Saturday, March 22, 2008

As the noose tightens...

Much like global warming, (whether you believe global warming is real or not), the absolute inability of our government to deal with issues that coalesce beyond the next election cycle will come to a head more quickly than the weasels would like to think.
The next president, assuming two terms, will be the last one to preside over a net surplus in the social security "trust fund". This article lays out what that means.

Social Insecurity, Sooner Than You Think

By Allan Sloan

One of Washington's rites of spring is almost upon us. It's the wonks' version of the Cherry Blossom Festival: the release of the annual Social Security trustees' report showing the health of our nation's biggest social program. Each year, the report touches off a debate, mostly misguided, about ...

To view the entire article, go to http://www.washingtonpost.com/wp-dyn/content/article/2008/03/17/AR2008031702702.html?referrer=emailarticle

Wednesday, March 19, 2008

Bear Stearns

This was a response to some (rare) economic blathering on Redskins Insider...
The key point is that there is a considerable spread between the risk that a typical investor is willing to take and the risk profile of these highly-leveraged, wildly overvalued mortgage-backed CDOs. So they're not worth the book value that a company like Bear Stearns has them listed at, and no one is attracted to them even at a discount price.
My analogy would be a car dealer that has a bright yellow AMC Pacer on the lot. It's not worth the $10,000 MSRP, and no one will buy it for $5,000, $6,000, or whatever less! Meanwhile, he's paying interest on the car, it's falling apart before his eyes (that's why it's a Pacer), and pretty soon the dealer starts thinking about giving it away just to stop the bleeding.
The government "rescue" of JP Morgan is equivalent to Chrysler taking over AMC [not that that would ever happen!], and the government stepping in as part of the transaction and providing a class-action lawsuit protection on all Pacers. In a reasonable world, the government will not have to lay out anything; if the market collapses, JP Morgan (Chrysler in the analogy) at least doesn't have to worry about a class action lawsuit.

Time for the annual update

In the end, there's not that much more to say.

The presidential nomination process is winding down toward a messy, muddled conclusion. Since the traditional media are totally unprepared for anything other than a neat little package, over on Super Tuesday, it's been interesting to watch what's happened since.
In the end, the typical media reports have focused on the personalities, not the ideas, plans, and intentions.

Ask yourself this question; on Jan. 23, 2009. [your choice for president] sits in the Oval Office for the first time. What is the first thing (s)he wants to get done? How much do they expect it to cost? And how are they going to pay for it?

Then, how are they going to "work with the other side of the aisle" to "get things done"? Obama and Clinton will both have majorities in the Senate and House, quite possibly filibuster-proof. If that really happens, they may not need to talk to the republicans... for the first couple of items on the to-do list. It'll be like 1993 all over again. And it will be very interesting to see if any lessons convey.

The funny thing about the whining about McCain not being conservative enough is that with a congress that can quite possibly override a veto, there's no chance for any legislation that truly appeals to 'core' conservatives. McCain might be able to retain the current tax rates that are due to expire, but that's about it.

In any case, the fundamental issue is that the current federal budget is $3 trillion of a $13 trillion economy. Do you feel you're getting value for your investment?