Friday, October 31, 2008

A Different Wealth Distribution


  • We are poor... not so much.
  • We exploit whatever resources we have without regard.
  • We provide you with shoddy, poisonous goods.
  • We pollute a large part of the world.
Ergo... you should pay for what we do.

That works... for some of us.


Suburban Heat Island


This morning, in Southeastern Michigan, the temperature is hovering in the upper 20s. Here are a couple of charts of those recorded temperatures from stations just several miles apart. Note what happens at 8:30 am [station numbers show the temperatures at the various reporting points].

Station "45°"
Station "31°"

These are private "weather stations" that are part of the "Weather Underground" reporting system. Looking at the charts above, can you guess which one might be situated in a sheltered area with an unblocked view of the sun?

Anthony Watts has a whole series of posts dedicated to how similar misplaced "official" weather stations have affected our perception of "global warming."



Thursday, October 30, 2008

Oil Future(s)


Now that oil prices have been cut by more than 50% from recent highs, it is tempting to ignore the energy reality that faces the world. We have bigger problems such as health care and wealth redistribution on which to focus. Maybe not....

A nice summation of global oil is provided at Take a look at these snapshots from that site... and then ask yourself what is missing from the pictures [click on pictures to enlarge].

Need a hint? Excluded from "known" reserves are most recent off-shore discoveries... and all shale/tar sands oil, which could exceed much of what is on the "top 10" list.

But given anti-energy forces in the U.S. and Europe, the "known reserves" picture is probably the most accurate assessment of what can be counted on for the future.
Oil Shale Resources

Green River Formationclick to view larger image
Location of the Green River Formation Oil Shale and Its Main Basins

While oil shale is found in many places worldwide, by far the largest deposits in the world are found in the United States in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.2 to 1.8 trillion barrels. Not all resources in place are recoverable; however, even a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. Present U.S. demand for petroleum products is about 20 million barrels per day. If oil shale could be used to meet a quarter of that demand, the estimated 800 billion barrels of recoverable oil from the Green River Formation would last for more than 400 years.
Yes, the anti-energy forces want you to believe that we should ignore the reality of today while we focus solely on what might be answers decades in the future.

We may not be able to "drill" our way out of potential supply problems, but "drilling" is not the only answer. If you ignore the supply side of "supply and demand," you can bet the last "oil price bubble" will not be the last... and the present global economic downturn will occur again and again as economies are whip-sawed by energy price movements.

Harry and his ilk are not "wrong" about the need to develop other sources of reliable energy... they simply are not realistic about it.





Frost On The Pumpkin


I'll skip the golf this morning.


She Will Be Shunned


Why would a young woman who has been a speech writer for the Democratic Party suddenly leave?

Read her own words


HT: Pat Dollard

Somewhere Out There


We are citizens of the world! Home is where the heart is! Let a smile be your umbrella!

So, why not a park bench for a legal residence? Do you have to file a change of address when it is taken away for repairs?

Read more....


Wednesday, October 29, 2008

Tax Post Removed

An earlier post regarding a tax comparison between Sens. McCain and Obama has been removed. Although the email upon which the post was based did come through a Wachovia executive, apparently he did not originate the material, but simply forwarded it.

Further checking shows that significant elements were erroneous. The Tax Policy Center of the Urban Institute and the Brookings Institution, a liberal think tank, estimates of taxes by income group show declining taxes for those making $227,000 or less for both candidates... with more savings to lower or no-tax groups in Sen. Obama's proposal. Sen. McCain's proposal would lower taxes across the board... based more on who was paying taxes rather than targeting some income groups for reductions which would be paid by other groups.

I agree with "Anonymous" that simply posting the email was not appropriate. But neither is Sen. Obama's plan, to wit:

“To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.”

— Thomas Jefferson, letter to Joseph Milligan, April 6, 1816
Of course, realistically with the enormous Federal spending going on, it seems unlikely that any tax cut is a long-term possibility.


HT: The Astute Bloggers

Oil Price Uptick


From the Associated Press:

Light, sweet crude for December delivery rose $5.56 to $68.29 a barrel on the New York Mercantile Exchange. The contract settled at $62.73 Tuesday, the lowest closing price since May 2007.

Oil prices have fallen by 55 percent since peaking at $147 a barrel in mid-July.

Oil investors have been tracking equity indexes for signs of market sentiment. They took heart from a rally in stocks that began Tuesday in the U.S. and continued in Asia and Europe on Wednesday.

But oil trader and analyst Stephen Schork did not read much into Wednesday's rally.

He credited the rise in oil prices on the dollar weakening against the euro in anticipation of a half-point rate cut Wednesday afternoon by the Federal Reserve and an oversold market for crude.

Investors often buy commodities such as crude oil as an inflation hedge when the dollar weakens and sell those investments when the greenback rises.

"Anyone who thinks a bottom is in, I'll sell them all the oil they want," Schork said.


Did The Groundhog See Its Shadow?


Hey! It's still October! What the heck???


Good thing we got the boat out of the water. Final data will be available for the month of October and February-October cumulative [didn't get the January data in time] in a few days, but [hint...hint] we're officially in Global Cooling. Well at least Michigan Cooling. Look for the post.

Our local record low for October is 21°F. Might be nudging that.

Now the official version brought to you by Sens. McCain and Obama:
Much colder than normal weather patterns in 2008 are consistent with Global Warming which causes temperature extremes. Global Warming will return as soon as the election is over. Meanwhile you'll just have to make do with hot air from the candidates.

Dow Excitement


Dow's 2nd best day ever

Tuesday, October 28, 2008

A Different Welfare For Detroit


Yesterday, The Washington Post ran an editorial titled "Welfare For Detroit."

AFTER YEARS of decline, U.S. auto companies face the double whammy of a credit crisis and a recession. Car and truck sales fell 26.6 percent in September, the first month since 1993 in which fewer than 1 million vehicles moved off the lots. General Motors, threatened with bankruptcy and burning through $1 billion in cash reserves per month, is groping for a merger with Chrysler. Ford's stock is down more than 70 percent in the past year, and investor Kirk Kerkorian is dumping his shares.

The $25 billion federal loan approved by Congress on Sept. 25 may not reach Detroit for six to 18 months because of red tape. So Detroit's allies are pushing for waivers of the usual rules and, perhaps, another $25 billion before the end of the year. And why not? Everyone else seems to be getting a bailout these days. Hundreds of thousands of people depend on Detroit for their jobs, directly or indirectly.

Well, we can think of several objections. First, there is the question of whether the U.S. government should be picking winners and losers in a business such as this. It's one thing to bail out the financial sector, whose product -- credit -- is essentially fungible and on which all other businesses depend. Automobiles, however, are not interchangeable, and Congress can't substitute its specific technological and aesthetic preferences for those of the market. What if we lend Detroit $25 billion and still nobody buys its cars?

Second, this bailout taxes the less well-off to protect the relatively privileged. The average individual General Motors production worker, whose job would be saved by the bailout, makes $56,650 per year, according to the Center for Automotive Research, and that doesn't count better-paid, white-collar types. Meanwhile, half of all households-- which typically include more than one earner -- make less than $50,000 per year. Where's the justice in that?

Congress approved $7,500 tax credits for purchasers of GM's much-touted plug-in hybrid Chevy Volt, built to run 40 miles on a single electric charge. That would knock the net cost of the four-seat Volt, due out in late 2010, down to $32,500 -- not much less than a basic Cadillac CTS costs now. Even then, it could take a decade of Volt driving to recoup the difference in purchase prices between it and the far cheaper Toyota Prius. Assuming a few well-heeled drivers take that deal, why should poorer people be taxed to enable them?

The downfall of the American auto industry is indeed a tragedy. But the automakers and the United Auto Workers have only themselves to blame for much of it. For years, they pursued protectionism against foreign competitors rather than tackle them head-on. The automakers say that they need $25 billion from Congress to offset the additional costs of tough new fuel-efficiency standards. Perhaps they wouldn't be in that situation if they had accepted such standards a long time ago and retooled to meet them, rather than persisting in the more familiar, and profitable, business of making gas guzzlers.

We would all have been better off if the federal government had enacted a higher gas tax so that the Big Three could have planned production on that basis. A stiffer gas tax, rebatable in some form to consumers, would still be the best way to guarantee a long-term shift to more economical cars. Alas, there's a limit to how much taxpayers can spend ensuring that such cars get built in Detroit.
I couldn't resist commenting:
Toyota and Honda, the largest competitors for Detroit automakers, have enjoyed a protected home territory and continue to do so. This has allowed them to develop and sell a variety of vehicles that, until the recent gas price increases, were only niche products in the U.S. In fact, because Japan was a market virtually closed to U.S. manufacturers, Toyota, Honda, and a variety of other Japanese manufacturers used the Japanese buyers to subsidize their sales in the U.S. You might note the same thing is happening with the Korean manufacturers.

In fact, Toyota spent large sums to develop full-sized trucks and SUVs to compete in the U.S. market because that was where the demand and profits were.

The U.S. companies had a variety of small vehicles that couldn't be given away... and were subsidized by the profits from the larger vehicles that were in demand by the public. It is interesting that the Ford Focus, which was one of those vehicles that couldn't be sold profitably, has become a big seller for that company... and at a profit. Does that make Ford execs geniuses for keeping a dud around for so many years?

The combination of an artificial gas price bubble [which is correcting], credit availability, and onerous government mandates for the next ten years, have turned economic "engines" for the U.S. economy into stalled scrap.

So, while the U.S. manufacturers are not blameless, you might recognize the complicity of the U.S. and foreign governments in this situation. You might also recognize the the U.S. manufacturers are both successful and profitable in most other global markets. You might also recognize that U.S. vehicle quality... particularly Ford... is virtually the same as Toyota's.
I noticed this comment received more "recommendations" than the others... except this one which received the same number.
"We would all have been better off if the federal government had enacted a higher gas tax so that the Big Three could have planned production on that basis. A stiffer gas tax, rebatable in some form to consumers, would still be the best way to guarantee a long-term shift to more economical cars."

I agree with one exception. REBATABLE. My suggestion has been that the money raised from an increasing gasoline tax go one third to repair and expansion of our infrastructure, one third to health care and one third to social security.

Is there a politician in the country with the cajones to even discuss raising the gas tax? Al Gore said we should talk about it and he got hammered. Six months ago would have been a very bad time to add a quarter or so to gas prices but the post election "new found courage period" would be perfect.

Finally all the tricky ways the politicians use to lead buyers to hybrids and electrics are ill focused. It is not the purchase of cars that consumes energy. It is the USE of the car. In the DAILY DECISION to drive the car or take the train, it is the cost of the USE of the car that is critical. This is best effected through higher FUEL cost. The taxation system is in place. No new bureaucracies are needed.
No, politicians won't do anything for which they can be blamed if they can blame the automobile manufacturers instead. As I wrote earlier this year:
Now that it is obvious to everyone that the government has no intention of letting market forces act as the agent of change, it is time for the government to quit pussy-footing around and do what is done in Europe: add taxes of $3 or more per gallon of gasoline. At that point, all other government actions... mileage and CO2 regulations, restrictions on drilling for oil, and subsidies for alternative fuels... will be moot and can be eliminated because the cost of implementing the government's policies will be borne directly by consumers without the government being able to divert attention and blame to vehicle manufacturers and oil companies.

... that would be a blow to politicians who would have to stand up to their constituents and explain why the government has to be involved at all in the marketplace. It would also create issues with regard to why many other taxes would have to remain in force [and the supporting bureaucracies]. It would also highlight issues with regard to the plethora of regulations that create additional costs for manufacturers and consumers.
I absolutely feel the economic manipulation by the government in the name of important causes is the cause of so many ridiculous problems and misguided fixes... including Detroit automakers current and future problems. So, while the second commenter's arguements are logical they are not reasonable.


An indication of how "protected the Japanese market is....

(RTTNews) - The sale of foreign auto makers cars, trucks and buses in Japan dropped 5.5 percent in August from the year before.

The Japan Automobile Importers Association says weaker sales of Volkswagen and BMW autos offset a rise in sales by Mercedes-Benz.

Sales of imported vehicles by foreign car makers totaled 14,406 in August [about 168,000 annually], down from 15,249 in the same month last year. Among the top three foreign brands by sales volume, Volkswagen saw sales drop by 1.5 percent on the year and BMW sales fell 21.3 percent. Mercedes Benz saw an increase of 3.3 percent.

Ford posted the largest drop among the top 10 foreign brands, falling 28.1 percent on the year.

For comments and feedback: contact

Copyright(c) 2007, Inc. All Rights Reserved
Meanwhile, Toyota and Honda, excluding other Japanese brands, sold over 240,000 vehicles... in the month of September, 2008.
So contrary to the Washington Post's assertion that U.S. manufacturers got "protection," The U.S. market is wide open.

Monday, October 27, 2008

This Says It All About Spreading The Wealth

from The Augusta Chronicle - click image for larger view


Obama: McCain will 'endanger' US


From the BBC News last Thursday:

US Democratic presidential hopeful Barack Obama has warned that rival John McCain would "endanger" US security.

He said that the election winner would face security "tests", due in part to President George Bush's "bad policies".

His running-mate, Joe Biden, said at the weekend that Mr Obama could face a "generated international crisis" within six months of becoming president.

So, the reason that Obama might face a "generated international crisis" is not because he has unrealistic world-views and has no understanding of military strategy, it is because of Bush's "bad policies."
Your chest broke my bullet and I'm suing you.
So, Joe misspoke again?
Responding to attacks over Mr Biden's comment on the likelihood that he would be "tested" by an international crisis, Mr Obama said his running-mate "sometimes engages in rhetorical flourishes".

"His core point was, the next administration is going to be tested regardless of who it is," he told reporters.

Yeah, Biden has a quick lip. He really meant whoever was president and just assumed it would be Obama. He didn't have to come right out and say it was Bush's fault... we all know that. He didn't have to say that McCain has no idea about military action.

Hey, that's old news. It doesn't matter because McCain is out of the race... no chance... fold up tents... go away.
However, an AP-GfK poll released on Wednesday suggests a much narrower margin, putting Mr Obama only one point ahead, with 44% support to his rival's 43%.
You understand, he should go away. We all want the change that Obama promises. We'll be able to sit back and watch how the Triumvirate* will knock our socks off with change.

Yes, I can't wait to see how they get 300 million Americans to blow on pinwheels to generate their own electricity. That will keep them busy while Washington changes things for them.

Yes, I can't wait to see how Obama's "redistribution of the wealth" is a unifying force for change.

Yes, we have a lot to fear from McCain.


* Obama, Reid, Pelosi

Sunday, October 26, 2008

Foreclosures A Problem If There Are Not Enough


Riding the wave of media hype about foreclosures...

Dohany, 58, a Republican who was appointed in 2003 and re-elected in 2004, has made collecting delinquent property taxes the priority. During his tenure, the county has had a 99.9% tax collection rate and has never foreclosed on an owner-occupied home. Dohany said his office has worked with county housing counselors to help keep taxpayers in their homes.

Meisner, 35, who is term-limited as a representative, said he believes the treasurer's office could do more outreach to people facing foreclosure. He also has proposed a county-run land bank, where foreclosed properties could be rehabilitated and later sold in the hopes of increasing property values.

Damn those evil and greedy Republicans.

Of course, foreclosures aren't the only issue. How about the "blame the other guy" approach?
In another hotly contested race, Oakland County Sheriff Michael Bouchard, a Republican, is to face Democratic candidate Jane Boudreau.

Boudreau worked for the sheriff's office for more than 18 years until she was fired in 2006, partly because she failed to cooperate with an investigation into her conduct. Boudreau, 44, filed a federal lawsuit in 2007 against the sheriff's office, claiming she was wrongfully discharged.

The lawsuit is pending in Detroit's U.S. District Court.

Is that kind of like defending yourself against murder by claiming the other person should be charged with malicious destruction of property for "breaking my bullet with his chest."


Detroit - Same Old Same Old


It seems as if years have passed since anything positive has occurred in Detroit. Former mayor Kwame Kilpatrick has been replaced by Ken Cockrell, Jr., former head of the city council... an organization not known for its astute decisions or leadership.

Meanwhile the city is in disrepair. Schools are pretty much failures with the Detroit Public Schools acting pretty much as the Detroit Penitentiary System... daily incarceration for children... with no hope of rehabilitation. Businesses are floundering. And the Lions are 0-6... soon to be 0-7. The only bright spot is Canada is just across the river.

Not quite 4 years ago, I wrote that:

The city is too strategically located to be abandoned entirely. But it has not yet reached its nadir. Detroit's present population is about 900,000. When it reaches about 750,000, there will be imminent threat of collapse. The state will be forced to step in. At that point, there will be significant opportunities to remake Detroit into a model city.
  • Reclamation of large, blighted tracts for development
    • buy-out of remaining residents
    • tear-down of existing properties
    • rezoning to achieve mix of residential, business and public areas
    • bring in high-end developers... gated communities...
  • Tax reformation
    • hiatus on property taxes for residents and businesses moving into the city
    • overall reduction of taxes residents and businesses must pay in the city
    • privatization of city services such as garbage disposal
The State of Michigan is pretty much a shambles, too... at least the southeastern portion where the majority of the population and manufacturing is. Still, the old politics of labor unions and welfare are thriving. So, it is unlikely that anything can or will be done about Detroit until the state government is fixed... from the top down.

I suspect that 95% or more of Detroit residents... living, dead, and imaginary... will be voting for Barack Obama and his message of "hope the government will give me more change... in my pocket." The same government philosophy that has brought ruinous spending and taxing in the state. The same anti-business, anti-jobs, anti-personal responsibility that keeps so many people living like sheep with the government as their "shephard."

It is time for change...
  • change at the state level to fiscal responsibility and pro-business policies
  • change at the city level to addressing problems rather than cultivating racial power
  • change at the personal level to realizing that "stupidity has its own rewards" and not being so damn stupid
What's the likelihood of such change? Somewhere between zero and zilch.

That makes it even more likely that ultimately the city will have to be split up into new, manageable pieces. As I also wrote in 2005:
Another radical approach would be to reduce Detroit to a 5 mile radius from the foot of Woodward Ave and then create several new cities along the outer ring or let existing cities annex adjacent areas. This would create a more manageable central area that could focus on high-end businesses and more affluent residents. The outer areas would be more traditional smaller cities that could focus on small business and the needs of its residents.

What do economists call that... creative destruction?


Saturday, October 25, 2008

No Tax Increase... Just Allowing Tax Cuts To Expire


From The Astute Bloggers:

via THE ASTUTE BLOGGERS by directorblue on 10/25/08

Check out the tax rates when Jimmy Earl Carter served as "president" in '78.

That's right. Carter's tax rates "spread the wealth" by confiscating 70% of any earnings over $203K. Seventy percent! That motivates a lot of folks to demand cash, hide income, cheat, operate in the black-market and/or not bother to work any harder. Even if you earned only $47K, Carter wanted half. Half!.

As for the results? In 1980 Time magazine put it this way.

...inflation is not only a frightening economic problem but is rapidly becoming Carter's most dangerous political liability as well... In the past few weeks, however, a new side of inflationary psychology has begun to show itself among businessmen and investors: plain, old-fashioned fear. Executives talk of inflation rates going to 20% or more in the next few months, creating an environment in which reasonable planning is impossible. The jitters have unhinged the investment markets. As recently as mid-February, stocks were widely considered a hedge against inflation and thought to be grossly undervalued. The Dow Jones industrial average hit a high of 904 on Feb. 13. But since then it has tumbled 92 points, to 812; nine points of the decline came last week. The average is now lower than it was 16 years ago.
Sound familiar? Maybe there's validity to the contention that the recent stock market turmoil can be termed an "Obama Panic". That is, investors anticipate a disastrous set of Carter-esque policies that send the economy into a tailspin and respond accordingly.
Of course, you can adjust these incomes by a factor of about 3.2 to get to 2008 prices. That would mean you were at the 28% bracket if you earned the equivalent of just over $60,000 and you were at 50% if you earned just over $150,000. That's "spreading the wealth" according to one way of thinking.
That's like saying there are two people; one who works and the other who doesn't. The working person works two jobs so he can give the person who doesn't work one of his paychecks. That's fair.
Now, let's allow Bush's tax cuts to expire and see what happens.


Explaining The Bailout


The recent and ongoing Federal bailout of everything may be confusing to some. Because a picture is worth a thousand words... on in this case, a million or more words... here is the explanation in two pictures.


Any questions?


The Science Gamer


Hey, is this cool, or what? From New Scientist. Xbox may never be looked at the same way.

Thousands of computer processors working together are needed to produce these detailed simulations of turbulent vortices.

Friday, October 24, 2008

OPEC Tries To Pump More Dollars


... by pumping less oil.

As the price of a barrel of oil drops toward the envisioned $51, OPEC is attempting to "stabilize" the price at high levels by cutting supplies.

This could have an impact... in the future... but for now the driving force [pun] is the economic malaise that has engulfed the world, a malaise that was in some large part due to the unjustified run-up in oil prices.

That is why this is exactly the time to begin expansion of oil supplies in preparation for the economic recovery... to prevent the continued economic yo-yo boom-bust related to volatile oil prices.
Instead of making it harder and more expensive for domestic oil producers to expand domestic oil supplies, the government should be making it much easier... thereby preventing greater future supply problems. Or is that just too difficult to grasp?


Political Intimidation


Are we beginning to see a pattern?

  • Sarah Palin is announced as John McCain's running mate and the media attacks immediately.
  • "Joe the plumber" asks a question about taxes and the media attacks immediately.
  • Unless this is a really bad joke... a young woman has a McCain bumper sticker on her car and a robber beats and disfigures her.

    Thanks, "Anonymous." Unfortunately, the last link below wasn't.
The first two are examples of "politics as usual," but the last one goes well beyond that. The danger is that physical intimidation will be seen as an effective way to prevent those who would support McCain at polling places from exercising their rights. It seemed to work against Hillary Clinton.
One response to intimidation.

Market Bottom


Many would like to know if the stock market has bottomed. Warren Buffett thinks this is a good time to buy stocks. One of my golfing partners dumped a bunch of cash into the market this week. The chart above indicates a market that took an emotional plunge and may be having second thoughts.

The stock market tends to play on emotions... elation or despair. Bubbles of elation become bursts of despair. If you want to time the market recovery... presuming that there will be a recovery... it may not be far off. The stock market started declining in earnest about around the middle of May. Usually, these sell-offs last about 9-15 months if I recall correctly. They always precede the government's proclamation of economic sliding... and the market always returns before the government is willing to say things are getting better.

So, if we use prior declines and recoveries as an indicator of where we are presently, I'd have to say we are jumping the gun... being too optimistic... that the market has bottomed or conversely that the market is ready to start rising steadily. There are too many levels of uncertainty right now for such optimism. What is reasonable to believe is that the market has largely discounted most bad news and will be in a state of agitation for awhile until matters financial are resolved.

My golfing buddy may have been a little too quick in his decision to enter the market, but his downside risk is much less now than 6 months ago... and his chances to catch the full recovery are... of course... 100% better than if he remained in CDs.

It's a gamble. Do you feel lucky today?


Thursday, October 23, 2008

Remember The Next Time


Tuesday, I wrote about the oil correction and how the $51 level I envisioned was being approached rapidly. On May 9, I noted this:

Can you connect the dots?
CNN - January 2, 2008 - It's been rumored Goldman Sachs has over $80 billion in the market, although the investment bank declined comment for this story.

CNN - May 7, 2008 - Oil hit record settlement and trading highs Tuesday after a Goldman Sachs analyst said crude prices could reach $150 to $200 within the next six months to two years.

[note the dates just under the prices on the two charts above]
I don't know if you can connect the dots, but... if not, I think Goldman Sachs has a bridge they'd like to sell you. In the meantime, they're doing quite a business pumping up the price of oil [and gas]... pun intended.
I tend to be skeptical about many things, but there has been enough massive financial manipulation going on the past decade to warrant the suggestion that you re-read this.
Say, I wonder what's been happening at Goldman Sachs? Oh, it's a "bank holding company" now? Hmmm. I'm sure they have great insight regarding fixing the present banking problems... just like they knew where oil was headed.

And do we know any politicians connected to them? Anyone involved in the bailout?

Meanwhile... shortly after the close of the stock markets yesterday...

Almost within $15 of the target. Hey, that's "close enough for government work"... eh?

Perhaps you should watch out for any money in banks under the new "bank holding company" umbrella.


Wednesday, October 22, 2008

Bailout Cost


Bill and I talked yesterday about the "bailout" and things economic. He wanted to know what I thought. What I think is this: the bailout strategy is confusion by obfuscation. A lot is spoken and little is said.

Some basic questions:

  • What is the real nature of the problem?
  • How much is really being spent to address that problem?
  • Who gets the money?
  • How is it spent?
  • Who administers the bailout funds?
  • What are the administrative costs?
  • What other expenditures are attached to the bailout?
  • How does it address the problem(s)?
  • How much are the total expenditures... directly addressing the problem, administrative, costs, unrelated to the problem but tagged on to the bill?
  • How much more spending is anticipated beyond the initial expenditures?
  • Will any of the bailout be repaid by the recipients?
  • How much more in taxes will that cost me?
I can address the last item.

I'm presuming that the advertised price [$700 billion] is before the bait and switch takes place. Of course, the cost per taxpayer is an average cost. Since the top 5% pay most [over 40%] of the taxes...

This translates into these additional taxes by income group:

[click on image for larger view - opens new tab]

I'm sure that will have a positive effect on our economy. Of course, under an Obama administration, there won't be any additional taxes ... except for the rich... so don't worry. And since Obama has convinced you that only the rich were involved in the financial problems, it is "only fair."

Meanwhile, Bill sent this email with more information about "what went wrong":

Federal Reserve

Note recent developments (all actions are not listed here; go to News and Events)

Federal Reserve - News and Events

The Money Market Investor Funding Facility (MMIFF) news release appears here.

Note the sublink for "Information Regarding Recent Federal Reserve Actions". That's where many of the other financial actions are identified, but that list is far from complete.

Federal Reserve - Information Regarding Recent Federal Reserve Actions
Actions from Sep 7 2008 - Present

This listing of actions doesn't cover the entire list. You will need to go to the archive for Monetary Policy Releases. Your first effort will walk you back to January 2008. Again, that effort still doesn't cover all actions undertaken. Recall that Fed actions related to this financial crisis kicked in during the fall of 2007 (as I recall). So, change the year in the window to 2007 and hit the Change Year button.

Federal Reserve - Monetary Policy Releases - 2008

Federal Reserve - Monetary Policy Releases - 2007

I believe that the list of principal special actions began with the August 10, 2007 announcement that the "Federal Reserve is providing liquidity to facilitate the orderly functioning of financial markets".

Just who is running this insane asylum?


Tuesday, October 21, 2008

Oil Down... Natural Gas Going Up


There are a lot of people making snide comments about "drill, baby, drill" these days. Oil prices are down in this economic pullback, so that proves we don't need to expand our domestic supply of energy resources.

That's like saying the nation is on a forced diet so we don't have to prepare for the time when it begins eating normally.
But just in case you belong to the "we don't need no friggin' drillin'" contention, consider this... and this.


They're Up; They're Down


I get both Detroit newspapers; The Detroit News and The Free Press. It allows me to see both sides of issues because the News is generally more conservative than the Free Press... generally.

Here are partial articles from both newspapers today...

As Benjamin Disraeli said.... Well, maybe it's more just picking the part you want to emphasize. Sort of like political campaign ads.


Have Oil Prices Corrected Yet


Last year when oil prices were on the way up and had reached $90 per barrel, I wrote that I could see a correction in the future... not immediately, but it would happen. My envisioned "corrected" point was $51 per barrel. That was obviously crazy given the peak oil forecasts of $200+ for 2009.

Now read what the Herald Sun in Australia wrote.
Not there yet, but maybe soon. After all, its only $25 away and has fallen over $70 already from the peak oil panic prices. Maybe it won't reach $51, but there is still a strong possibility.

How could I have made such an audacious prediction and how could it have the possibility of being correct when the world's experts all pointed in the opposite direction? If oil were a commodity or product upon which little else depended and for which there were no substitutes, then its scarcity could certainly drive up its prices... presuming there was a steady market that wasn't that price sensitive. I'm not sure what kind of product that could be.

But oil is a basic commodity upon which nearly all economies depend. There was never a real scarcity... just the potential of demand outstripping supply. So when prices doubled and tripled, it was pretty obvious what the result was going to be... dramatic economic pullback... followed by a dramatic price reduction for oil back to a more "balanced" level. This happened in 1973 and 1980 so why is anybody surprised the third time? Maybe they didn't study history. Of course, the credit debacle has pushed the price decline fairly more rapidly than even I might have anticipated.

As economies begin to recover, there will be repeated efforts to push oil prices back up over $100, but it becomes self-defeating if pushed too far. It was obvious last November that it was being pushed too far. I'm not sure what is "the right price" for oil, but we can all tell what is "the wrong price" when we experience it.

Maybe OPEC and speculators will learn something this time. Maybe our politicians will also learn that grandiose alternative energies available in 20, 30 or 50 years from now, don't take the place of real energy produced now in our own back yard guaranteeing sufficient supply at non-extortion rates. Or maybe we just have to go through this a 4th time... or more.


Monday, October 20, 2008

It Was Not People Like Me


The NY Times writes a poignant tale of the way one noble man's dreams of providing housing to the poor were dashed.

SAN ANTONIO — A grandson of Mexican immigrants and a former mayor of this town, Henry G. Cisneros has spent years trying to make the dream of homeownership come true for low-income families.

... While Mr. Cisneros says he remains proud of his work, he has misgivings over what his passion has wrought. He insists that the worst problems developed only after “bad actors” hijacked his good intentions but acknowledges that “people came to homeownership who should not have been homeowners.”

They were lured by “unscrupulous participants — bankers, brokers, secondary market people,” he says. “The country is paying for that, and families are hurt because we as a society did not draw a line.”

... After a sex scandal destroyed his promising political career and he left Washington, he eventually reinvented himself as a well-regarded advocate and builder of urban, working-class homes. He has financed the construction of more than 7,000 houses.

... It was, he argues, impossible to know in the beginning that the federal push to increase homeownership would end so badly. Once the housing boom got going, he suggests, laws and regulations barely had a chance.
A politician with poor judgment sees an opportunity to cash in on the housing boom and then argues it was everyone else's fault that things went wrong... how could he have known?


There are a lot of people and organizations who are asking the same questions. They had such good intentions. Now they are on the road to....


Sunday, October 19, 2008

Closing The Cottage


Technically, we are not closing up our lake cottage because our son stays there. But the season is closing for my wife and me. Although we may go there occasionally before next spring, a big reason we go there... the lake and the boating... will end this weekend.

I took a few pictures yesterday and share them with you. [click on them to enlarge}

Today, we will return to do some yard work. Then start thinking about less pleasant thoughts... such as the election.


Friday, October 17, 2008

Autumn Morning


It's the time of year in Michigan where thoughts of global warming disappear and we begin to think of preparation for our "grey" or "gray" season [isn't English fun in it's looseness?]. This weekend, its time to take the boat out of the lake and get it into storage. I have to seal the deck. I'm considering putting my golf clubs in the basement. It's definitely time to take the air conditioners out of the cottage windows.

For all of the dire consequences about our changing climate, the obvious changes predicted are not obvious. The leaves are turning color on schedule. Birds are beginning to circle in preparation of leaving the area. Local temperatures are at or below normal... still. No, our focus is on getting ready to hunker down for several months of short daylight hours and heavy meals.

We have an apple cider mill not far from here. I've been remiss about going there, so my wife finally skipped her workout session to pick up cider and spice/sugar doughnuts.

This morning, my wife was fascinated by the sunrise and clouds so she took the picture below. As autumn deepens, we get more dark clouds and bright sun contrasts like that. Gradually, the clouds take over as more Canadian air sweeps over the Great Lakes and keep the sky loaded with cold moisture.

Winter is on its way... but not yet here. There is still abundant color and life to look at.

I really didn't want to write about politics today. We all need a break from that.


Thursday, October 16, 2008

New Economics Crashes


Everyone wants to know what happened. How could so many things go so wrong in our economy? We are the richest, most technologically advanced, best educated, most productive, most innovative society in the world... so what went wrong?

  • We decided that domestic manufacturing and capable, well-paid labor was a disadvantage
  • We decided that cheap, illegal labor was necessary and would contribute to our wealth without draining our communities' resources or undermining our social values
  • We decided that government programs were required for all who felt disadvantaged and could be paid by printing money
  • We decided that gender, racial, and sexual orientation preferences were more important than merit
  • We decided that corporations and profits were nefarious and should be controlled with mandates and more taxes
  • We decided that limited, expensive, alternative energy was more desirable than improving and expanding existing, reliable energy
  • We decided that service jobs and debt-based spending could keep the economy growing
  • We decided that manipulation and deception were legitimate financial instruments
  • We decided that everyone was entitled to happiness rather than the pursuit of happiness... and that happiness could be purchased even if you had no money of your own
We laughed at the moral and ethical responsibility of the great middle class and said they didn't understand the new economics.

But they did.


Wednesday, October 15, 2008

Votor Fraud


In the 2000 election, the Democratic Party held the U.S. hostage with post-election allegations of voter fraud... especially in Florida's "hanging chad" brouhaha.

Now there is ample evidence that the Democratic Party has been the chief beneficiary of voter fraud... primarily through the efforts of ACORN... and within the Democratic Party the chief beneficiary appears to be Barack Obama who has had very close ties to ACORN.

This post at Al Fin does an excellent job of summarizing the scope of this scandal.

Hanging Chads were a minor issue compared with the ACORN effort. Yet the problem had to be settled with an extensive ballot-by-ballot examination and a Supreme Court ruling.

The real question in 2008 is: Where is the Justice Department and the FBI?

Is known fraud going to be allowed to impact this coming election? Will it have to go to a national recount and ballot-by-ballot voter verification with another Supreme Court ruling?
This could well be the most corrupted election in U.S. history.


This is text from an email I received today:
Voter Fraud Group Caught Red Handed in Jackson While Paying for False Attack Ads Against Tim Walberg

Nationally Scandal Plagued A.C.O.R.N. Is Charged With Voter Fraud Locally

Jackson, MI – Scandal plagued A.C.O.R.N. (Association of Community Organizations for Reform Now) has been hit with allegations of voter fraud nationally. Their offices have been raided in Las Vegas, investigated in Minneapolis, and A.C.O.R.N. attempted to register Mickey Mouse to vote in Florida. Yesterday, Attorney General Mike Cox issued six counts of forgery related to A.C.O.R.N. voter fraud right here in Jackson, Michigan.

A.C.O.R.N is a member of Health Care for American Now, which is paying for a false attack TV ad against Tim Walberg.

"This radical liberal group supporting Mark Schauer tried to register Mickey Mouse to vote in Florida, is associated with voter fraud charges in Jackson, and now is paying for false attack ads against Tim Walberg. Mark Schauer's votes for massive tax increases and driver's licenses for illegal aliens, along with his support from these radical liberals, demonstrate he will fit in well with the liberal Washington crowd," said Justin Roebuck, campaign manager for Tim Walberg.
So Federally funded ACORN is involved not only in voter registration fraud, but is using federal money to fund election campaign ads.
Doesn't that make you feel good about being an honest taxpayer and legitimate voter?

Getting Rid Of CO2 Costs Money So We Will Keep It


There are a lot of people who are happy to spend your money on "saving the world." The decade of the 90s were the golden years for the global warming brigands. But, increasingly, during this decade the scientific evidence has been accumulating that the "unstoppable global warming" was little more than another climate oscillation caused by a convergence of factors from solar activity to ocean currents... and had little to do with carbon dioxide.

Still, politicians are willing to spend your money to... ostensibly... save the planet, but in reality to have a political platform to power. In Europe, that is changing. We can only hope that will change here as well.

From the Guardian:
EU climate pact in crisis ahead of summit

• Friction over methods to meet agreed targets
• Sarkozy proposals face UK and German opposition

French attempts to craft a global warming pact to make the EU a world leader in tackling climate change are gridlocked, with governments unable to agree on how to share the pain and costs of slashing greenhouse gases by 20% within 12 years.

A European summit tonight in Brussels will fail to agree on the means to the end of meeting the EU's ambitious targets, warned diplomats and officials.

The deal has to be struck by the end of the year for the package, which was agreed unanimously by European governments 18 months ago, to become European law.

But senior officials and diplomats doubt whether that will be possible despite the fanfare that accompanied the unveiling of the policy last year.

"The targets have been agreed and we have presented them all over the world," said José Manuel Barroso, the European Commission chief. "There will be a real problem of credibility for Europe."

He added: "Saving the planet is not an after-dinner drink, a digestif that you take or leave. Climate change does not disappear because of the financial crisis."

Nicolas Sarkozy, France's president and current EU president, has been told that his proposals for tonight's summit have no chance of being supported, with some of the 27 countries arguing that the financial crisis means that the Europeans can no longer afford the huge costs entailed.

"In this difficult situation, it's only natural that governments become more defensive and prudent," the European Commission chief said.

On Monday, Franco Frattini, the Italian foreign minister, told a meeting of his European counterparts that, with Europe heading into recession, the entire complex package should be renegotiated.

The foreign secretary, David Miliband, opposed the Italian demands, arguing that if Europe was grappling with the credit crunch, it also was confronting a "resource crunch" that made the climate change package all the more urgent.

But while British ministers say they support the plan, they are also trying to water down some of its key provisions. The energy and climate change secretary, the foreign secretary's brother, Ed Miliband, last week failed to get the rest of the EU to exempt the aviation sector from a central element of the climate change package - that which obliges Europe to obtain 20% of its energy mix from renewable sources by the 2020 deadline.

Sarkozy's effort to build a consensus has already seen him scale back his ambitions, according to sources. But he has still encountered a wall of insuperable opposition on several fronts.

The heart of the plan is the so-called emissions trading scheme which forces European industries to buy permits to pollute, encouraging them to save money by becoming cleaner.

But amid furious objections, particularly from Germany, Sarkozy has proposed that especially energy-intensive industries such as the steel, aluminium and cement sectors be awarded their pollution permits for free to prevent them abandoning Europe and moving their business elsewhere. Britain and others reject the blanket exemption for these sectors.

However, there is also widespread concern that Europe will simply export jobs and businesses without making any difference to carbon dioxide emissions.

HT Benny Peiser:


Tuesday, October 14, 2008

Best Day Ever


From Bloomberg:

U.S. Stocks Rally Most Since 1930s on Bank Plan; Dow Gains 936
Before you get too excited, just remember that the Dow only needs another 4,800 points to get back to last October's levels.

Nothing has fundamentally changed yet. We have an election in three weeks that could have profound impact on the direction of the Dow for many years to come.

If you have some extra cash burning a hole in your pocket, you may be able to gain a few dollars betting that the market will go up some more. I might be inclined to let my equities try to recover, but hold on to the cash just in case something else blows up. Of course, after getting hit with an oil bubble, a housing bust, and a credit crisis, we might think the worst has already hit us. We might think that....


Monday, October 13, 2008

Gasoline Prices Correcting


Oil ran out of reasons to be artificially inflated. Now it looks as if gasoline has encountered the same market correction.

While the price of gasoline is still too high, the $3.00 per gallon barrier was broken this weekend in the Detroit area approaching $2.80. Elsewhere, the $2.50 per gallon price is being negotiated.

That is certainly good news for many battered economies. The problem is that the next increase will be the price of natural gas and winter is certainly getting closer. Sure, the Democratic-controlled Congress has given the go-ahead for more offshore drilling... but just wait until all of those court challenges start rearing their ugly heads. And if Obama wins and the Democrats keep their control of Congress, you can bet that there will be more smoke and mirrors than at a magicians convention... and little will actually get done to address the long-term energy needs of this country.

It just doesn't serve the purposes of the Democratic Party to have things run smoothly. Then there are no giant honey pots of special Federal programs for them to dip into. If you think you saw pork in the $700 billion bailout, just keep looking. There's a lot more where that came from. And if you think government intrusion in the marketplace will be bigger because of the bailout, just keep looking because you haven't seen anything yet. The big alternative energy programs are lurking around the corner while nuclear, coal, natural gas, and petroleum expansion will never be realized.

Then the average Joe will realize that the few pennies per gallon more or less isn't even worth talking about.


Sunday, October 12, 2008

Wrong On So Many Levels


Found in the Detroit Free Press:


77th Of 114 Above Average?


As noted in Icecap, NOAA published the September temperature ranks by state. I noticed that Michigan was ranked 77th warmest of 114 years.

Okay. I guess I'll have to believe NOAA that Michigan's September temperatures were "above normal." After all, the temperatures I track in Southeastern Michigan were 0.1° F above average. Does that mean in order to be "near normal" there has to be less than 0.1° F variance from average?

I guess it is possible that the rankings are based on highly skewed temperature averages. In that unlikely scenario, there would be a lot of years slightly below average and a few years very much over average. Anything over 0° variance would then be ranked above normal.

Or, maybe just this part of Michigan was "near normal" while the rest was "above normal."

Somehow, this doesn't seem to compute. Well, actually it does. "Normal" is based on 114 years which, indeed, does include some very cold years [but excludes warmer years prior to that]. Meanwhile, "average" just refers to 30 years or so.

The point is that when you have oscillating climates, "normal" and "average" begin to lose their normalness and averageness... especially when you compare a series that includes data that is excluded from others. So, if the weather cools for a decade or so, then we might have "near normal" "below average" temperatures. Got it?


Saturday, October 11, 2008



It happened in Germany when the economy was bad.

It happened in Venezuela when the economy was bad.

It happened because "the people" embraced it.

Can it happen in the U.S. because the economy is bad?


Friday, October 10, 2008

Oil Prices


Last year, I wrote this about an oil price correction.

Not quite to the level I thought was appropriate... but headed there. Just think "tech stocks."


Assessment Of The Candidates


It has been several months since I posted this assessment of the candidates for President of the U.S.

I see no reason to change that assessment.


$ $tre$$


Econbrowser reports that 89% of economists now think we may be headed for a recession; up from 60% last quarter. Hmmm.

73% of morticians think that chance of death increases as one ages beyond 90.

It's good to have facts at hand when watching what is happening in the financial markets, the manufacturing sectors, the retail markets, and employment rates.

11% of economist apparently are not sure there is a problem. Probably need more facts. Or maybe just a little insight.
Then there is this post from October 29, 2007 ... a few weeks after the stock market reached record levels. Maybe too many numbers make economists dy$lexic.


Thursday, October 09, 2008

Question Of Rights


The second debate between Sens. Obama and McCain included the question of whether medical coverage was a right or not showed a distinct split in philosophies between the senators.

Sen. McCain answered that providing medical coverage was the responsibility of individuals... parents for their children and themselves... but went on to say that he would like a healthy tax credit [pun intended] to assist in the pursuit of that happiness.

Sen. Obama indicated it was a right. And the government [you] should provide it to those who can't or won't pay for it themselves [no test required for how income or other stipends are used]... but you don't have to take government coverage... you can keep your company's coverage.

My wife, who listens to Andrew Wilkow, went nearly ballistic tonight talking about that. Andrew asked if the government is going to pay for some, why would any company pay for any? Let the government pay for all.
Then, if the government covers all, will it also decide how much is paid? It seems to me that if the government mandates free health coverage, it should mandate that universities give free medical educations for doctors-in-waiting to make up for the income those doctors will eventually have to forego that would have been used to pay off those hundreds of thousands of dollars in loans.
Universities will gladly provide that free education because it supports the general social philosophies of their faculties. Taxpayers will then fund everything... or maybe China will because they love to subsidize us.
Now that we've all agreed that we all have a right to health care, it only makes sense that we have a right to food [which is far more basic], and a right to good designer clothing, and a right to a car that won't embarrass us. And we all agree that the government should provide it.
I think there was a model for that somewhere.


Wednesday, October 08, 2008

Yom Kippur


To our Jewish friends


The Voters Speak Out


HT: Moonbattery

A little profanity, but just as we suspected.

We can only hope for horrible weather on election day.


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CO2 Cap and Trade

There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)