Google, Haiti, and Taxachusetts

Saturday, January 23, 2010

There have been so many juicy topics to cover, it’s been difficult to keep away. Every time I’m moved to write, though, I really have something else to do or simply don’t want to devote the time to it. That said, here is, in summary, how to think about the following issues:

Google/China: Yes, if Google was #1 in China this wouldn’t have happened, but they’re not and it did. As a result, this is one of the great humanitarian corporate moves of all time. Perhaps the greatest (there’s not a lot of competition, I’m guessing). Google should follow through and close their business there. As arguably the most important corporation in the world, the move will properly shame China and the many companies that remain in that authoritarian country. Here’s a question that any one doing business there should ask: Would I want to live here?

Haiti: Nothing to do in the aftermath but help. In the long term, I’m with David Brooks and Bret Stephenson. Let’s stop giving money to countries “in need.” It does nothing, and may actively do harm. It’s difficult, because it is human nature to try to help fellow humans in need, but it’s also the right thing to do. Certainly, what the first world has been doing for decades has not worked.

Taxachusetts: I would have voted for Scott Brown too. Seriously. I would have voted for a cardboard cutout against Coakley. Although she was inept, I would have done it to send the message. I have said, many times, that if Obama and this Congress can’t get it done, then there is no hope for us. Year one has been an epic, unmitigated failure. Iraq, Afghanistan, secrecy, deficit spending, bank coddling, and worst of all, the healthcare nightmare. I blame Obama for not using his robust post-election strength to strong arm Pelosi (failure) and Reid (failure) immediately. Weak, poorly managed, pathetic. Obama, where are your balls? It’s time to lead.

And, btw, why do you need the 60 votes? Make an exceptional bill and let the GOP filibuster. Call their bluff. If they do it, and the bill dies, you hang it around their neck. Now, the bill dies, and it’s a Dem failure. Disgraceful.

(But then there would be no healthcare bill, someone wails. So fucking what? Paul Krugman can cry to his cats. This is not the most pressing issue in America. Budget restraint, financial reform, and confiscatory, punitive taxes on very wealth bankers, should be the priority. Followed by a 10% spending cut across the entire government, no exceptions.

We are going to have to suffer, period. Let us start suffering already so we have a shot at not fucking our children.)

The bottom line for me, in all this, is that I have really given up hope. I don’t believe our Congress (and the state legislatures) are capable of introducing the change (ethics, responsible spending) that is necessary.

Something very, very bad is going to happen in the next ten or twenty years. War with China, epic depression/inflation/default, or, in the best case scenario, a benevolent military coup (and a draft) that reforms the government in a way that makes it possible for America to function properly.

David Petraeus, are you out there? Rome needs you. Cross the Rubicon. Cast the die!

P.S. I can’t believe I just wrote that. Nevertheless, letting it stand.

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Big Surprise: Citi and BoA Fail Stress Test

Tuesday, April 28, 2009

From the Wall Street Journal.

Ken Lewis on life support. Pandit, too (though it really wasn’t his fault).

The real problem here is one, to repeat an oft used explanation, of confidence. No one believes the banks or the government. Any reasonably informed person sees what Geithner and Bernanke are doing and breaks out in a cold sweat. Borrowing and printing money to reinflate a bubble (our economy) is either genius or suicide. To me, it is most assuredly the latter.

We are in for years of topsy-turvy hard times with the outcome far from assured. Forget ripping the band-aid off quickly, they’re wrapping it up in bandages made of dollars. It’s going to hurt a lot more when it finally comes off.


Calling the Depression

Friday, November 14, 2008

Wondering who called the downturn along with a small circle of economists and finance managers?

Me.

In an aside in an email to my brother, who is general counsel to a hedge fund, from October 2007:

Btw, I’m calling a market top two weeks ago. It’s going to be a blue Christmas and next year is going to be worse. It’s time for ______ to start shorting everything except gold.

Later, in April 2008:

Don’t know if you’re in today, but don’t believe this rally. It’s a crock. The triumph of desperation over reality. I see a deep, deep darkness on the horizon.

Of course, those of you reading this blog regularly know this, but I figure if I don’t toot my own horn who else will?

And, btw, it didn’t take a genius to see this was coming. It just took an unbiased interest in the matter. This one chart, which I first encountered in 2005, says it all:

As we are now witnessing, home prices are reverting to mean (as they must). With that, an explosion of mortgage equity withdrawals have dried up (you can’t borrow against negative equity). And, unfortunately, there is no where else for the American consumer to turn. Consumption is the engine of our economy but everyone (consumers, businesses, banks, local, state, and federal governments) is up to their eyeballs in debt.

Want further elaboration? Here’s a post from May called America: We Can’t Afford It.

The only thing I will confess to not understanding was the depth and magnitude of the trading up of these mortgages by Wall Street. The housing crash is, by itself, a serious recession. The Wall Street profit engine built upon mortgages (that has now seized) is what will cause the depression.

So, I’m calling it now, officially. It may not be as severe as the Great Depression, but then again, it may. We are certainly heading for many consecutive quarters of negative growth (with possible timeouts for stimulus packages) and double digit unemployment. At worst, we are facing an American default. Mark my words and pray that I’m wrong.

Without exaggeration, this is one of America’s darkest hours.


Retail Sales Down 1.2% in September

Wednesday, October 15, 2008

Auto sales were a big part of this, but it was still double analyst estimates. For an economy that runs on consumer spending, these figures are a clear indicator pointing towards recession.

Wholesale inflation was also up.

For an overview on the crisis, watch the Prophet of Doom, Nouriel Roubini, on Bloomberg:

P.S. You know what I like about Roubini besides that fact that he has been an accurate and truthful forecaster? His tie is always undone. Watch his interviews. He just can’t stand that tie around his neck.


Fed Leads Global Rate Cut

Wednesday, October 8, 2008

As markets around the world continue to be hammered by the financial crisis, the Federal Reserve cut the Fed Funds interest rate by a half point in a move coordinated with central banks in the UK, European Union, Switzerland, Sweden, and Canada.

China also cut its key rate.

Overnight, Asian markets took a nosedive, with Japan’s Nikkei dropping more than 9%, while Europe rebounded from sharp falls earlier in the day.

U.S. stock future are up on the news of the rate cut.

Expect a rally this morning, but don’t be surprised if it doesn’t last through the day.

In related news, the UK is stepping up to partially nationalize two more banks. They are injecting capital in exchange for equity. Exactly what the U.S. Government should have done.


Wells Fargo to Buy Wachovia

Friday, October 3, 2008

For $7 a share, scuttling Citigroup’s FDIC-backed deal. Citi is threatening a lawsuit.

Serious consolidation in the banking industry continues.

In other financial news, there are bad unemployment numbers out today and the credit markets, where small businesses, local governments, and all manner of financial companies secure short-term loans, are still frozen.

Related to this, California is warning that it will need $7 billion from the Feds if credit markets don’t improve quickly. California is the canary in the coal mine of state governments. What is happening there will soon be happening everywhere.

Lastly, the House is now debating the bailout bill. Visit the usual suspects (CNN, CNBC, CSPAN) to watch online.


Home Prices Down 20% Since July 2006

Tuesday, September 30, 2008

Here is the most important fact underlying the economic meltdown: Home prices continue to decline. The S&P/Case Shiller composite index showed prices dropped nearly 1% from June to July.

Until the housing market finds a floor, we will not be able to turn things around. And there are still more declines to come before housing prices return to their historical trend. (Click on the link and follow the red line back along the trend line. The median home price should be in $100,000 to $150,000 range. The National Association for Realtors shows the national median existing-home price for all housing types was $203,100 in August, down 9.5 percent from a year ago when the median was $224,400.)

Still plenty to go.