing the same things and expect to get different results. The current economic situation is the result of failed policies that the government is now seeking to prop up with more taxpayer money.

Do not let them.

Maybe we can't stop the deal from happening, but we can't just sit back and take it either. So, take a few minutes out of your day and contact your representatives.

Find Representatives
Find Senators

Let them know you oppose the plan. And, if they don't listen... well, we can deal with that next.

Ron Paul on the Bailouts

Friday, September 26, 2008

Wamu Becomes Largest Bank Failure Ever

From the Portland Business Journal:

"J.P. Morgan Chase bought the bulk of Washington Mutual’s banking operations Thursday in a deal orchestrated by federal regulators who had seized control of the troubled thrift.

In a sign of the bank’s worsening condition, regulators said WaMu had lost $16.7 billion in deposits since Sept. 15.

Saying WaMu had insufficient liquidity to meet its obligations and was “in an unsafe and unsound condition to transact business,” the federal Office of Thrift Supervision closed the bank and appointed the Federal Deposit Insurance Corp. as receiver. The FDIC held a bidding process that ended in the sale to J.P. Morgan.

Regulators, who termed this the largest U.S. bank failure ever, said there will be no effect on the bank’s depositors, but it appeared the WaMu shareholders would be wiped out as a result of the deal."

Wednesday, September 24, 2008

Anatomy of a Blowup

Great insights from an incredible mind...

Figure 1 My classical metaphor: A Turkey is fed for a 1000 days—every days confirms to its statistical department that the human race cares about its welfare "with increased statistical significance". On the 1001st day, the turkey has a surprise.

Original Article

Tuesday, September 23, 2008

CEO Murdered After Firing Workers

Corporate India is in shock after a mob of sacked workers bludgeoned to death the chief executive who had dismissed them from a factory in a suburb of Delhi.

Read the full story

Tuesday, September 16, 2008

Seeking Alpha Gets it Right

Capitalism punishes bad risk. These jokers took bad risk in spades, so they should be wiped out. The common shareholders should be left with nothing. If this was a good deal for the taxpayers, this would have been a private transaction. The very fact that the Fed is involved speaks loudly to us that no private company believes that this is a prudent loan.

Go to the site and read the entire story.

Monday, September 15, 2008

No Bailouts. No Rescues.

One good thing about the Lehman bankruptcy is the fact that the government did not stop it.

Free markets can work if you let them. But, as in the case of Fannie Mae and Freddie Mac, the US government has shown that it is more than willing to let the taxpayer take the bullet for private businesses in the face of a free market firing squad.

Well, I hope the Lehman decision is a sign of things to come. A lot of big names are on the chopping block, AIG and Wamu being the top two that come to mind.

And while they scurry about trying to get financing to cover their shortfalls, I hope that the government remains content to sit quietly on the sideline and let's nature take its course.

Lehman Bankrupt

Another one bites the dust. Some interesting links:

Affect on the Dollar
On Bankruptcy Law

More later.

Monday, September 08, 2008

Rogers Blasts USA as "More Communist Than China"

Boo ya! Finally someone telling it like it is.

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it's just bailing out financial institutions"

"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this"

Watch the video

Fannie Mae and Freddie Mac Quick Analysis

What does the seizure of Fannie Mae and Freddie Mac really mean? Here are some quick thoughts...

If any of you were under the illusion that we live in a free market economy, this should be the nail in the coffin. Free markets don't step in and save struggling companies. They let them die and use the corpses as reminders to other companies to make smarter decisions.

But no, not us. We encourage bad behaviour and fiscal irresponsibility by stepping in to save companies that could not survive on their own.

5cr3w the Taxpayer
I have a business proposition for you. I will start a company. If I make money, I will keep all the profit. BUT, if I LOSE MONEY, then you will assume my debts. Sound good?

Well, that's exactly what is happening to us right now with this seizure. Fannie and Freddie were private companies. That means that they lent the money privately, and kept the profits privately.

But now they are in trouble and the GOVERNMENT has taken over. That means that Johnny and Sue Taxpayer, You and I, are now responsible for the debts incurred by these irresponsible companies.

Read it again, I am not making it up: They have a business. They make money. They keep it. They lose money, now its our responsibility and we pay for it.

Bondholders Win
The takeover shelters bondholders while potentially hurting stockholders. Considering the influence that bond holders have over fiscal and monetary issues, especially the valuation of currency, this is a very interesting area that I'd like to look at more later.

However, in the near term, this take over bodes well for bondholders at the expense of stockholders.

Smaller Banks In Bigger Trouble Now
Let's look at the stockholder / bond holder thing in more depth. Bond holders own debt in a company. Companies sell bonds and promise to pay the money back later. A bond is like an IOU.

Stockholders own shares in a company. If the company goes up in value, the value of their shares go up, making them money. They also get paid money in the form of a dividend.

Simple stuff.

Okay, so, let's look at what happens. If these companies fail, they can't pay back their debts and the stock is worth nothing. So, everybody loses their money.

On the other hand, with this take over, the stocks lose value and the dividends get eiliminated, but the companies still exist, so they can pay back their debts. So, the stock holders lose, but the bond holders win.

Now, the question is, who are the stock holders?

In particular, a lot of banks held shares in these companies. But, these banks are now faced with holding a lot of paper worth a whole lot of nothing. Worse, the dividends that the stocks were going to pay have probably been completely lost.

It's a lot like people who live month to month finding out that they won't be getting a paycheck next week.

So, even though we have been expecting bank failures en masse (See the Bank Closure Map), the exact mechanisms on how they would happen were unclear. But, with the seizure of Fannie Mae and Freddie Mac, very clear lines are now drawn for many more banks to go under.

HERE IT COMES - Fannie Mae and Freddie Mac SEIZED!!!!!

We knew it was going to happen, but we weren't sure when. Well, the big dominos are starting to fall now.
In its most dramatic market intervention in years, the U.S. government seized two of the nation's largest financial companies, taking direct responsibility for firms that provide funding for around three-quarters of new home mortgages.

Full Article

Friday, September 05, 2008

Financial Tsunami

The U.S. government needs to start using more of its money to support markets to stem a burgeoning "financial tsunami," according to Bill Gross, manager of the world's biggest bond fund.

Full Story