"Our Children and Grandchildren are not merely statistics towards which we can be indifferent" JFK

Monday, February 21, 2011

Dylan Ratigan: Where are the handcuffs? Fraud in the financial system. Oh, by the way, Angelo Mozilo WALKS!!

February 17, 2011 on the Dylan Ratigan Show: Where are the handcuffs? Thousands jailed during the S and L crisis. Why not know? Charles Ferguson, director of the "Inside Job" share with Dylan Ratigan that everyone within the Obama Administration refused an interview request for the "Inside Job" documentary.

If this interview didn't get you blood boiling, how about news the very next day!

Mozilo's actions in the mortgage meltdown
which led to $67.5-million settlement against him
did not amount to criminal wrongdoing,
federal prosecutors have determined

Los Angeles Times
February 18, 2011
By E. Scott Reckard

As the former chairman of Countrywide Financial Corp., Mozilo helped fuel the boom in risky subprime loans that led to the crippling of the banking industry and the near-collapse of the financial system.

A federal grand jury in Los Angeles began probing Mozilo in 2008, and four months ago he agreed to pay a $22.5-million fine and to repay $45 million in what the government said were ill-gotten gains to former Countrywide shareholders. The payments settled a civil action by the Securities and Exchange Commission.

But the criminal investigation has wound down without indictments of Mozilo or others at his Calabasas company, according to people familiar with both the prosecution and the defense teams, all of whom spoke on condition of anonymity because they were not authorized to discuss the matter.

"Sometimes the public thinks all you have to do is to indict someone and that's it," one of the federal sources said. "But you have to be able to prove your case, and it can be worse losing a case than not bringing one at all."

The 72-year-old Mozilo hung up the phone when contacted for comment at his home in the Lake Sherwood golf community of Ventura County.

The criminal investigation into Mozilo was never announced publicly, and as a rule federal prosecutors make no formal announcement when such cases are closed.

One defense attorney, however, said the government would probably keep a close watch on civil litigation by Countrywide shareholders against Mozilo and could still decide to bring charges depending on what develops in those cases.

"He may have to testify, and you never know what may come up," the attorney said.

Asst. U.S. Atty. Stephen A. Cazares, who spearheaded the Countrywide criminal probe, could not be reached for comment. A spokesman for U.S. Atty. Andre Birotte Jr. said the office would have no comment "at this time." If you dare to care, keep reading

Federal prosecutors have shelved a criminal investigation of Angelo R. Mozilo after determining that his actions in the mortgage meltdown — which led to $67.5-million settlement against him — did not amount to criminal wrongdoing.

National Association of Realtors: Liar, Liar, Pants on Fire

February 21, 2011

On January 20th, 2011: National Association of Realtors (NAR) doing their very best to carry on the extend and pretend economic recovery. NAR reported an annualized (seasonally adjusted) 5.280 million existing home sales headline for December. As expected, the once again better than expected data afforded CNBC and other sophomoric financial news outlets the opportunity to proclaim a bottom in the housing market.

Funny thing about seasonal adjustments, the only ones making money off a bogus and fundamentally irrelevant headline number are the HFT/Algorithmic juveniles. NAR's annualized, non-seasonally adjusted existing home sales clocked in at 4.848 million units. 432,000 fewer homes on an annualized basis.

That's 432,000 annualized units generating zippo-nada-zilch to the:
  • seller
  • mortgage company
  • real estate agents commission (a.k.a. income)
  • real estate brokers
  • closing companies
  • county fees
  • home furnishing retail sales
  • remodel/repair retail sales and contractor wages
Stay Tuned, as NAR Continues Sharing their Dream
on Wednesday, February 23th when they Report
January 2011 Existing Home Sales...

Inman News
By Matt Carter
February 15, 2011

Statistics published by the National Association of Realtors (NAR) appear to overstate sales of existing homes by 15 to 20 percent, mortgage and property data aggregator CoreLogic says in a new report that concludes home sales fell more sharply last year than previously thought.

A NAR spokesman said the CoreLogic claim "is premature at best," and NAR will be making some benchmark revisions to its historic sales data later this year.

NAR's figures -- based on data collected from multiple listing services and large brokerages -- show sales of existing homes fell 5 percent in 2010, to 4.9 million. But CoreLogic, which collects public sales records from county recorders and courts, estimates that home sales actually fell 12 percent, to 3.6 million.

The implications are not trivial: A slower rate of sales means that it will take longer to burn through unsold inventory, and a glut of homes for sale in a given market can undermine prices. CoreLogic says the unsold inventory on the market in November represented 16 months of supply, compared with NAR's estimate of 9.5 months.

Weak sales following the expiration of the federal homebuyer tax credits, an excess supply of unsold homes, and the impact of sales of distressed homes is driving home prices down, CoreLogic said. A national, repeat-sales home-price index compiled by the company was down 5.1 percent in November from a year ago.

If that trend continues, national home prices will probably be down 10 percent year-over-year by spring, CoreLogic said.

In its latest forecast, NAR projects that the median existing-home price will be down 0.6 percent from a year ago during the first quarter of 2011, but post year-over year gains for the next five consecutive quarters.

CoreLogic says one reason NAR's existing-home sales data may be inflated is because the benchmark multiplier NAR analysts use to adjust for MLSs that they aren't getting data from hasn't been calibrated since 2004.

But there's been consolidation among MLSs since then, CoreLogic noted, and a decline in the number of for-sale-by-owner sales outside the MLS and brokerage process. That means NAR is now capturing a greater percentage of existing-home sales and doesn't need to make so large an adjustment when extrapolating its results.

CoreLogic said that historically it's been able to account for only 85 to 90 percent of the existing-home sales tallied by NAR.

Beginning in 2006, NAR's sales numbers began to look even more inflated relative to data collected by CoreLogic, the Mortgage Bankers Association, and the U.S. Census Bureau, a trend that has "continued and become more pronounced through 2010," CoreLogic said in the February edition of its monthly report, "U.S. Housing and Mortgage Trends."

While NAR numbers show home sales bottomed in 2008 and then rebounded in 2009, CoreLogic data shows no such rebound in 2009.

CoreLogic Senior Economist Sam Khater said the analysis "is less about NAR's data than a critique of data in general."

"Anytime you've got fundamental changes in the market like that, it's going to cause market data to go haywire," Khater said. It's important to have data from a wide range of sources, Khater said, in order to "see where the truth lies in between them."

NAR spokesman Walt Molony said that while NAR will be making benchmark revisions later this year to its historic sales data, "data drift" issues are expected to be "relatively minor."

"Under the circumstances, the CoreLogic claim is premature at best, especially given the process that is currently under way," Molony said in an e-mail.

The last benchmark revisions of the existing-home sales series was based on 2000 Census data, Molony said, and NAR will soon be rebenchmarking using independent sources. NAR will be consulting with outside housing economists on the methodology to determine if there is any drift in the data, and by how much, he said.

"There's been a notable increase in nontraditional sales outside MLSs, so a major function in consulting with outside housing economists and government agencies is to determine methodology and obtain consensus on the benchmarking," Molony said.

He said NAR will also be looking for a new way to rebenchmark existing-home sales on a more frequent basis instead of waiting for Census data to be updated every 10 years. NAR already updates sales rates and months' supply benchmarks on an annual basis, Molony said.

Molony said the rebenchmarking of existing-home sales will result in "no notable changes" to NAR's previous characterizations of monthly sales changes, and no impact on price data.

Khater said CoreLogic's public records data captures all sales, whether they involve a mortgage or are all-cash purchases, and regardless of whether a home was listed in an MLS or not.

One drawback with public records data is the lag time before sales are reported and data are collected. Khater said CoreLogic estimated December 2010 existing-home sales in the February report using preliminary data.

Sunday, February 20, 2011

Money Won’t Buy You Health Insurance...and Health Care CEO's really appreciate your business

Los Angeles Times: The top executives at the nation's five
largest for-profit health insurance companies
pulled in nearly $200 million in compensation last year.

The Wall Street Journal: Health Care CEO's Earn Top Pay,
Median CEO pay was $10 MILLION

Star Tribune: Minnesota's Highest Paid CEOs
Top of the LIst-Stephen Hemsley, CEO United Health Group

By Donna Dubinsky
Op-Ed Contributor
The New York Times
Published: February 19, 2011

THIS isn’t the story of a poor family with a mother who has a dreadful disease that bankrupts them, or with a child who has to go without vital medicines. Unlike many others, my family can afford medical care, with or without insurance.

Instead, this is a story about how broken the market for health insurance is, even for those who are healthy and who are willing and able to pay for it.

Most employees assume that if they lose their job and the health coverage that comes along with it, they’ll be able to purchase insurance somewhere. The members of Congress who want to repeal the provision of last year’s health insurance law that makes it easier for individuals to buy coverage must assume that uninsured people do not want to buy it, or are just too cheap or too poor to do so.

The truth is that individual health insurance is not easy to get.

I found this out the hard way. Six years ago, my company was acquired. Since my husband had retired a few years earlier, we found ourselves without an employer and thus without health insurance.

My husband, teenage daughter and I were all active and healthy, and I naïvely thought getting health insurance would be simple.

Why did we even need insurance? First, we wanted to know that, if we had a medical catastrophe, we would not exhaust our savings. Second, uninsured patients are billed more than the rates that insurers negotiate with doctors and hospitals, and we wanted to pay those lower rates. The difference is significant: my recent M.R.I. cost $1,300 at the “retail” rate, while the rate negotiated by the insurance company was $700.

An insurance broker helped me sort through the options. I settled on a high-deductible plan, and filled out the long application. I diligently listed the various minor complaints for which we had been seen over the years, knowing that these might turn up later and be a basis for revoking coverage if they were not disclosed.

Then the first letter arrived — denied. It never occurred to me that we would be denied! Yes, we had listed a bunch of minor ailments, but nothing serious. No cancer, no chronic diseases like asthma or diabetes, no hospital stays.

Why were we denied? What were these pre-existing conditions that put us into high-risk categories? For me, it was a corn on my toe for which my podiatrist had recommended an in-office procedure. My daughter was denied because she takes regular medication for a common teenage issue. My husband was denied because his ophthalmologist had identified a slow-growing cataract. Basically, if there is any possible procedure in your future, insurers will deny you.

The broker then proposed that the three of us make individual applications. Perhaps one or two of us might be accepted, rather than the family as a group.

As I filled out more applications, I discovered a critical error in my strategy. The first question was “Have you ever been denied health insurance”? Now my answer was yes, giving the new companies reason to be wary of my application. I learned too late that the best tactic is to apply simultaneously to as many companies as possible, so that you don’t have to admit to a denial.

I completed four applications for each of the three of us, using reams of paper. I learned to read the questions carefully. I mulled over the difference between a “condition” and “something for which you have sought treatment.” I was precise and succinct. I felt as if I was doing a deposition: Give the minimum true information, and not a word more. I was accepted by exactly one insurance company. So was my daughter, although at a 50 percent premium over the standard charge for a girl her age. My husband was also accepted by one insurer but was denied by the company that approved me.

Our premiums, which were reasonable at first, have increased substantially over the last six years; the average annual increase has been 20 percent. I now am paying premiums that are more than double what they were initially. And because these are high-deductible policies, we still are paying most of the medical bills ourselves.

The new health care reform legislation is not perfect. Nothing that complex could be. But I have no doubt that the system is broken and reform is absolutely essential. If we are not going to have universal coverage but are going to rely on employer plans, then we must offer individuals, self-employed people and small businesses a place to purchase insurance at a reasonable price.

If members of Congress feel so strongly about undoing this important legislation, perhaps we should stop providing them with health insurance. Let’s credit their pay for the amount that has been paid by the taxpayers, and let them try to buy health insurance in the individual market. My bet is that they all would be denied. Health insurance reform might suddenly not seem to them like such a bad idea.

Donna Dubinsky, a co-founder of Palm Computer and Handspring, is the chief executive of a computer software company.

Saturday, February 19, 2011

Welcome to the Banking Recovery: FDIC closes 22nd bank of 2011

Yes America, the Banking Sector
Recover is Strong
Bernake said it is just fine...it's all good
May 2007
The subprime mess is grave but largely contained.
While rising delinquencies and foreclosures will
continue to weigh heavily on the housing market this year,
it will not cripple the U.S.

February 19, 2011
The FDIC closed 4 more banks on Friday, February 11th bringing the Year to Date closings to 22. The estimated total hit to the Deposit Insurance Fund (DIF) from Friday's closings is $267.6 million. This is the fourth Friday of 2011 in which the FDIC has closed 4 banks in a single day.

Year to date, the estimated hit to the DIF is $1.72 billion with the single largest hit from the closing of United Western Bank in Denver, CO ($312.8 million). The state of GA is on top of the leader board with 6 closed banks and a $376.4 million hit to DIF.

CA is in isecond place with 3 bank closings while CO, FL and WI are tied for third place with two bank closings each, however Colorado's total hit to DIF is $555.4 million (38% of the total DIF hit).

FDIC is running slightly ahead of last year's closings as they shut down 20 banks as of February 19, 2010.

Bill Fleckenstein: The Bulls will be punished before the year's out (King World News)

Link to interview with Bill Fleckensten
(click play when site boots...telephone interview)

Interview Recap via Business Insider
By Mamta Badkar
February 18, 2011

Bill Fleckenstein is still giving loud warnings about a QE-induced stock bubble.

He tells King World News investors are getting drunk at the punchbowl:

What's happened with money printing this time around is people have gotten a little financially drunk again.

Fleckenstein says the bubble is becoming obvious in tech stocks -- which surprises him given what we've been through:

We're working on you know internet badness 2.0 now, with social networking and all the other stuff, Facebook, Groupon and all this other stuff. There's a lot of speculation in tech stocks now and so there's a lot of things that you wouldn't think would be occurring now given what we've been through, and given the economic backdrop, but that's what money printing does.

Fleckenstein says the bulls will be "punished" before the year's out:
"Trying to guess how high is high and how long it can last is really impossible, and people that try to pick a top will probably lose a bunch of money."

Additional Insight from Bill Fleckenstein
Link to articles by Bill Fleckenstein in MSN Money. Video with Bill Fleckenstein and Dylan Ratigan

Do We Think We Are Better Off Than Our Parents? Only if your parents were named Wall and Street.

By Annalyn Censky
Staff reporter

NEW YORK (CNN Money) -- Are you better off than your parents?

Probably not if you're in the middle class.
Incomes for 90% of Americans have been stuck in neutral, and it's not just because of the Great Recession. Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed.

In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. Fast forward 20 years, and not much had changed: The average income was still just $33,000 in 2008, according to IRS data.

Meanwhile, the richest 1% of Americans -- those making $380,000 or more -- have seen their incomes grow 33% over the last 20 years, leaving average Americans in the dust.

Experts point to some of the usual suspects -- like technology and globalization -- to explain the widening gap between the haves and have-nots.

But there's more to the story.

A real drag on the middle class
One major pull on the working man was the decline of unions and other labor protections, said Bill Rodgers, a former chief economist for the Labor Department, now a professor at Rutgers University.

Because of deals struck through collective bargaining, union workers have traditionally earned 15% to 20% more than their non-union counterparts, Rodgers said. But union membership has declined rapidly over the past 30 years. In 1983, union workers made up about 20% of the workforce. In 2010, they represented less than 12%. "The erosion of collective bargaining is a key factor to explain why low-wage workers and middle income workers have seen their wages not stay up with inflation," Rodgers said. Without collective bargaining pushing up wages, especially for blue-collar work -- average incomes have stagnated.

International competition is another factor. While globalization has lifted millions out of poverty in developing nations, it hasn't exactly been a win for middle class workers in the U.S. Factory workers have seen many of their jobs shipped to other countries where labor is cheaper, putting more downward pressure on American wages. "As we became more connected to China, that poses the question of whether our wages are being set in Beijing," Rodgers said.

Finding it harder to compete with cheaper manufacturing costs abroad, the U.S. has emerged as primarily a services-producing economy. That trend has created a cultural shift in the job skills American employers are looking for. Whereas 50 years earlier, there were plenty of blue collar opportunities for workers who had only high school diploma, now employers seek "soft skills" that are typically honed in college, Rodgers said.

A boon for the rich
While average folks were losing ground in the economy, the wealthiest were capitalizing on some of those same factors, and driving an even bigger wedge between themselves and the rest of America.

For example, though globalization has been a drag on labor, it's been a major win for corporations who've used new global channels to reduce costs and boost profits. In addition, new markets around the world have created even greater demand for their products.

"With a global economy, people who have extraordinary skills... whether they be in financial services, technology, entertainment or media, have a bigger place to play and be rewarded from," said Alan Johnson, a Wall Street compensation consultant.

As a result, the disparity between the wages for college educated workers versus high school grads has widened significantly since the 1980s. In 1980, workers with a high school diploma earned about 71% of what college-educated workers made. In 2010, that number fell to 55%.

Another driver of the rich: The stock market.
The S and P 500 has gained more than 1,300% since 1970. While that's helped the American economy grow, the benefits have been disproportionately reaped by the wealthy. And public policy of the past few decades has only encouraged the trend. The 1980s was a period of anti-regulation, presided over by President Reagan, who loosened rules governing banks and thrifts. A major game changer came during the Clinton era, when barriers between commercial and investment banks, enacted during the post-Depression era, were removed.

In 2000, President Bush also weakened the government's oversight of complex securities, allowing financial innovations to take off, creating unprecedented amounts of wealth both for the overall economy, and for those directly involved in the financial sector. Tax cuts enacted during the Bush administration and extended under Obama were also a major windfall for the nation's richest.

And as then-Federal Reserve chairman Alan Greenspan brought interest rates down to new lows during the decade, the housing market experienced explosive growth. "We were all drinking the Kool-aid, Greenspan was tending bar, Bernanke and the academic establishment were supplying the liquor," Deutsche Bank managing director Ajay Kapur wrote in a research report in 2009.

But the story didn't end well. Eventually, it all came crashing down, resulting in the worst economic slump since the Great Depression.  With the unemployment rate still excessively high and the real estate market showing few signs of rebounding, the American middle class is still reeling from the effects of the Great Recession.

Meanwhile, as corporate profits come roaring back and the stock market charges ahead, the wealthiest people continue to eclipse their middle-class counterparts. "I think it's a terrible dilemma, because what we're obviously heading toward is some kind of class warfare," Johnson said.

Friday, February 18, 2011

Stock Market is Increasingly Irrelevant (Felix Salmon)

Seeking Alpha
By Felix Salmon
February 14, 2011

I’m sad that my NYT op-ed on the decline of stock exchanges went to press too late to include the bonkers rhetoric emanating from Chuck Schumer:

The New York Stock Exchange is the cradle of American capitalism. It is a national treasure. In America, we start each day in our Congress and in our classrooms with the Pledge of Allegiance, and we also start it with the ringing of the bell on the floor of the stock exchange.

The NYSE is in no sense the cradle of anything. A cradle is a safe place for the young to develop until they grow up and become more self-sufficient. Y Combinator is a cradle. The NYSE is place for algorithms and speculators to make bets on financial assets. It last funneled real amounts of money into the broader economy during the dot-com boom, leaving behind a lot of Aeron chairs and little else. Since then, I get the feeling that the big capital raises on U.S. exchanges have been by financial institutions, rather than the real economy; maybe someone can find a breakdown for me of which sectors raised the most money in primary and secondary offerings over the past ten years.

As for the idea that the NYSE is a national treasure akin to the Pledge of Allegiance, well, yes. Which is to say, its value is symbolic, and rooted in the days of old, when “allegiance” meant something more than who you’re friends with on Facebook, and when institutions were judged on the size and weight of their Corinthian columns.

There’s one other point I would have liked to make in my piece, which is that the tax code is a large part of the reason why the stock market is bad at capital formation. Look at the trillions of dollars cash on corporate balance sheets: why aren’t those companies paying it out as dividends to their shareholders? In an efficient capital market, they would do just that, and then raise new equity capital as and when they needed it in future. After all, sitting on billions of dollars in cash is hardly a core competency of most exchange-listed corporations.

But companies don’t do that. It’s partly because they fear that the money might not be there when they need it. But it’s also because the cost to shareholders of dividending out money now and then getting it back again in future is enormous. For one thing, the underwriters of the secondary offering are likely to require a hefty seven-figure fee when you ask them to raise that money for you. And more importantly than that, the shareholders you send the dividend to are going to have to pay income tax on it, at rates in the region of 35% to 40%. There’s no way that can be efficient.

I’m not saying that we should abolish the income tax on dividends. But it does help to explain why U.S. capitalism can be very inefficient, and why the stock market, broadly speaking isn’t working very well these days when it comes to its core function of capital allocation.

More Articles by Felix Salmon

Bernanke and Federal Reserve: Bubbles "R" Us, 3rd Bubble in 11 Years (Comstock Partners)

It seems incredible that the Fed is creating
the third bubble within 11 years,
but that is what is underway.

Comstock Partners
February 17, 2011

It seems incredible that the Fed is creating the third bubble within 11 years, but that is what is underway. In the late 1990s the Fed kept the pedal on the gas and helped engender the dot-com bubble that collapsed with a 75% decline in the Nasdaq and 50% in the S and P 500. To prevent the economy from correcting the imbalances created in that era, the Fed kept the funds rate at 1% for an extraordinarily long time, thereby fostering the backdrop for the historic housing boom that also collapsed and came dangerously close to bringing down the global economic and financial system.

The initial gargantuan efforts by the Fed and the Administration and Congress to keep the economy from collapsing were necessary and effective. Since then, however, further stimulative programs have resulted in only a tepid economic recovery along with the addition of dangerous amounts of new debt and a soaring stock market that seems doomed to disappointment once again as in 2000-to-2002 and 2008-2009.

The Fed jump-started the stock market with two rounds of massive easing commonly known as QE1 and QE2. Not coincidentally, the market bottomed in March 2009 just as QE1 got underway. When that program, consisting of the Fed's purchase of $1.5 trillion of Treasury Bonds and mortgages, ended in April 2010, stocks dropped 17% in a few months. When stocks declined and the economy faltered Chairman Bernanke, at a late August meeting in Jackson Hole, announced the Fed's intentions to institute QE2, a program to buy $600 billion of 2-to10-year Treasury notes by June 30, 2011. Since that time the market began rising and hasn't stopped since. Notably the program, which actually began in October is pumping about $3.4 billion into the economy and assets every workday of the week.

The stated purpose of QE2, as outlined in a Washington Post op-ed column by Bernanke, is to pump up asset values with the hope that it would feed into the economy and to lower mortgage rates in an effort to aid the housing market. QE2 did goose the stock market, but appears to be failing miserably on a number of other fronts. It has not helped housing, which is still in the doldrums, and has only marginally helped employment. Furthermore the policy has created a lot more commodity inflation with higher prices for energy, food, cotton and a wide number of other items. It has led to inflation in emerging nations that have begun tightening money to slow down their economies. It has also caused a rise in long-term bond and mortgage rates, contrary to initial expectations. In addition let's not overlook the contribution of food price inflation to the unrest in Tunisia, Egypt and the rest of the Mid-East.

Underlying all of these problems is the massive debt, both government and household, built up over the past few decades, particularly in the most recent one. Household debt has averaged about 55% of GDP over the last 60 years, but recently peaked at 98%, and is now down to 91%. As a percent of disposable personal income, household debt has averaged 75%, with a recent top of 130% and is currently at 117%. Similarly, government debt has averaged 66% of GDP and is now at a peak 108%, as government debt has recently risen more than private debt has dropped.

The problem, as everyone belatedly realizes, is that, as a nation we have far too much debt, both public and private. But debt is the fuel that enables economic growth. Without an increasing amount of debt the economy cannot grow and, in fact, shrinks. The hope is that by substituting government debt for household debt we can get the economy back on a normal growth path while also getting consumer balance sheets back into shape.

In our view the chances for success are dim. After all is said and done, debt is debt whether it's the government debt or private debt. And as Greece has shown, even governments cannot keep increasing their debts without severe consequences down the road. It seems the only way out is to reduce total national debt, both public and private. That would have dire consequences for the economy in the short run. On the other hand, continuing to increase debt as we have been doing may work in the very short run but in the end, is unsustainable. And note that QE2 ends in June. After that, any further stimulus is probably politically impossible anyway, given the climate in Washington and the various state governments.

This will all become obvious to the market soon enough,
and once again they will say nobody saw it coming.

Comstock Special Reports

Thursday, February 17, 2011

David Stockman on Dylan Ratigan: Administration and Congress are Fiscally Cowardice

David Stockman: Administration and Congress as Fiscally Cowardice

February 17, 2011

Former Budget Director David Stockman on Dylan Ratigan Show (2/15/11) discussing Obama's very discouraging 2012 budget. David "grandchild friendly" Stockman explains how Obama and Congress can end the cycle of passing debt to future generations.

Mr. Stockman refers to the Administration and Congress as Fiscally Cowardice and offers an almost insanely simplistic short list to reign in debt: Revenue/Entitlements/Defense (RED). David is appalled with $7.5 trillion for defense/security spending over the next 8 years and emphatically points out that the U.S. no longer has Industrial Enemies. The United States has 11 carrier battle groups out to sea at a cost of $10's of billions while China has ZERO and Russia has ONE and it is 25 years old. It begs the question...WHY!!!

David Stockman refers to economic projections as "pie in the sky" while noting a transaction tax on trading stocks would raise a significant amount of revenue with no foul given the majority of trading is simply daily churning of stocks by robots.

Show starts with a President Obama clip from his recent press conference in which Obama deems the media impatient..."If it does not happen today..."

For the record Mr. Obama, $14+ trillion in debt is clearly an accumulation of thousands of days of fiscal irresponsibility. It would take but a single day for you and your standing ovation peers to flip the focus switch to children and grandchildren. They deserve a fair shot at an equitable playing field.

Children get a time out for unacceptable behavior and I recommend the same for you and the ovation crowd. A one day time out to reflect and acknowledge the burden all of you have placed on our grandchildren while making a commitment to focus on what is in their best interest.

Go ahead, give it a try, it is amazing what can be accomplished in a day. Just think about what a 1 day old newborn achieves in their first 24 hours. Not asking for much Mr. President, JUST CHANGE GRANDCHILDREN CAN BELIEVE IN.

Wednesday, February 16, 2011

Geithner: balancing budget will require Americans to sacrifice (banks not so much)

Geithner: balancing the budget will
involve some difficult choices on the
part of lawmakers and
“will require sacrifice from all Americans.”

Automobile Tax Credits (Hybrid Gas-Electric)
BAB (Build America Bonds)
Big Oil Tax Subsidies Act (roughly $8 billion per year)
Cash For Caulkers
Cash For Clunkers
Chrysler BAILOUT
Consumer Energy Efficiency Creidts
First Time Homebuyer Tax Gift Credit
General Motors BAILOUT
HAFA (Home Affordable Foreclosure Alternatives a.k.a. "Exit Gracefully")
HAMP (Home Affordable Modifcation Program)
HARP (Home Afrfordable Refinance Program)
Home Energy Efficiency Improvement Tax Credit
HHF (Hardest Hit Housing Markets)
Operation Enduring Freedom (gov't speak for Afghanistan War)
Operation Iraqi Freedom (gov't speak for Iraq War)
PRA (Principal Reduction Alternative)
TARP (Troubled Asset Relief Program a.k.a. Too BIG to FAIL)
UP (Home Affordable Unemployment Program)

...and so on..and so on...

No, it's Not Colic

ABC News
By Arlette Saenz

ABC News’ Arlette Saenz reports: In a hearing before the House Ways and Means Committee, Treasury Secretary Timothy Geithner defended the president’s budget proposal as a means of restoring fiscal responsibility to an economy riddled by a mounting national deficit.

“Our deficits are too high. They are unsustainable, and left unaddressed, these deficits will hurt economic growth and make us weaker as a nation,” Geithner said. “We have to restore fiscal responsibility and go back to living within our means.”

Geithner targeted entitlement programs as the key to reducing the national debt while insisting that Social Security benefits remain protected.

“Our long term deficits that we face over the next century are primarily driven by rapid rates of growth in healthcare costs and to a lesser extent by Social Security obligations. The most important thing we can do to reduce those long term costs is to reduce the rate of growth in healthcare costs.”

But committee members pounced on the president’s budget proposal for not providing enough guidance in curbing entitlement programs.

“Americans shouldn’t have to wait any longer for some real solutions, and frankly, this budget is a missed opportunity,” Chairman Dave Camp, R-MI, said. “There‘s nothing on entitlement reform, and there’s little more than lip service about getting the deficit under control.”

“For so many of us, we are just dumbfounded, astounded by the fact that the administration hasn’t taken this opportunity to address the issue of entitlements,” Rep. Tom Price, R-GA, said. “There’s no evidence of this administration taking the lead and initiative on entitlement reform. You’ve taken the lead and initiative in expanding entitlements and expanding automatic spending.”

Geithner acknowledged that balancing the budget will involve some difficult choices on the part of lawmakers and “will require sacrifice from all Americans.”

Geithner took a brief moment to tout the success of TARP, which was initially projected to cost taxpayers $350 billion but is anticipated to show a positive return for taxpayers.

“I think it will prove to be the most successful financial rescue in modern history,” Geithner said. “Even recognizing, we face a lot of challenges ahead in digging out of this crisis, repairing the damage caused by it.”

Harley Davidson's overly ambitious expectations (Motley Fool)

The Motley Fool
By Nick Kapur

Eighteen months ago, iconic American motorcycle manufacturer Harley-Davidson (NYSE: HOG) announced plans to enter the 1 billion-strong Indian consumer market. Three months ago, the company announced that it would build just its second-ever international assembly plant in the country. Today, the company has effectively placed a huge bet on India, a country that is truly in love with the motorcycle.

Unfortunately, as I spend more and more time here in India, I realize that I cannot see this company thriving in its markets. Worse, I fear that Fools could feel the painful brunt of Harley's overly ambitious expectations.

The Hog ethos
When I think Harley-Davidson, I think open road, fresh air, and a cool breeze tearing through the nostrils of an over-the-hill, balding baby boomer. Thanks to a sustained economic boom, I think there are folks who fit that description and would be willing to shell out $20,000 on a new toy. But I seriously wonder if any of the actual joys of riding a Harley will ever come to the small few who can afford it. And for everyone else, it's simply not a reality.

Still better than I-95
The hard truth for Harley is that driving in and around major cities in India has relatively little to do with open road, fresh air, and the feeling of freedom. In fact, the best way to describe road travel in urban India is adrenaline-inducing ... and not in the good way.

The majority of one's time is spent idling in bumper-to-bumper traffic, as pedestrians play a terrifying game of Frogger between taxis and giant, overstuffed transport vehicles. The remainder of one's time is spent accelerating as fast as possible to jostle for position at the next bottleneck.

One has to seriously wonder how appealing Indian purchasers will find the Harley-Davidson lifestyle when unable to enjoy this very expensive product in the way it was naturally intended to be enjoyed. It's analogous to asking how much you'd love your Kindle if you were only allowed to use it in the dark.

The wrong market
Roads certainly aren't clogged everywhere in this country. But the vast majority of eligible consumers live in major cities where they are. For these people, accessing free-flying highways is no trivial matter. Open roads could be hours away -- even if they exist in the same city.

Not a small market
In Harley's defense, India is undoubtedly a huge market with lots of potential. As the second-largest motorcycle market in the world (behind China), India purportedly hosted somewhere around 37 million motorcycles as of 2002. Compare that to the U.S.'s 7 million registered motorcycles (as of 2007) and you can clearly see why Harley is licking its chops.

Unfortunately, the vast majority of Indian motorcycles are not discretionary, luxury purchases. I won't even get into the economics of how difficult it would be for 99% of people here to afford an object of that price -- but it's not inspiring

Motorcycle's here are not toys, as they are for most Harley owners in the States. They are a primary means of transport, often for entire families. And they are generally simple, straightforward, cheap offerings sold by names like Honda (NYSE: HMC), Maruti Suzuki, and others.

Therefore, unless you're talking about an extremely small sliver of the market, Harley-Davidson and fellow luxury manufacturers like BMW and Ducati don't stack up favorably. If Harley is, in fact, only targeting the super-rich, let us not forget the aforementioned product satisfaction issues. Either way, making meaningful inroads should be an issue.

The Foolish bottom line
Harley-Davidson is expecting foreign sales to account for more than 40% of total sales by 2014. Today, foreign sales represent just $1.2 billion of the company's $6.2 billion in annual revenue. Clearly the company is expecting big things out of its international divisions and much of that will undoubtedly need to come from fast-growth markets like India. But I'm not quite so optimistic about its chances here.

For some that can afford a luxury item like a Hog, the brand has a shot. And as the country grows richer and infrastructure improves, Harley's potential here could be significant. But my investment money would be focused toward entities that are trying to work within existing realities to succeed here. After all, a Hog isn't a Hog if you can't own the road.

Tuesday, February 15, 2011

Obama: Sorry about cutting off your heat, but I will give you $7,500 for an Electric Car (with heat)

As President Obama proposes a $7,500 gift (rather than make them wait for a tax credit) for those with the means to purchase a $40,000+ electric car, his 2012 budget proposes a 50% cut for the Low Income Home Energy Assistance Program, reducing its allocation to $2.5 billion from just over $5 billion.

Purpose of LIHEAP
The mission of the Low Income Home Energy Assistance Program (LIHEAP) is to assist low income households, particularly those with the lowest incomes that pay a high proportion of household income for home energy, primarily in meeting their immediate home energy needs.

Target Population of LIHEAP
The authorization provides that an eligible household's income must not exceed the greater of 150 percent of the poverty level or 60 percent of the State median income (In FY 2009, 75 percent of the State median income). Grantees may not set income eligibility standards below 110 percent of the poverty level, but they may give priority to those households with the highest home energy costs or needs in relation to income.

Mr. Obama's goal is to put 1 million electric cars on the road by 2015 as this will surely strengthen his base of auto workers come 2012. Clearly, our President has no issues with dumping $7,500 per purchase on the backs of our grandchildren who have yet to ride their first tricycle.

Using a Minneapolis, MN $4.00 per day average bus fare, $7,500 would provide 1,875 bus fares versus 1 electric car. If Obama reached 25% of his "wish upon a star" 2015 electric car goal, the total gift would provide 469 million bus fares. DUH!

The Huffington Post
By Arthur Delaney

WASHINGTON -- The Obama administration acknowledged on Monday that its proposal to slash funding for heating assistance to the poor would, in fact, hurt the poor.

"This is a very hard cut," White House budget director Jacob Lew said during a press conference. "This is a cut that has real impact."

The White House's proposed budget for fiscal year 2012 halves funding for the Low Income Home Energy Assistance Program, reducing its allocation to $2.5 billion from just over $5 billion.

LIHEAP doles out money to states, which then hand it over to local relief agencies, which review personal financial data to ensure that applicants for the assistance really need it. Eligible applicants have the money credited to their accounts with the local utility company. Roughly 8.3 million people used the program last year. Its target population is the elderly and the disabled.

The National Energy Assistance Directors' Association, a group that represents state aid officials in Washington, estimated that the reduction would amount to 3.1 million households going without assistance on heating and cooling costs (not 3.5 million, per a previous estimate).

"I thought the administration would draw a circle around the social safety net for low income families. I thought we were part of that safety net," NEADA director Mark Wolfe said. "These are families who, without LIHEAP, will fall behind on their bills or cut back on basic essentials because they don't have any discretionary income."

Nearly two-dozen people who use the program told HuffPost in emails and phone interviews what LIHEAP has meant for them in recent years, and what they thought of Obama's decision to sacrifice its funding to appease deficit hawks.

Caution: The Real Life Stories You Are About to Read
Have Not Been Seasonally Adjusted
"Obama was supposed to have this image that he was for the everyday person," said Karrin Herring, a resident of Beaver County, Pa., who said she received $300 from LIHEAP in the fall to pay her heating bill. "It helped me out and I was glad to get it, too."

Herring, a 56-year-old middle school registrar, is disabled with avascular necrosis in her knees. She said she's still in the president's corner, despite her frustration over LIHEAP.

"For him to go straight to a program like this, especially when there are so many unemployed people out here now, a lot of times through no fault of their own, and more people needing the LIHEAP, I just couldn't understand why he would even think about this program in particular. They can find someplace else to cut some money if they really wanted to."

Christie Graber of Council Bluffs, Iowa, said she just recently qualified for $350 in assistance for her heating bill after applying for LIHEAP for the first time. Graber, a 60-year-old former event planner, said she gets by on $1,035 monthly Social Security disability checks.

"I think he can cut other places," she said of the president's proposal to cut LIHEAP. "I'm very disappointed. I campaigned for him. I believed in him. I was thrilled. I had tears in my eyes watching the election results come in ... I don't think he should cut help to the poor."

Michele Tracey of Sun City, Calif., said LIHEAP has paid her electric bill for four or five months during the summer for the past three years.

"There's a lot of people more hurting than us, but that program is one of the really helpful programs. California's not a real cheap state to live," said Tracey, 50. She said she and her husband, who is 62, support their family-of-four with his Social Security disability payments supplemented with money she makes as an occasional substitute teacher.

"It really helps," she said. "If it goes, I'll sure miss it."

Lew defended the decision to cut LIHEAP funding, citing declining energy prices.

"Going back to 2008, the program was funded at roughly $2.5 billion," Lew said. "We had a huge spike in energy prices, and the program doubled to $5 billion. We're now at a price level that's close to where we were before that increase. looking at our fiscal challenges, we can't straight line the program at $5 billion. We went back to the level it was at when prices were roughly the same."

It's true that energy prices have declined, but as has been pointed out by opponents of the cuts, the economy is in worse shape than when the funding was increased in 2008.

"It's done an enormous amount of good for a lot of people," Lew said. "It was meant to be a grant program that the states administered. Balancing our fiscal challenges and the funding change from 2008 until now, we made the tough decision. We said in the documents and the budget that we will keep our eyes on what prices go and what the need of the future is, but we can't cruise at a historic high spending level when we're trying to make these very difficult savings. In terms of investing in the future, we've been very clear that we need to create more opportunities to invest in education, in innovation, and in billing the infrastructure for the future, so we've had tough tradeoffs."

The administration's proposal is not about to skid through Congress. A bipartisan bloc of 32 senators has already insisted that the White House back off the program.

Rick Santelli comes out swinging and accuses Steve Liesman of Fighting Like a Girl

Rick Santelli was on a tear this morning and took the first swing at Steve "I can put a positive spin on anything" Liesman and when he swung back, Rick Santelli informs the planet that Steve fights like a girl. Rick's ire is raised at the 7:45 mark and the "fights like a girl" fireworks are around 10:15.

Enjoy the show! (the cackling in the background is ex-Federal Reserve Governor Frederic Mishkin).

Sunday, February 13, 2011

Obama proposes $7,500 electric car tax credit, a $53 Billion Train and cut $1.1 Trillion from Budget?

The administration's 10-year,
$1.1 trillion deficit reduction is less than the
total projected deficit for 2011 alone.
(Meanwhile, back at the White House Ranch, Obama
proposes a $7,500 Electric Car car tax credit and
$53 Billion High Speed Rail Project)

By Jonathan Weisman and
Naftali Bendavid
The Wall Street Journal

WASHINGTON – The White House's budget proposal for 2012 would shave $1.1 trillion from cumulative federal deficits over 10 years, mostly through spending cuts, a move White House officials believe would bring government spending into a healthier balance.

The cuts the administration will propose in its budget proposal Monday would hit a number of federal agencies and programs, but fall short of the spending reductions congressional Republicans will try to push through the House of Representatives this week. They also don't overhaul the major entitlement programs that are the biggest contributors to the nation's long-term fiscal woes.

Washington's focus has pivoted sharply in the last year from concerns over the financial crisis to concerns about the growth of government spending, which has joined jobs and the economy as major issues for voters. The administration's proposal will be the first time it details its vision for the economy and the role of government since Republicans won control of the House of Representatives in November.

White House officials still have not revealed some key details for Monday's budget, including total recommended spending levels and its projected deficit for 2012. The budget is in essence the White House's proposal for fiscal policy to Congress. The House and Senate must approve any changes to tax and spending policy, and their visions can contrast sharply with what the White House requests.

The administration's 10-year, $1.1 trillion deficit reduction is less than the total projected deficit for 2011 alone, which the nonpartisan Congressional Budget Office estimates will total $1.48 trillion. It also falls short of the $4 trillion in reductions the White House's bipartisan deficit-reduction commission proposed in December.

If enacted, the president's budget would bring the country's deficit to around 3% of the country's gross domestic product by 2017, an administration official said. This is higher than the 2.3% threshold the deficit-reduction commission proposed and short of the administration's target of 2015.

The White House plan would miss the goal administration officials had laid out of balancing the budget outside of interest payments by 2015.

Last year, the White House projected the deficit as a percent of GDP would be 4.2% at the end of 2020 and that total deficits as of that time would be $10.1 trillion. The deficit as a share of GDP in 2010 was roughly 10%. Two-thirds of the deficit reduction in the White House's budget proposal would come from spending cuts to mandatory and discretionary programs, both foreign and domestic, with the other one-third coming from changes to tax policy, although the details of that aren't yet clear.

House Speaker John Boehner (R., Ohio) launched a pre-emptive critique of Mr. Obama's budget, saying it leaves spending and debt too far out of balance. "The president's asked us to increase the debt limit, and yet he's going to present a budget tomorrow that continues to destroy jobs by spending too much, borrows too much and taxes too much," Mr. Boehner said on NBC's Meet the Press.

The budget proposal will recommend ending Bush-era tax cuts for the highest earners when they are set to expire at the end of 2012, though the White House didn't include the projected revenue from this in its budget forecasts. The budget projections are based on the administration's economic forecast which shows a recovering economy, but it was made before the December tax-cut compromise which, most private forecasters say, has boosted the near-term growth outlook. Faster growth could mean higher government tax revenues and a smaller deficit.

Many of the spending cuts or reductions in the budget are already known. It would, for example, freeze levels of domestic non-defense spending for five years, something the White House believes will save $400 billion.

The White House will also propose reductions to a number of federal programs, from the U.S. Forest Service to a program that provides heating assistance for low-income families. It will adopt previously recommended reductions in military spending that would reduce costs by $78 billion over several years. The budget proposal will also recommend targeted spending increases, particularly in education and infrastructure programs.

White House Budget director Jacob Lew said the administration is making hard choices in its budget to get the deficit under control. "There are scores of programs that are being reduced," Mr. Lew said on CNN's State of the Union. "We're beyond the easy, low-hanging fruit."

He said the budget would mix sensible spending with necessary cuts. For example, it would enable nine million people to take advantage of Pell grants, Mr. Lew said, but to pay for that, it would eliminate Pell grants during the summer, limiting them to the academic year. Similarly, the budget will help pay for 100,000 new teachers, especially in the math and sciences. But it would also begin applying interest to graduate students' loans while those students are still in school.

"The challenge we have is to live within our means but also invest in the future," Mr. Lew said. "We're doing what every family does when it sits around the table."

Rep. Paul Ryan (R., Wis.), chairman of the House Budget Committee, said the president's five-year freeze on discretionary spending simply locks the government into a high level of spending.

"This discretionary freeze is off of an extremely high base," Mr. Ryan said on Fox News Sunday. "They just blew spending off the gates in the last two years...It looks like to me that [Mr. Obama's budget] is going to be very small on spending discipline and a lot of new spending, so-called investments."

Neither party has proposed significant cuts to entitlement programs like Medicare and Social Security, which make up an outsized proportion of the budget but are politically difficult to cut.

"I think it's incumbent on leaders here in Washington to help the American people understand how big the problem is," Mr. Boehner said. "Once the American people get their arms around how big the problem is, then and only then" can solutions be laid out.