January 23, 2009 –
Over the past weekend, I believe I said that the US economy is like a family that makes $100,000 per year and has $45,000 in credit card debt. Now he is going to add another $7000 to his credit card debt to bail out the little banks he owns.
Looks like I was wrong. The total debt is 74% of our nation's production. This U.S. "person" makes $100,000, owes $74,000, and is about to add another $55,000 to his credit card bill. It is no wonder that confidence in his ability to pay back the loan is dropping. Quickly.
http://www.nytimes.com/imagepages/2009/01/23/business/20090124_CHARTS_GRAPHIC.html
Total US GDP = $14.412.8 billion (you can also toss in the debate on whether GDP is the right measure for a nation's output, but that's a separate debate)
Total US debt = $10,618.7 billion (74%)
infusion = $8,000 billion (55%)
source: Bureau of Economic Analysis, National Economic Accounts (http://www.bea.gov/national/index.htm)
source = United States Treasury (http://www.treasurydirect.gov/NP/BPDLogin?application=np)
source = CNN Money (http://money.cnn.com/2009/01/06/news/economy/where_stimulus_fits_in/index.htm) [more]
November 12, 2008 –
New York Times article by Mark Landler and David D. Kirkpatrick "Then there is the National Marine Manufacturers Association, which is asking whether boat financing companies might be eligible for aid to ensure that dealers have access to credit to stock their showrooms with boats — costs have gone up as the credit markets have calcified. Using much the same rationale, the National Automobile DealersAssociation is pleading that car dealers get consideration, too. "The first wave of lobbying came in early October when Mr. Paulson announced the plan to buy troubled mortgage-related assets from banks. The Treasury said it would hire several outside firms to handle the purchases, and would dispense with federal contracting rules. "Alston & Bird, for example, highlights its two biggest stars — former Senator Bob Dole and former Senator Tom Daschle. Mr. Dole “knows Hank Paulson very well” and has been “very helpful” with the financial rescue groups, said David E. Brown, an Alston & Bird partner involved in its effort. "Underscoring the many ways companies can take part in the rescue fund, the Hispanic Chamber of Commerce and other Hispanic business groups met with Mr. Paulson to push for minority contracts in asset management, legal, accounting, mortgage services and maintenance jobs, like plumbing and masonry." ===================== The lessons from this: a) If the government is handing out money, get your piece. b) You make more money after you leave the Congress than during it. c) Keep on screwing the little guy, because the government tax is heavy on the little guys and we the powerful should all get a piece of that $700 billion. Disgusting. [more]
November 11, 2008 –
Yesterday morning the Treasury and the Fed agreed to inject an additional $40 billion into AIG. (source: money.cnn.com) That brings the total to $150 billion. Why?! AIG is a big counterparty, so if they fail to pay the western world's financial system may collapse.
So we continue to privatise gains and socialize the losses. We give money to the already ultra rich (by calling them management bonuses) but take money from the middle class and the poor (by calling THAT bailouts). When the company fails, we don't ask the previous bonuses back, but we do ask to limit the future golden parachute (but do taxpayers know how many millions of dollars constitute a "fair" parachute?).
Circuit City filed for bankruptcy yesterday morning as well. Too bad it wasn't a bank, but only the nation's number 2 electronics retailer. [more]
November 06, 2008 –
With the stocks falling, the economy in tatters, the housing market in a coma, why would anyone want to invest in the United States?
The US dollar-to-anything-else exchange rate is actually rising, quite mysteriously I add. I know that there are several commentators that say despite the economic meltdown, the United States is the safest place to park their money. That is why people are still buying the US dollar, driving its price up.
I disagree. I think that with the Federal Reserve bank issuing loans at 1%, the United States as joined Japan as the world's favorite source of money. Borrow money in the US at 1%, and money from Japan at 0%, and then invest it in Europe for 3.5%. That sounds easy.
The carry trade is happening against the US Dollar. All that precious money is not really being spent to spur the US economy, but being used in the large washing machine known as the world financial system. [more]
October 22, 2008 –
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RELATED TICKERS: HD
, F
, GM
To the boards and CEOs of General Motors, Ford, and Chrysler:
Mergers will not solve your problems. There is too much capacity in the collective manufacturing plants, your costs of manufacturing in America is too high, and very few people want to buy the particular cars and trucks you produce. Do the responsible choice: one of you must close. Not merge, close.
I personally vote for Chrysler, since it is the smallest and weakest among the three of you. Closing Chrysler will also serve as a hammer to Cerebus, and shatter the myth that private equity always know how to manage money in order to get superior returns. Private equity can do good, just not always.
Since Cerebus is named for a three-headed dog, I am presenting 3 reasons to shut down Chrysler. 1) Chrysler is the weakest among Detroit's GM, Ford, and Chrysler. 2) It shows that private equity is not all-knowing. 3) It will also punish Bob Nardelli, current CEO of Chrysler, who once took $210 million pay out package even though Home Depot stocks made no movement during his tenure.
To the boards and CEO's of General Motors, Ford, and Chrysler: one of you must go. Please choose.
P.S. I know you're asking money from Congress, and hence the general public, to stay afloat. Please don't. You'll only waste our money on yourselves. [more]
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