Scientists announced today they have discovered a new element, one of the heaviest and definitely one of the most lethal. The discovery came as part of an investigation into the collapse of large molecular structures, which had previously been thought to be extremely stable. As researchers dug through the toxic wasteland, they sampled the black water pooling at the bottom of the newest Superfund Waste Management site. To their surprise, they discovered a new compound.
The new compound had a simple chemical structure, it was an oxide. Most people are very familiar with oxides, especially those that drive by the rusted hulks of once-proud manufacturing plants. There's plenty of iron oxide in public view. What was unusual about this oxide was its weight. Simply put, the more complex an atom is the more it weighs, so whatever was in this sample was very complex. The researchers knew they weren't looking at plain old rust any more.
After more tests, the researchers knew they had discovered a new element. One, that when combined with oxygen destroyed the very foundations of the structures built using that element. Chemical reactions can be very powerful, just ask any explosives expert. The researchers rushed to find the source of the new element because they now knew how dangerous it was. They dug farther into the ruins where they discovered the traces of the compound; there they found records of the research being conducted by the firm, which had been destroyed by the collapse.
The name of the collapsed research firm was Lehman Brothers. The name of the new element discovered by the forensics team and the chemists was Greed, which when exposed to Oxygen forms the compound Greed Oxide, GO2. The toxic waste site was rife with Greed Oxide, as shown in this article on Yahoo Finance News.
http://news.yahoo.com/s/ap/20081006/ap_on_go_co/meltdown_lehman
Even a Lehman Brothers executive, George W. Bush's cousin, wondered what was in the water.
Now we know, it was GO2. Even as they were asking the federal government to bail them out, they were voting each other millions of dollars in compensation. The question remains how much more GO2 is out there and how many more financial institutions and the lives of the workers supporting them are going to be ruined.
We have no shortage of corporate executives perfectly willing to kill the golden goose for one last taste of goose, blind to the fact that without the goose there will be no more golden eggs.
Monday, October 6, 2008
Saturday, October 4, 2008
The Price of War - Creditworthiness
The credit market squeeze we've all heard so much about these days is a beast of our own creation, yet most don't realize what's feeding the monster. If you have to spend more than you have in your bank account, then the only way you can do that is to borrow money from someone willing to lend you money.
President Bush decided to commit us to a War on Terror, primarily in Afghanistan and Iraq, and in doing so committed us to paying the military-industrial complex over two trillion dollars to pay for the War. Yes, that's trillion with a "t", a thousand billion. Aside from the engineering companies that supported him and Dick Cheney (think Halliburton) and are now laughing all the way to the bank, who else has benefitted the most from this war? Every other country that is buying our debt. The terrorists must be laughing finally, because now we've spent so much money to "eliminate" them that we're essentially borrowing from the rest of the world. We've gone from being the world's largest lender to being the world's largest debtor.
How did we manage to do that you ask? We managed it by being very credit-worthy. Americans pay their debts; we work our asses off to make sure we pay what we owe. Yes, some do file bankruptcy when the weight of debt becomes too much for many valid reasons, but even that alternative has been changed to force more people to pay off at least the principal on what they borrowed. Because of this, the world sees us as the most credit-worthy country in the world, and so they lend us more and more money so our government can blissfully spend more money than it takes in. The net effect is we pay more and more tax dollars just to pay the interest on the debt.
We have now launched a "rescue" of the financial system, setting more than $840 million in funds to purchase assets, which are currently moderately to severely impaired, and to fund tax breaks, some of which were truly needed. The reindexing of the Alternative Minimum Tax ("AMT")threshhold has been needed for a long time, and will actually help homeowners who are actually paying their mortgages in areas with high real estate prices (and mortgages). Because they are no longer subject to AMT, they will no longer have their interest deduction essentially capped due to AMT. So not everything in the rescue plan, formerly known as bailout plan, is bad, it's just troublesome to me that the people who led us to this debacle are in charge of getting us out of it.
In over 30 years in business, I have yet to see a management group recover from almost running their company or project into the ground. Being an ex-Navy man, I'll put it in nautical terms. Bad management teams are like a ship's officers who managed to run the ship aground because they weren't paying attention to the signs there was danger ahead. You would think since they were the ones who made the decisions and took the actions that led them into peril, that they would learn from their mistakes and be able to pull the ship off the rocks. It's been my experience even if they manage to pull off of the rocks, they get the rudder stuck in a port-side turn and crash the ship on the rocks again. They will continue to do so until the company ship is nothing but a skeleton on the reef for the shipworms to devour. Putting the current administration in charge of this rescue plan is tantamount to putting the worst complement of ship's officers in charge of the largest ship ever built.
We need to use our creditworthiness to save our ship and put us back on a safer course, not to fund a war that is breaking us. Our congressional leaders have now committed us to pay to save our credit standing in the world. Let's make sure we actually get something for it; like energy independence, better roads and highways, safer bridges and tunnels and more fuel-efficient vehicles at a reasonable cost. Contact your congressional representatives and tell them you are tired of your money and creditworthiness being wasted on war, and if they don't agree to support your position, vote for somebody who will.
It is time to realize government has a role in our lives and we have to pay for them to perform those functions, so taxes are inevitable. What is not inevitable is wasting those taxes, so please take a stand and support leaders who will try to make sure our money is not wasted.
President Bush decided to commit us to a War on Terror, primarily in Afghanistan and Iraq, and in doing so committed us to paying the military-industrial complex over two trillion dollars to pay for the War. Yes, that's trillion with a "t", a thousand billion. Aside from the engineering companies that supported him and Dick Cheney (think Halliburton) and are now laughing all the way to the bank, who else has benefitted the most from this war? Every other country that is buying our debt. The terrorists must be laughing finally, because now we've spent so much money to "eliminate" them that we're essentially borrowing from the rest of the world. We've gone from being the world's largest lender to being the world's largest debtor.
How did we manage to do that you ask? We managed it by being very credit-worthy. Americans pay their debts; we work our asses off to make sure we pay what we owe. Yes, some do file bankruptcy when the weight of debt becomes too much for many valid reasons, but even that alternative has been changed to force more people to pay off at least the principal on what they borrowed. Because of this, the world sees us as the most credit-worthy country in the world, and so they lend us more and more money so our government can blissfully spend more money than it takes in. The net effect is we pay more and more tax dollars just to pay the interest on the debt.
We have now launched a "rescue" of the financial system, setting more than $840 million in funds to purchase assets, which are currently moderately to severely impaired, and to fund tax breaks, some of which were truly needed. The reindexing of the Alternative Minimum Tax ("AMT")threshhold has been needed for a long time, and will actually help homeowners who are actually paying their mortgages in areas with high real estate prices (and mortgages). Because they are no longer subject to AMT, they will no longer have their interest deduction essentially capped due to AMT. So not everything in the rescue plan, formerly known as bailout plan, is bad, it's just troublesome to me that the people who led us to this debacle are in charge of getting us out of it.
In over 30 years in business, I have yet to see a management group recover from almost running their company or project into the ground. Being an ex-Navy man, I'll put it in nautical terms. Bad management teams are like a ship's officers who managed to run the ship aground because they weren't paying attention to the signs there was danger ahead. You would think since they were the ones who made the decisions and took the actions that led them into peril, that they would learn from their mistakes and be able to pull the ship off the rocks. It's been my experience even if they manage to pull off of the rocks, they get the rudder stuck in a port-side turn and crash the ship on the rocks again. They will continue to do so until the company ship is nothing but a skeleton on the reef for the shipworms to devour. Putting the current administration in charge of this rescue plan is tantamount to putting the worst complement of ship's officers in charge of the largest ship ever built.
We need to use our creditworthiness to save our ship and put us back on a safer course, not to fund a war that is breaking us. Our congressional leaders have now committed us to pay to save our credit standing in the world. Let's make sure we actually get something for it; like energy independence, better roads and highways, safer bridges and tunnels and more fuel-efficient vehicles at a reasonable cost. Contact your congressional representatives and tell them you are tired of your money and creditworthiness being wasted on war, and if they don't agree to support your position, vote for somebody who will.
It is time to realize government has a role in our lives and we have to pay for them to perform those functions, so taxes are inevitable. What is not inevitable is wasting those taxes, so please take a stand and support leaders who will try to make sure our money is not wasted.
Wednesday, October 1, 2008
Real Estate Value Myth - True House of Cards
Due to the privilege of paying income taxes, income earners pay the highest combined tax rate; and because year-to-year compensation increases rarely even keep up with inflation, America reached the point where the middle class was spending 101% of its income just to stay afloat.
The real estate nuclear bubble that has laid waste to Wall Street was driven largely by overconsumption and sheer greed. Middle class borrowing against rising "equity" to pay for what they thought were necessities, along with Wall Street being very happy to make everyone think the bubble would go on forever, created an environment where Wall Street thought real estate borrowers would be able to pump more and more money in the real estate funnel to maintain the higher yields of mortgage-backed securities.
Investment bankers were happy to raise capital for mortgage lenders so they could sell more mortgages, so they could then repackage the mortgages into more mortgage-backed securities, and so they made money on both ends of the mortgage business. So now you know why all those CEOs (many now-departed to find other pastures) got the multi-million dollar compensation packages. So why are we being asked to spend more taxpayer money on bailing out the financial system? Because Wall Street has "mortgaged" itself to the lie that these assets are worth what they "paid" to acquire them.
The truth is these mortgage-backed assets are major factor in why a decent house in the Los Angeles metropolitan area still costs over $500,000. I have seen a house purchased right after the Northridge Earthquake in 1994 for $135,000 go down to $100,000 after much of the aerospace industry left Los Angeles soon after the earthquake, and then go as high as $650,000 at the top of the real estate bubble. Even after losing 35% of its value since then, the house is still worth more than $400,000, which means it increased in value an average of 14% per year over the last 14 years. Though my income has done well by most standards, it has only increased an average of 7% per year over that some period, so I would venture to say there is still a disconnect between incomes and housing prices, at least in Los Angeles. That said, how are the real estate prices in Los Angeles going to be able to stabilize if so few people have good enough credit, $100,000 to $150,000 in cash for a down payment, and the income to be able to afford the mortgages to purchase those homes?
Financial systems like equilibrium, so real estate prices are being driven down to the level where more people can afford them. This momentum comes from the steep level from which these values are following. If you think of accumulated mortgage debt as the deep snowpack on a very steep mountain, then you can think of the slide in real estate values as the avalanche of snow screaming toward the bottom of the mountain obliterating everything in its path. This avalanche will not settle down until it reaches flat land and releases its kinetic energy, and real estate values will not settle down until all the downward momentum has dissipated. I'm thinking the snow still has a long way to go...
The real estate nuclear bubble that has laid waste to Wall Street was driven largely by overconsumption and sheer greed. Middle class borrowing against rising "equity" to pay for what they thought were necessities, along with Wall Street being very happy to make everyone think the bubble would go on forever, created an environment where Wall Street thought real estate borrowers would be able to pump more and more money in the real estate funnel to maintain the higher yields of mortgage-backed securities.
Investment bankers were happy to raise capital for mortgage lenders so they could sell more mortgages, so they could then repackage the mortgages into more mortgage-backed securities, and so they made money on both ends of the mortgage business. So now you know why all those CEOs (many now-departed to find other pastures) got the multi-million dollar compensation packages. So why are we being asked to spend more taxpayer money on bailing out the financial system? Because Wall Street has "mortgaged" itself to the lie that these assets are worth what they "paid" to acquire them.
The truth is these mortgage-backed assets are major factor in why a decent house in the Los Angeles metropolitan area still costs over $500,000. I have seen a house purchased right after the Northridge Earthquake in 1994 for $135,000 go down to $100,000 after much of the aerospace industry left Los Angeles soon after the earthquake, and then go as high as $650,000 at the top of the real estate bubble. Even after losing 35% of its value since then, the house is still worth more than $400,000, which means it increased in value an average of 14% per year over the last 14 years. Though my income has done well by most standards, it has only increased an average of 7% per year over that some period, so I would venture to say there is still a disconnect between incomes and housing prices, at least in Los Angeles. That said, how are the real estate prices in Los Angeles going to be able to stabilize if so few people have good enough credit, $100,000 to $150,000 in cash for a down payment, and the income to be able to afford the mortgages to purchase those homes?
Financial systems like equilibrium, so real estate prices are being driven down to the level where more people can afford them. This momentum comes from the steep level from which these values are following. If you think of accumulated mortgage debt as the deep snowpack on a very steep mountain, then you can think of the slide in real estate values as the avalanche of snow screaming toward the bottom of the mountain obliterating everything in its path. This avalanche will not settle down until it reaches flat land and releases its kinetic energy, and real estate values will not settle down until all the downward momentum has dissipated. I'm thinking the snow still has a long way to go...
The Rich Get Richer - Middle Class Squeeze.
If you ask most Americans what form of government we have, they would probably respond with a democracy or a republic. In truth, it seems to me we have an oligarchy, defined as:
It takes a lot of money to get elected; the average member of Congress spent $516,000 to get elected in the last election. How many people do you know can spend that kind of money? So because some people feel they can make a difference or because they have further political ambitions, they decide to run for office. Because of the high cost, in many cases getting elected comes down to convincing special interests you will support their causes and help them once you are elected. If you have a process where most likely the person who spends the most gets elected, then by definition you have a government by the few.
If you set aside all the wonderful language in the Constitution about life, liberty and the pursuit of happiness and dig into the body of law by which our country is governed, you can quickly come to the conclusion the "Founding Fathers" were rich men looking for a way to stay rich men without having to share their wealth with a monarchy across the Atlantic Ocean. It seems to me the United States has truly become their promised land. To read more about the concentration of wealth in the United States and the effects it is having on the middle class, please see:
http://harvardmagazine.com/2008/07/unequal-america.html
It appears to me the playing field needs to be more level in order to allow the United States to return to economic preeminence. Without a healthy middle class, there is nobody to buy what American companies have to sell. Henry Ford built his wealth making sure he paid his workers enough to be able to afford what he was manufacturing. It sounds like a good idea to me, so spreading the wealth more equally is actually better for America in the long run.
- government by the few;
- a government in which a small group exercises control especially for corrupt and selfish purposes; also: a group exercising such control
It takes a lot of money to get elected; the average member of Congress spent $516,000 to get elected in the last election. How many people do you know can spend that kind of money? So because some people feel they can make a difference or because they have further political ambitions, they decide to run for office. Because of the high cost, in many cases getting elected comes down to convincing special interests you will support their causes and help them once you are elected. If you have a process where most likely the person who spends the most gets elected, then by definition you have a government by the few.
If you set aside all the wonderful language in the Constitution about life, liberty and the pursuit of happiness and dig into the body of law by which our country is governed, you can quickly come to the conclusion the "Founding Fathers" were rich men looking for a way to stay rich men without having to share their wealth with a monarchy across the Atlantic Ocean. It seems to me the United States has truly become their promised land. To read more about the concentration of wealth in the United States and the effects it is having on the middle class, please see:
http://harvardmagazine.com/2008/07/unequal-america.html
It appears to me the playing field needs to be more level in order to allow the United States to return to economic preeminence. Without a healthy middle class, there is nobody to buy what American companies have to sell. Henry Ford built his wealth making sure he paid his workers enough to be able to afford what he was manufacturing. It sounds like a good idea to me, so spreading the wealth more equally is actually better for America in the long run.
Wednesday, September 24, 2008
Bailout Fiasco
Our government is asking us to lend money to the very same people who were bragging about their multi-million dollar bonuses not so long ago. They've trotted out their pet doomsayers to say we have to do this quickly or all hell will break loose. Sound vaguely familiar?
All hell for who? All hell for those who believe we should continue to concentrate wealth to historic highs? Would it really be all hell to turn that trend around somewhat and put the comatose American Dream on better life support? It seems to me it would have been a much greater taxpayer incentive if they didn't take it in the first place.
I feel a better solution to the mortgage lending crisis is for all the companies who over-inflated the price of real estate in order to be able to sell more and more mortgage debt in the first place to take the losses, starting with the executives who made more 50 times more than their lowest paid worker (The modified Ben and Jerry's Rule). They should write-off at least 30% of the value of those mortgages, mortgage-backed securities and all the other exotic financial instruments associated with mortgages, re-write all mortgages to be 2% mortgages and allow everyone who defaulted and were foreclosed on to settle any remaining debt based on 70% of their original first loan.
All second and third (or fourth) loans should be written-off with no recourse against the borrowers, unless the total debt owed on the property is below 70% of the appraised value. All new real estate transactions should be made more streamlined and more cost-efficient; consider that in California we normally pay 5-10% in non-loan related closing costs for useless items like title insurance and such.
Decrease the cost of government so we the taxpayers can make our own choices on how to stimulate the economy. Creating a $700 billion bailout of Wall Street doesn't sound like less expensive government to me. Given the choice, I think most of us would choose to spend much less money on the machinery of war and Wall Street, and more on the machinery to actually make things in America once again.
Speaking of the machinery of war, the Middle East has been in a continuous state of conflict for almost 3,000 years. How arrogant are our leaders to think they will be the ones to finally get different religous groups to coexist?
It's time to stand up to those who would take more of your money and give it to their "friends". We need a government that is actually looking out for everyone and not just the rich and connected. We have been fed a steady diet of our current leaders have our best interests at heart, where were they as the real estate market was preparing to go nuclear?
All hell for who? All hell for those who believe we should continue to concentrate wealth to historic highs? Would it really be all hell to turn that trend around somewhat and put the comatose American Dream on better life support? It seems to me it would have been a much greater taxpayer incentive if they didn't take it in the first place.
I feel a better solution to the mortgage lending crisis is for all the companies who over-inflated the price of real estate in order to be able to sell more and more mortgage debt in the first place to take the losses, starting with the executives who made more 50 times more than their lowest paid worker (The modified Ben and Jerry's Rule). They should write-off at least 30% of the value of those mortgages, mortgage-backed securities and all the other exotic financial instruments associated with mortgages, re-write all mortgages to be 2% mortgages and allow everyone who defaulted and were foreclosed on to settle any remaining debt based on 70% of their original first loan.
All second and third (or fourth) loans should be written-off with no recourse against the borrowers, unless the total debt owed on the property is below 70% of the appraised value. All new real estate transactions should be made more streamlined and more cost-efficient; consider that in California we normally pay 5-10% in non-loan related closing costs for useless items like title insurance and such.
Decrease the cost of government so we the taxpayers can make our own choices on how to stimulate the economy. Creating a $700 billion bailout of Wall Street doesn't sound like less expensive government to me. Given the choice, I think most of us would choose to spend much less money on the machinery of war and Wall Street, and more on the machinery to actually make things in America once again.
Speaking of the machinery of war, the Middle East has been in a continuous state of conflict for almost 3,000 years. How arrogant are our leaders to think they will be the ones to finally get different religous groups to coexist?
It's time to stand up to those who would take more of your money and give it to their "friends". We need a government that is actually looking out for everyone and not just the rich and connected. We have been fed a steady diet of our current leaders have our best interests at heart, where were they as the real estate market was preparing to go nuclear?
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