Tuesday, September 30, 2008
Monday, September 29, 2008
The McCain debate needless to say was a disappointment. Prior to the debates, the media revealed that Obama spent days practicing for the debate. It was also said that McCain didn't spend much time preparing, because he does better without preparation. Well from watching the debate, I think McCain should have practiced more. I was hoping for an Obama knockout by McCain. Admittedly, McCain did better on foreign affairs, but he didn't do well on the bailout, and that was the most important issue of the night.
I have said before that we should do debates more like the French where the candidates sit down at a table and dialogue, and the moderator only controls the questioning process. Friday night was the closest to these French debates I have seen except that the candidates instead of sitting were standing at a lectern. Jim Lehrer, the moderator, was to start with a lead question, and the two candidates were to dialogue, but I don't think either candidate got it. On several occasions, Lehrer, said, "Talk to each other", as opposed to the television audience or he would say, "say it directly to him" directing Obama to McCain. McCain not catching on sneered "are you afraid I can't hear him?" This prompted Lehrer to say, "I'm just determined to get you all to talk to each other. I'm going to try." It was like a schoolmarm trying to get her students to follow a new process, but the children, hesitant to change, just couldn't get what the teacher wanted. Isn't Obama big on change? Lehrer just gave up after awhile.
Obama did catch on after awhile, and began talking to McCain, but McCain did not look at Obama once during the entire event. That did not look good. It was also obvious that Obama had practiced for this debate because he had improved in his debating style quite extensively with very few uhs and duhs as is his custom. But, this was a referendum on the economy, and McCain should have and could have done much better even though the focus of the debate was supposed to be on foreign affairs.
What polls showed and what the American public wanted to know was; why did McCain feel it necessary to go to Washington? And what is the difference between his bailout plan and Obama's bailout plan? These questions were not answered. When the three page Paulson plan was announced, the senate was receiving 100 to 1 phone calls against the plan. Obama said, "We haven't seen the language yet "but there is a huge difference between what the Republicans want and what the Democrats want. McCain needed to spell out these differences, and why his plan is what the American public wants. This would have gone a long way in alleviating the public's fears. Moreover, it would have shown once again how McCain is not Bush since McCain was against the Bush plan, but he remained reticent, and said nothing. During this entire round, I wanted to grab McCain's neck and shout, "Don't let this radical leftie near the White House." – but I didn't think he would hear me.
And why didn't McCain say anything about Representative Barney Frank and Senator Chris Dodd. These are two of the principals involved in the Fannie Mae and Freddie Mac mess yet they are overseeing this bailout. Wasn't McCain going to name names?
What was amazing was how Jim Lehrer kept asking if there were any fundamental changes that either candidate would do because of this new economic crisis. As circumstances change ones plans would presumably change. But both McCain and Obama stuck to their talking points. McCain finally said he would consider a spending freeze which is actually a good tool. Businesses do it all the time during slow periods in a business cycle. Obama not understanding economics once again said, "The problem with a spending freeze is your using a hatchet instead of a scalpel." At least McCain's pro growth policies of drilling off shore, lower taxes, lower corporate taxes, cutting spending works in any environment whereas Barack's policies of high taxes, socializing health care, etc will hinder growth and kill a slowing economy. Barack, however, stuck to his talking points of raising taxes even on corporations and even after Jim Lehrer prompted questions to both candidates on what they would do differently.
McCain did not spell out how Barack's taxes would destroy the economy and cause the bailout to fail. He needed to do this. He would say one line about Barack's taxes and then go back to his earmark talking points. We all know about McCain's earmarks, but he needed to expose what Barack's taxes will do. Imagine how much it is going to cost to socialize medicine when we just bailed out Wall Street. That is going to kill the economy.
McCain said, "Right now, the United States of American business pays the second-highest business taxes in the world, 35 percent. Ireland pays 11 percent." And Barack Obama shot back that American corporations have all kinds of loopholes. McCain should have said how Ireland has been booming because of its low tax rate. Ireland is a good example. Not sure what loopholes Obama was talking about, the point is you lower corporate taxes, you grow the economy period.
The second part of the debate was McCain's shining point and while foreign policy should be as or more important than the economy, Bush's success on the war on terror has actually hurt McCain – Why? - Because the American public has the memory of a gnat. 9/11 is as distant to the left as Pearl Harbor, and many on the left don't even believe the war on terror remains a threat. They still believe global warming is a greater threat than terrorism.
When Russia invaded Georgia, Obama made three evolving statements, the first showing he had no clue as to what the incursion of Russia meant into Georgia. During the debate, McCain said the following, "Well, I was interested in Senator Obama's reaction to the Russian aggression against Georgia. His first statement was, "Both sides ought to show restraint."" McCain, then showed a very deep understanding of the situation with Georgia and Russia. As McCain derided Obama's naiveté on Georgia, Obama appeared flummoxed. Obama had no clue that Georgia was an ally of ours with 2000 troops fighting alongside of us in Iraq. A sound bite that the media will repeat over and over the next day is an important aspect of a debate. But again, McCain missed an opportunity. McCain knew he would be speaking about this; this would have been an opportune time to sneak in a memorable sound bite. How about, "Obama first said each side needed to show restraint until others made it clear that this was purely Russian aggression, and then he had to google whose side we were on." Or something of that sort.
Obama looked visibly flustered at times during the second half of the debate, and interrupted McCain several times. When Obama first interrupted McCain, McCain should have put him in his place by saying, "Do you mind if I finish my point." But, he did not, he let Obama interrupt him. Several times Obama raised his hand like an impatient child, but then just smirked in the usual Obama condescending way. This is the man that could be president.
In any event the foreign policy part of the debate clearly went to McCain, but the country is focused on the economy and because McCain did not score any major points against Obama on the economy, I believe that Obama won the debate. Polls show that Americans trust Obama ten points more than McCain, and only God knows why. I wonder what the voters base this on. I can only surmise that we are dealing with an illiterate electorate.
I hope someone is prepping Sarah Palin correctly for the VP debate. I was listening to Laura Ingraham this morning, and she makes a valid point. Whoever prepped McCain for the last debate should be fired, whoever has been handling Sarah Palin should be fired. I hope that Sarah Palin does well on the VP debate, and I hope she is being well prepared. She needs to be authentic. She needs to be Sarah Palin.
As of this writing, latest poll data per Gallup shows Obama up eight points less than 40 days to the election - God help us all.
Thursday, September 25, 2008
The current crisis in which we currently find ourselves was 100% preventable.
During the Clinton years, it was the Internet bubble. Bill Clinton was widely credited for the economic growth and expansion that took place during his eight years in office. However, anyone who studied what was really going on also understands that this expansion was due in large part by the dot-coms that were making no money. The economy was run by venture capital. There were no products, just hope. At one point there were six Internet companies of dog food. The growth in sales was what counted, profits didn't matter. Stock market valuations reached the stratosphere. All of this occurred as a result of the infusion of massive amounts of venture capital. The adage, "Stock market valuation doesn't matter, we have reached a new paradigm" was the mantra heard. Anytime you hear this, it is time to head for the hills, because stock market valuations always matter, and bubbles will always pop. What goes up must come down. At the end of Clinton's term, the Internet bubble did burst, and in its wake, it left collateral damage of companies from every industry. These companies were affected since they no longer could do business with these failed Internet companies. This is what I call Clinton's "Fake Economy."
When Bush was elected president in 2000, he inherited a fledgling economy, and in 2001, there was another shock to the system, September 11th. This could have portended disaster to the economy. The tragedy of September 11th caused the Dow Jones to fall 681 points 7.1% to 8920, its biggest ever one day point decline. The stock market lost 1.2 trillion dollars in one week. Every industry declined especially the airline industry. Can you imagine if Bush raised taxes in this scenario? President George W Bush campaigned on lower taxes, and in 2001 he followed through on his promise. These tax cuts spurred the economy on, and avoided a recession that everyone thought was going to happen.
As the economy grew, a new bubble was forming, this was the housing bubble spurred on by low interest rates and easy credit. This was Bush's bubble. People who could not afford houses were buying houses with loans lower than the cost of money on the assumption they would make up the difference later when they sold their houses later at a higher price. Why? - Because houses would always go up. Where had we heard that before? Banks would package these loans and offload the risk to other financial institutions and investment houses making a quick buck. Investment institutions would package these loans into fancy financial instruments known as derivatives that few people could understand. Earnings on these derivatives were estimated and wildly optimistic, and their ultimate value depended on the creditworthiness of the counterparties involved, and we now know the creditworthiness of these counterparties. Warren Buffet called these derivatives in his annual letter to shareholders 2002, "Weapons of financial destruction."
If you want to understand the idiocy of bubbles, and how we will continue to follow them like a pack of rabid dogs, and how the same pattern will repeat over and over again, check out the Tulip Bubble. The tulip was introduced in Europe in the mid 17th Century from the Ottoman Empire. The tulip became so popular that buyers bid up the price to astronomical levels. In Feb 1637, Tulip bulb prices collapsed abruptly, and the trade of tulip bulbs grew to a halt. Click on Tulip Bubble to read the rest of the story. You may think that people were really gullible falling for tulips, but there is no difference in what is happening today.
Greed pure and simple drove the borrowers to take out loans they could not afford, and greed pure and simple drove the financial institutions to lend to any dead man walking.
Who is to blame? The Democrats will say it happened on Bush's watch so he is to blame, so they will point the finger and say, "This is Bush's legacy." But this started long before Bush was president. Even Bill Clinton had to concede that the Democrats were partly at fault. You can reach no other conclusion that Fannie Mae and Freddie Mac are a Democratic mess unless you are blind. The Democrats pushed for easier loans so everyone could buy a home. They don't understand that not everyone should own a home. Bush, however, is not blameless. He was responsible for many grants to left-wing organizations for the purpose of sub-prime mortgages.
So what do we do now going forward?
- Reinstitute the Glass-Stegall act – The Glass-Stegall act was enacted in 1933 as a result of the Great Depression. It was repealed by Bill Clinton in 1991. The intermingling of commercial banking and investing activity were thought to be the reasons for the financial crash. It was believed commercial banks took on too much risk. Banks became too greedy risking depositor's money as they tried to reap big payoffs. Many thought that the Glass-Stegall act was too harsh and adversely affected the banking industry. But with the repeal, what feared might happen after the Great Depression, happened. The Glass-Stegall act should be looked at. There needs to be a barrier between the normal financial activities of a bank and investing activities (ie: the speculation that was occurring in the subprime market between banks and the major brokerage houses.)
- Severely curtail the securitization of loans. Securitizing loans is the packaging of loans and selling them to a willing buyer for a profit. This allows a bank to take on more risk than they should because they offload the risk to other institutions. When did banks forget how to assess risk? That is their job. If loans are not securitized, the risk remains at the bank. The banks would not take undue risk if they knew they had to hold on to the loans.
- Golden parachutes and bonuses should be forfeited if companies fail.
- Banks and investment institutions should be transparent in the risk they are taking. I have invested in many bank stocks, and when I read the annual reports, it is almost impossible to assess the risk these institutions are taking. Loans on and off the books, performing and non-performing assets should be transparent, and the risk these financial institutions are taking should be in the annual reports. Had this been known, investors would not have been buying these companies. On April 2nd , 2008 I predicted this financial crisis in my entry The Coming Economic Tsunami. In my blog entry I quoted Whitney Tilson of Tilson Funds in which he stated,
We've been very bearish on housing for a number of years, but after all of the recent terrible news, we had thought that we might be in the 6th or 7th inning of this unfolding debacle and perhaps it might be time to start buying some of the stocks that have been obliterated, in anticipation of a bottom and then recovery. But then we were introduced recently to the CEO of Amherst Securities Group L.P. Sean Dobson, who has collected extensive data on every mortgage that was securitized in the United States this decade. He was kind enough to share some of his data with us, which shows that we are still in the early innings of the bursting of the housing bubble. Believe it or not, as bad as things have been to date, we have only seen the tip of the iceberg: an enormous wave of defaults, foreclosures and auctions is about the hit the United States. We believe it will get so bad that large-scale federal government intervention is likely.
Why does it take a financial analyst talking to the CEO of a Securities firm to find out the gravity of this problem? Why is this information not disclosed in the financials so investors can make informed decisions?
One final thought – The ire of voters is palpable and understandable. But, if Obama should be the next president of the United States, who thinks that Obama will not go ahead with his inane idea to raise taxes, and what do you think that will do the economy already teetering on the brink? He already suffers from abulia. One shudders to think of the possibilities.
Thursday, September 4, 2008
I first heard of Palin a few months ago. I read her resume and I saw an interview she gave on CNBC. She came across very well, and she knew her energy. She was the woman who would give the impetus to McCain to change his mind on ANWR. She also has an 80% approval rating in her own state. The left does not know how to deal with this woman.
The media is out of touch with mainstream America. For years Hillary was the darling of the media until the "One", the "Obamamessia" came along, then without so much as a by-your-leave, this same media threw Hillary under the bus, so much so that Clinton considered Fox News to be "Fair and Balanced." Then comes along Palin, a strong conservative woman, and the barrage of attacks begin, Palin belongs to the Alaska Independence Party, a group wanting to secede from the union, Palin supported the Nazi sympathizer, Pat Buchannan, Palin's down-syndrome child was actually the love child of their pregnant daughter. One problem, none of the attacks were true. They were rumors created by left-wing bloggers like the Daily Kos and picked up by the mainstream media as fact with no sources, just scurrilous attacks in order to impugn the integrity of this woman. This was supposed to somehow deter Palin to drop out of the race. However, the media would have loved it had Palin been pro-choice, aborted her down-syndrome child, and convinced her 17 year old child to abort her child. Then, she would have been the left's heroine.
Janet Daily of the London Daily says,
"Like Margaret Thatcher before her, Mrs Palin is coming in for both barrels of Left-wing contempt: misogyny and snobbery. Where Lady Thatcher was dismissed as a "grocer's daughter" by people who called themselves egalitarian, Mrs Palin is regarded as a small-town nobody by those who claim to represent "ordinary people".
It is the left who engages in mysogyny unless the woman meets the definition of the left's view of a woman.
After Guliani gave his speech, there was no video, no introduction, Palin just walks to the microphone and begins her speech.
As Palin gave her speech to thunderous applause, she silenced the critics and proved to everyone she had what it takes. The cameras zoomed in on little Piper of 7 years as she groomed the hair of little Trig. Trig had to look good because his mom was about to give the speech of her lifetime. The speech was Palin's coming out party, and she proved that McCain made the right choice, something conservatives already knew. The left is running scared. The only thing they could say is well, "It was written for her." Well, duh!!! Aren't they all? What they didn't know at the time is that the teleprompter malfunctioned in both Giuliani's and Palin's speech. The speech kept scrolling up the teleprompter even through the applauses. Halfway through the speech, she was no longer following the speech on the teleprompter on the screen since it had scrolled too high. She was doing it from memory. You could not tell.
One of the more memorable lines "What's a difference between a hockey mom and a pit bull – lipstick" was not even scripted.
With poise and grace, Sarah Palin did what no other VP candidate would have been able to do. She changed the dynamics of this race. 38 million people tuned in to watch her speech, the same number that watched Obama's convention speech. And win or lose, she is here to stay.