Zach's News Digest
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Why Don't You Get It (Creative Generalist)
Back in March I posted about my forthcoming involvement in The Age of Conversation 2, a book about the shift towards new business and marketing techniques for evolving dialogue about brands, experience, and community.
Well, it just released today. Ta-da!
This book has 237 contributors and I am one of them, writing about this creative generalism thing of course. The book is now available in both hard and soft cover from Lulu. All proceeds go to Variety, the international children's charity.
Chiefs vs Chargers - Game 9 (Kansas City Chiefs)
Listen Live to the Chiefs vs Chargers - Windows | Real - KANSAS CITY CHIEFS (1-7) at SAN DIEGO CHARGERS (3-5) REGULAR SEASON GAME #9 SUNDAY, NOVEMBER 9, 2008 -- 3:15 PM (CENTRAL) QUALCOMM STADIUM -- SAN DIEGO, CALIFORNIA
Tracking the tech downturn (CNET News.com)
We follow the economic downturn and its impact on the tech industry, from the industry giants to the scrappy start-ups.
Q&A: The formula behind FiveThirtyEight (CNET News.com)
Nate Silver, the creator of the election projection site, discusses sending text messages to poll-hungry political junkies and fielding calls from the French ambassador.
People-search sites Reunion.com, Wink to merge (CNET News.com)
Early next year, the sites will combine their technologies into an "entirely new brand" with the ability to search more than 700 million social-networking profiles.
Concentrating the Wealth, Pt 1. (The Republic of T.)
Thisentryis part 1 of 2 in the series concentrating the wealth
Last week I ventured into the "spreading the wealth" discussion with a post attempting to unpack one aspect of why even some people who might be helped by the kind of economic policies Obama is proposing are against them anyway. It was a rather long post, so I wrapped it up without getting into another aspect of the debate that I alluded to briefly and hoped to get back to in another post.
Never mind that it takes an utter lack of an ?irony gene? to speak of ?steal-from-the-rich,? when only after the taxpayer-funded $1 trillion bailout of the financial sector that got us into the current economic mess ? welfare for the wealthy, essentially ? was passed has Washington started talking about a stimulus package for the rest of us. It takes Joe himself to bring it on home.
While the McCain/Palin campaign attempts to whip people into a lather with a liberal use of the "socialism" label, invoking fears of a wealth transfer, it’s easy to forget that a huge wealth transfer has been underway for a while and is going on even now. We call it "the bailout."
You know, the one that passed without any help for homeowners on the verge of homelessness? Yeah. That one. But the transfer started long before that. We’re just living in the aftermath.
I can’t claim to have figured it out all on my own. Paul Krugman did that, two years ago. (Maybe that’s one of many reasons why he has a Nobel Prize and I don’t.)
America has never been an egalitarian society, but during the New Deal and the Second World War, government policies and organized labor combined to create a broad and solid middle class. The economic historians Claudia Goldin and Robert Margo call what happened between 1933 and 1945 the Great Compression: The rich got dramatically poorer while workers got considerably richer. Americans found themselves sharing broadly similar lifestyles in a way not seen since before the Civil War.
But in the 1970s, inequality began increasing again — slowly at first, then more and more rapidly. You can see how much things have changed by comparing the state of affairs at America’s largest employer, then and now. In 1969, General Motors was the country’s largest corporation aside from AT&T, which enjoyed a government-guaranteed monopoly on phone service. GM paid its chief executive, James M. Roche, a salary of $795,000 — the equivalent of $4.2 million today, adjusting for inflation. At the time, that was considered very high. But nobody denied that ordinary GM workers were paid pretty well. The average paycheck for production workers in the auto industry was almost $8,000 — more than $45,000 today. GM workers, who also received excellent health and retirement benefits, were considered solidly in the middle class.
Today, Wal-Mart is America’s largest corporation, with 1.3 million employees. H. Lee Scott, its chairman, is paid almost $23 million — more than five times Roche’s inflation-adjusted salary. Yet Scott’s compensation excites relatively little comment, since it’s not exceptional for the CEO of a large corporation these days. The wages paid to Wal-Mart’s workers, on the other hand, do attract attention, because they are low even by current standards. On average, Wal-Mart’s non-supervisory employees are paid $18,000 a year, far less than half what GM workers were paid thirty-five years ago, adjusted for inflation. And Wal-Mart is notorious both for how few of its workers receive health benefits and for the stinginess of those scarce benefits.
Right now, inequality is up worldwide. But the U.S. has the dubious distinction of being among the countries with the highest rate of inequality. In fact, we’re number three on income inequality, beaten out by Mexico and Turkey.
The gap between rich and poor in most wealthy nations has widened, the Organisation for Economic Co-operation and Development (OECD) has said.
Across the 24 OECD countries where data was available, the cumulative rise in inequality was 7% over the past 20 years, the Paris-based group said.
But this was not as large a rise as had been expected, it said.
Since 2000, income inequality had risen sharply in the US and Germany and declined in the UK, Mexico and Greece.
…The report found that the income of the richest 10% of people was, on average, nearly nine times that of the poorest 10%.
But the size of the income differentials varies, with the greatest disparity in Mexico, which has a ratio of 25 to one, followed by Turkey and the US.
Iif current trends continue, it’s likely to to get much worse. Already companies are cutting costs and slashing jobs, as the economic consequences of the last few decades continue to ripple outward from Wall Street. More than 80% of the states ? 41 out of 50 ? reported jobs lost in September 2008, more than double the the number of states reporting jobs lost in the previous month. The same month, mass layoffs reached their highest point since 9/11. Meanwhile, state unemployment funds are drying up. (Even the postal service is considering the possibility of first-time-ever layoffs.) And indications suggest we’re soon to face a tsunami of pink slips.
When the dot-com and housing bubbles burst, it was easy to see what types of jobs would disappear. But these days as nervous lenders cower and credit contracts, virtually every industry is likely to be scathed in the widely predicted downturn starting this autumn. Nearly every business relies on credit to operate?just as they need customers to have spending power.
With lending trimmed, and companies and consumers tightening their belts (BusinessWeek, 10/9/08), jobs will be cut across broad swaths of the economy, from the tech sector to investment banking, and from manufacturing to soft drinks.
Rippling out from there are further consequences. Tapped out consumers, many jobless just before the holidays due to mass layoffs, are cutting back as the credit crisis completes the journey from Wall Street to Main Street. (Especially since those stimulus checks have long since been handed to banks and creditors to pay down debt. Thus completing the loop, ulimately putting tax dollars into private hands, with consumbers as the middle-man.) More people are getting food stamps, and finding out that food stamps buy less than before. More are struggling with energy bills, and cutting back on needed medications (like medicines for high blood pressure and osteoperosis), as the basic necessities become more difficult to afford. The states’ welfare caseloads have been rising since mid-2007, after declining for more than a decade.
Job losses could also impact foreclosures, which are up 21% from a year ago. The rise in foreclosures is fueling an alarming rise in homelessness, and a rush on soup kitchens that are dealing with their own shrinking budgets even in the face of an increase in the number of people needing their help. More and more people are living out of their cars, and some cities are setting aside special parking lots designated for the new population of auto-dwellers.
The postponing of health care is even more distressing when you consider that the financial crisis is causing higher levels of anxiety and despair, keeping people awake at night, causing some to turn to desperate measures. While the epidemic of "jumpers" after the Great Crash of 1929 was a myth, because relatively few people on Wall Street leapt from windows, the "jumper" became a symbol of the anxiety and despair caused by the 1929 crash. Much in the same way, though relatively few may attempt it, the "Main Street suicides" of the 2008 meltdown may become a symbolic of today’s anxiety as the "Wall Street jumper" was 79 years ago.
When people look back on this event, they may remember stories like that of Raymond and Deanna Donaca.
Raymond and Deanna Donaca had fought foreclosure on their home and lost, but had dropped strong hints they wouldn’t leave the three-level dwelling alive.
On Tuesday, Crook County sheriff’s deputies went to the home east of Prineville after neighbors called with concerns that they were not answering their door, and their dogs were missing.
They walked up the driveway and smelled gas. Inside the attached locked garage, a 1981 Cadillac Eldorado sat empty, its engine running.
Then they entered the house.
They found the bodies of Raymond Donaca, 71, and three golden retrievers. Upstairs they discovered the bodies of Deanna Donaca, 69, and a fourth dog.
"By the time you foreclose on my house, I’ll be dead."
So read the note that 53-year-old Carlene Balderrama of Taunton, Mass., faxed to her mortgage company, according to Taunton Police Chief Raymond O’Berg.
The message turned out to be tragically prophetic. According to local reports, PHH Mortgage Corp. — the company foreclosing on Balderrama’s home — notified police of the message less than an hour and a half before the home was to go on the auction block. By the time officers arrived at Balderrama’s house, they found she had fatally shot herself with her husband’s rifle.
O’Berg said Balderrama’s death has been officially ruled a suicide. But though the case is closed, he notes that the tragedy underscores a problem that is affecting many in the community of about 60,000, which lies roughly 40 miles south of Boston.
"It has a lot of people talking, because there are a lot of homes in foreclosure here," O’Berg told ABCNews.com. "It’s just a tragedy. Then again, someone told me that these financial stresses are tough."
And with no end in sight to the country’s economic downturn, some psychological experts say that cases like these may become more common.
Or Addie Polk.
A 90-year-old Ohio woman, facing eviction from the home she has lived in for 38 years, shot and wounded herself this week, becoming a grim symbol of the U.S. home mortgage crisis.
Addie Polk was found lying on the floor of her home with what appeared to be a self-inflicted gunshot wound to her shoulder when police came to the home on Wednesday to serve an eviction notice, Akron police spokesman Lt. Rick Edwards said on Friday.
Polk survived the shooting and is being treated in a hospital.
It was the latest attempt by sheriff’s deputies to evict Polk from her modest single-family home because she could not keep up with her mortgage.
"It appears they’re evicting her over her mortgage. She’s lived in the house, the neighbors said, something like 38 years and in the last couple of years fell prey to some predatory lending company or financial institution," Edwards said.
(Polk’s mortgage was later forgiven.)
Or Karthik Rajaram.
Sorrento Pointe, Calif., does not look like the setting for the death of the American Dream. From outside the tasteful guardhouse stationed at the entrance of this gated community about 23 miles from downtown Los Angeles, all seems peaceful. The manicured lawns are a verdant oasis within the surrounding sun-scorched mountains. The only sound disturbing the quiet is the gentle swish of luxury cars ? Mercedes, BMWs and Porsches ? as their drivers turn homeward.
However, that sense of well-being was shattered brutally on Monday, Oct. 6, when police discovered the bodies of the Rajaram family in their home on Como Lane. Karthik Rajaram, 45, had shot his mother-in-law, wife and three children to death before killing himself sometime between Saturday evening and Monday morning.
Rajaram, a former financial analyst at PricewaterhouseCoopers and Sony Pictures, left two suicide notes ? one for police and another for family and friends ? and a will. "I understand he was unemployed, his dealings in the stock market had taken a disastrous turn for the worse," said Los Angeles deputy police chief Michel R. Moore. "This was a person who had been quite successful in this arena." Amid news of the global financial crisis and the credit crunch, this murder-suicide has become emblematic of the times ? in its way parallelling the deathly plunges of Wall Street stockbrokers in 1929.
…Despite his record of success at holding executive-level jobs and making highly profitable investments, Rajaram had apparently been unable to find work. Meanwhile, he began to accumulate financial losses which took their toll on his saved-up profits. Suddenly having an M.B.A., working one’s way up in finance and using one’s business acumen to make solid investments offered little protection and security. "The essence of it was that this was a man’s emotional spiral downward due to financial difficulties. He saw it as a tragedy, a disaster that had befallen him. He lost perspective," said the LAPD’s Moore. "He thought his life circumstances were because he was a failure. He got caught up in a rabbit hole, apart from reality."
By wiping out his family, Rajaram also wiped out the seemingly bright future of his children. "His family was healthy, his son [Krishna] was on a Fulbright scholarship at UCLA, his 7-year-old was at a magnet elementary school, a high-performing student, as was his 12-year-old," Moore said. He described their home as "organized and nicely adorned" with drawings by the children and photos of a smiling family. In short, there was nothing to suggest the violence that ended the suburban idyll.
To understand how we got here, or how the last eight years effectively accelerated greased the incline on a slide that started back in the 70s, we have to go back to Krugman.
During the 2000 election campaign, George W. Bush joked that his base consisted of the "haves and the have mores." But it wasn’t much of a joke. Not only has the Bush administration favored the interests of the wealthiest few Americans over those of the middle class, it has consistently shown a preference for people who get their income from dividends and capital gains, rather than those who work for a living.
Under Bush, the economy has been growing at a reasonable pace for the past three years. But most Americans have failed to benefit from that growth. All indicators of the economic status of ordinary Americans — poverty rates, family incomes, the number of people without health insurance — show that most of us were worse off in 2005 than we were in 2000, and there’s little reason to think that 2006 was much better.
So where did all the economic growth go? It went to a relative handful of people at the top. The earnings of the typical full-time worker, adjusted for inflation, have actually fallen since Bush took office. Pay for CEOs, meanwhile, has soared — from 185 times that of average workers in 2003 to 279 times in 2005. And after-tax corporate profits have also skyrocketed, more than doubling since Bush took office. Those profits will eventually be reflected in dividends and capital gains, which accrue mainly to the very well-off: More than three-quarters of all stocks are owned by the richest ten percent of the population.
Bush wasn’t directly responsible for the stagnation of wages and the surge in profits and executive compensation: The White House doesn’t set wage rates or give CEOs stock options. But the government can tilt the balance of power between workers and bosses in many ways — and at every juncture, this government has favored the bosses. There are four ways, in particular, that the Bush administration has helped make the poor poorer and the rich richer.
Well, he’s right. The rich did get richer.
In a new sign of increasing inequality in the U.S., the richest 1% of Americans in 2006 garnered the highest share of the nation’s adjusted gross income for two decades, and possibly the highest since 1929, according to Internal Revenue Service data.
Meanwhile, the average tax rate of the wealthiest 1% fell to its lowest level in at least 18 years. The group’s share of the tax burden has risen, though not as quickly as its share of income.
The figures are from the IRS’s income-statistics division and were posted on the agency’s Web site last week. The 2006 data are the most recent available.
The figures about the relative income and tax rates of the wealthiest Americans come as the presumptive presidential candidates are in a debate about taxes. Congress and the next president will have to decide whether to extend several Bush-era tax cuts, including the 2003 reduction in tax rates on capital gains and dividends. Experts said those tax cuts in particular are playing a major role in falling tax rates for the very wealthy.
That was from a report published in July of this year, based on 2006 data. It turns out, the rich got even richer in 2007, and their wealth more concentrated in the hands of an increasingly small percentage of the population. The poor did indeed get poorer, and the middle class stagnated.On the other end of the spectrum, the poor have seen their gains reversed since the 1990s, and more of them are living in concentrated areas of poverty.
One less visible aspect of the economic boom of the 1990s was a decline in the number of low-income working people who lived in very poor neighborhoods.
But that trend has reversed during the first five years of this decade, according to a new analysis by the Brookings Institution, a nonpartisan think tank in Washington. It found that the number of poor people who live in areas of concentrated poverty increased by 41 percent since 1999.
"Many of these neighborhoods that made these great gains in the 1990s ? with the downturn in the beginning of this decade and the weak recovery ? have been hit hard by this economic change," says Elizabeth Kneebone, lead author of the report and a senior research analyst at Brookings’ Metropolitan Policy Program. "We’ve lost a lot of ground and see poverty again increasing in these neighborhoods."
Such increases in concentrations of poor people in specific neighborhoods create a kind of self-perpetuating economic segregation, says Ms. Kneebone. That’s because low-income neighborhoods generally have lower-performing schools, less access to good jobs, poorer health outcomes, higher crime rates, and less economic investment.
"As people try to work their way out of poverty, they don’t find as many of the opportunities they need in very low- income neighborhoods," she says. "All of this creates the cycle that perpetuates poverty."
The consequence has been concentrating an increasing amount of wealth in the hands of an increasingly small group of people. And, the fairly tale of supply-side economics ? an article of faith for conservatives over the last 30 years or so ? turned out to be just that, a fairy tale.
When Ronald Reagan first ran for president of the United States in 1980, he promised to cut taxes in what seemed, at the time, a magical way. Tax revenue would go up, not down, he said, as the economy boomed in response to lower rates.
Since then, supply-side economics, as it was called - first with derision but then as a label embraced by its supporters - has become a central tenet of Republican political and economic thinking in the country. The big supply-side tax cuts of the 1980s and the 2000s did not work as advertised, even supporters admit, but the concept has reappeared in this year’s U.S. election campaign anyway, in an amended form.
"What really happens is that the economy grows more vigorously when you lower tax rates," said Kevin Hassett, an adviser to the presumptive Republican nominee, John McCain, and the director of economic policy studies at the conservative American Enterprise Institute. "It is beyond the reach of economic science to explain precisely why that happens, but it does."
But even with a growing economy, the promised boon in tax revenues never materialized.
Even with the economic growth of the Bush era, the prosperity never made it into the hands of "those who work for a living," as Krugam puts it. Wages stagnated as they had been doing all along. Jobs, rather than being created, disappeared at an alarming rate, and don’t seem to have been replaced with an equal number of jobs, or jobs that offer the same (or better) benefits and compensation.
It was, we were told, supposed to "trickle down."
"Trickle-down economics" and "trickle-down theory" are terms of political rhetoric that refer to the policy of providing tax cuts or other benefits to businesses and rich individuals, in the belief that this will indirectly benefit the broad population.[1] The term has been attributed to humorist Will Rogers, who said during the Great Depression that "money was all appropriated for the top in hopes that it would trickle down to the needy."[2]
Proponents of these policies claim that if the top income earners invest more into the business infrastructure and equity markets, it will in turn lead to more goods at lower prices, and create more jobs for middle and lower class individuals.[citation needed] This sentiment is captured in John F. Kennedy’s argument, "a rising tide floats all boats." Proponents argue economic growth flows down from the top to the bottom, indirectly benefiting those who do not directly benefit from the policy changes. However, others have argued that "trickle-down" policies generally do not work,[3] and that the trickle-down effect might be very slim.[4]
Today "trickle-down economics" is most closely identified with the economic policies known as Reaganomics or supply-side economics. Originally, there was a great deal of support for tax reform; there was a dual problem that loopholes and tax shelters create a bureaucracy (private sector and public sector) and that relevant taxes are thus evaded. Reagan repeatedly cut taxes overall by modest amounts, but dramatically de-progressivized the income tax system, cutting the marginal tax rates on the highest-income tax bracket of joint-filed couples from 70% to 28%. [5]
Except, that it didn’t. I’m not an economist, so I probably can’t effectively explain why it didn’t. But the census data released in August paints a pretty stark picture of the "economic Katrina" left in the wake of the Bush administration and the Republican congress during about 7 1/2 years of one-party rule, and too little opposition from Democrats. Real median income for working families has gone down $2000 below its 2000 level, while the costs of food, fuel, health care, etc., have only gone up. The number of families in poverty increased by 5.7 million. And, as if often the case, minorities fared even worse.
As for why the "recovery" of the Bush era didn’t reach many other than the "haves and have-mores" the best explanation I’ve read punches a hole in the "rising tide lifts all boats" canard. (Which always struck me as odd, because it doesn’t account for people who don’t have boats, etc.)
President John. F. Kennedy is credited with the following quote: ?A rising tide lifts all boats.? This quote is often used to justify the reduction of income tax rates for the already wealthy, because of the belief that the wealthy will invest their additional funds in job creating activities, increasing the number of the employed and their incomes.
In reality, a rising tide will lift all boats in a harbor an equal distance, but it will not increase the size and power of any of the smaller boats. A twelve-foot sailboat will be lifted the same distance as a forty-foot yacht, but it will not transformed into a forty-foot yacht.
There has been a great deal of interest in the growing income and wealth inequality both in the US and in the rapidly growing economies of Asia. The effects of globalization on this issue are also being examined. Much of the increase in wealth has not only resulted from the substantial increase in executive salaries, but also from wealth generated by capital gains, dividends, new publicly traded firms, technology development (Google, for example) and appreciation in real estate and other similar assets. Both Alan Greenspan and Ben Bernanke, the former and current chairman of the Federal Reserve Bank, have warned about the destabilizing effects of too much concentration of wealth and income on our economy and the related social consequences. Simply put, trickle down economics doesn?t work, but trickle up economics is alive and well.
I’ll get back to Alan Greenspan later, but I have my own theory about what happened to what didn’t trickle down. Much of the "wealth generated by capital gains, dividends, newly traded firms, technology development, and appreciation in real estate," was simply invested in more of the same, rather than put back into the economy by people buying boats, or redecorating their kitchens, etc., as is to be expected in an economy that rewards "people who get their income from dividends and capital gains, rather than those who work for a living." (Remember, the president’s roots and the Bush family’s wealth go back to Wall Street speculation.)
The result is a concentration of wealth, rather than "spreading the wealth," and ? as Krugman points out ? concentrating the wealth requires a transfer of wealth from the bottom of the economic ladder to the top.
In other words, it’s a "rising tide" that leaves most of us floundering in the surf as the S.S. Economy goes town, and we’re supposed to believe that the lifeboats will be back for us as soon as the "first class" passengers have been saved. We just have to wait.
Watch Your Back (The Republic of T.)
Don’t get me wrong. I’m voting for Barack Obama, but as a human being I can’t see someone in danger and not warn them. And, I’m not talking about Obama, even though everyone has probably at some point wondered and worried about “what if.” (And the first and second foils assasination attempts don’t help calm anyone’s nerves.
I’m talking about John McCain. And I feel the need to warn him, because I can’t see someone in danger and not warn them. And I think John McCain is in danger based on the latest quotes from Sarah Palin about 2012.
ELIZABETH VARGAS: If it doesn’t go your way on Tuesday … 2012?
GOV SARAH PALIN: I’m just … thinkin’ that it’s gonna go our way on Tuesday, November 4. I truly believe that the wisdom of … of the people will be revealed on that day. As they enter that voting booth, they will understand the stark contrast between the two tickets. …
VARGAS: But the point being that you haven’t been so bruised by some of the double standard, the sexism on the campaign trail, to say, “I’ve had it. I’m going back to Alaska.”
PALIN: Absolutely not. I think that, if I were to give up and wave a white flag of surrender against some of the political shots that we’ve taken, that … that would … bring this whole … I’m not doin’ this for naught.
The only thing more stunning more stunning than this is the reaction of a McCain campaign aide upon hearing of the above.
Dana Bash: I just got off of the phone, Wolf, with a senior McCain adviser and I read this person the quote and I think it is fair to say that this person was speechless. There was a long pause and I just heard a “huh” on the other end of the phone. This is certainly not a surprise to anybody who has watched Sarah Palin that she is interested in potentially future national runs, and she is being urged to by a lot of people inside of the Republican Party if they do lose, but it is an “if” and people inside of the McCain campaign do not want any discussion that has an “if” in front of it six days before the election, they don’t want any discussion at all, any kind of hypothetical talk about running for the next time around. So certainly, this is not at least initially being received well inside of the McCain campaign.
Wolf Blitzer: I am not surprised, not surprised at all. It is one of those “wow, she is talking about 2012 if we lose,” that is not supposed to be something that you say. You are supposed to say, “well, I’m not looking ahead, I’m not looking ahead only to Tuesday,” and those are the talking points she’s supposed to be saying, but she is obviously blunt and she is looking ahead if something were to happen on Tuesday that she wouldn’t be happy with.
John, I know that there are Republicans who’ve already scheduled a post-mortem, probably after hearing that you’re opponent is very close to outpolling you in your own state, and fearing a long sojourn in the wilderness. But John, you need to know that the buzzard is no longer circling overhead. The buzzard is in the house, sitting at the table, waiting patiently. Outside, the rest of the flock is cheering on their champion. (Who, by the way, is not you.)
That’s where the warning comes in; rest of the flock. These are not folks to be taken lightly, and they plan on running things if you should lose, and may even if you (*shudder*) win. And they plan on wrenching the party even further to the right.
South Carolina GOP Chairman Katon Dawson insisted this is necessary, arguing that “moderating our party is what caused us to lose power” in 2006.
This is not an uncommon sentiment among leaders of the Republican base — they seriously believe voters would be far more likely to support the GOP if party leaders were more right-wing. What’s more, if things don’t go well for the party seven days from now, these activists will push this line very aggressively as the party starts to put the pieces back together, whether it makes sense or not.
Kevin recently predicted that the Republican Party is “going to be riven by factional warfare for years, with moderates unable to get a purchase on the party apparatus because of the McCain albatross hanging around their necks. Eventually, like Britain’s Labor Party in the 80s, they’ll find their Tony Blair, but in the meantime they’re likely to double down on the most strident possible social conservatism, convinced that the heartland will respond if only they regain the true faith.”
How that wil work out, I can only guess, but these people are serious. These are the same people who were praying for your early demise after winning the election, following the Palin pick. Need I explain why?
So, on the outside chance you win the election, my advice to you (which I sincerely hope you never need) is to watch your back. Don’t trust your vice president any further than you can throw her. I mean this. If you’re walking down a staircase together, let her go first. If you’re dining together, don’t eat until until she does, and … in fact, just skip eating. Oh, and travel together as much a possible, on the same plane.
For your sake, I hope you don’t have to worry about it, because if you do become president, well, you’re gonna have to watch your back when it comes to some of the people in your own party, and perhaps even in your own administration.
Know Nothing (The Republic of T.)
They finally said it. I always thought that part of the reason McCain chose Palin was because it would put Obama ? who’s already in the position of having to be careful how he addresses race ? in the position of having to do something that would put him in a precarious position as black man: attack a white woman. Even politically. (Now, I’m sure someone will point out an attack on Hillary during the primaries, but I don’t recall any.
The flip side of coin is that she can attack Obama in any number of ways, but he has to be careful about how he deals with her.
That’s the first layer of subtext in this ad, but I think there’s another.
But to make that point, I have to turn to another video.
It’s the same thing John Stewart ran into on The Daily Show, upon watching a clip of “Joe” the “Plumber” talking about Israel. (It’s about four minutes in to the video. I can’t extract a clip.) Let’s just say it’s bad when a Fox anchor has to be the voice of reason.
Anyway, five minutes with Joe The Plumber had Shepard Smith so frustrated that the Fox anchor felt compelled to issue a disclaimer, immediately following the segment, pushing back on any notion that Obama would mean the “death of Israel,” saying: “I just want to make this 100 percent perfectly clear — Barack Obama has said repeatedly and demonstrated repeatedly that Israel will always be a friend of the United States, no matter what happens once he becomes President of the United States. His words.” Smith later added, “The rest of it — man…some things — it just gets frightening sometimes. We’ll be right back.” I haven’t seen Shep this broken up about the state of the world since Katrina.
Meanwhile, let’s remember that after a year of trying to figure out what their campaign is about, the McCain camp has basically pinned all their hopes to the avatar of Joe The Plumber, a random dude who says, “I know just enough about foreign policy to probably be dangerous…I have no idea where John McCain’s position is…I honestly want people to go out and find their own reasons. I tell people not to listen to everyone else’s opinion. I’m not going to have them start listening to mine.” His words. Such as they are.
I’ll say it again.
Well, it?s the political equivalent of Courtney Love showing up at your intervention and suggesting you ease up on the pipe just little a bit.
And, while I’m at it, I can’t help posting one of my own. (That got over 15,000 views when it debuted.)
He?s a Muslim. He?s an Arab. He?s a Socialist. He?s a?. (The Republic of T.)
Wait for it.
Well, somebody finally came out and said it. The question is did Palin hear it? And if she did, why didn’t she address it? And if he hasn’t addressed it, why hasn’t she? McCain did stop and address stuff like this earlier, and the base didn’t love him any better for it.
Concentrating the Wealth, Pt. 2 (The Republic of T.)
Thisentryis part 2 of 2 in the series concentrating the wealth
A funny thing happened on the way to the bailout. A number of the members of the bucket brigade ? that’s us, taxpayers ? realized that for all the billions of dollars worth of bailing we’re doing, we still appear to be sinking. Our task seems to be keeping things afloat long enough for first class passengers to fill the lifeboats. And as the water rises, more of us are less content with apparent the “brokers and bankers first” rule.
And let there be no doubt, as the U.S. economy looks like it’s going down for the first time, “brokers and bankers first” is the rule.
In the waning days of, well, everything from the George W. Bush era, to the Reagan era and 30 years of conservative rule ? as is often the case in a disaster ? men’s true characters reveal themselves, and they reveal their intentions when they have little left to lose.
It’s heard in back channels, on conference calls when they believe no one from steerage class can hear them.
How do you know that the Wall Street types were trying to steal from us, other than the fact that they said that the refusal to hand over money was akin to a terrorist act? Treasury officials had a secret conference call with Wall Street executives. Unfortunately for them, some bloggers were on the call. The ‘Treasury boys’ on the call made it clear that “the tranching is a mere formality, and the Treasury boys as much as said so. They could take the $700 billion max as soon as the bill has passed.” That was always obvious.
And they admitted that “the exec comp provisions sound like a joke, They DO NOT affect existing contracts, they affect only contracts entered into during the two years of the authority of this program and then affect only golden parachutes.” Both of these provisions were ‘concessions’ sought by Democrats. Of course, no one could have predicted this bill’s ‘concessions’ to Democrats were farcical. No one at all.
And it can be heard in committee meetings, where there’s strangely little concern that the news will drift down to steerage, when they essentially ask “How much do you think the take will be?”
In the final days of the election many Republicans seem to have given up the fight for power. But don’t be fooled: that doesn’t mean they are relaxing. If you want to see real Republican elbow grease, check out the energy going into chucking great chunks of the $700bn bail-out out the door. At a recent Senate banking committee hearing, the Republican Bob Corker was fixated on this task, and with a clear deadline in mind: inauguration. “How much of it do you think may be actually spent by January 20 or so?” Corker asked Neel Kashkari, the 35-year-old former banker in charge of the bail-out.
When European colonialists realized that they had no choice but to hand over power to the indigenous citizens, they would often turn their attention to stripping the local treasury of its gold and grabbing valuable livestock. If they were really nasty, like the Portuguese in Mozambique in the mid-1970s, they poured concrete down the elevator shafts.
Nothing so barbaric for the Bush gang. Rather than open plunder, it prefers bureaucratic instruments, such as “distressed asset” auctions and the “equity purchase program”. But make no mistake: the goal is the same as it was for the defeated Portuguese - a final, frantic looting of the public wealth before they hand over the keys to the safe.
Whether most of us heard the message in such explicit terms, we got the message. The public anger over the bailout, that in the end did nothing to stop it and little to change it, was probably rooted in what was unsaid in how the bailout was sold: it was never about helping everyday Americans. Certainly, we were told that the bailout was necessary to prevent financial disaster that would devastate Main Street. That much would trickle down. But the rescue, to date, has not.
As a result, more of us are angry, looking for targets, and sometimes fixing on the wrong ?though convenient ? ones.
It’s hard, however, to miss targets that have $700 billion and $1 trillion bullseyes painted on them. That’s because the bailout, thus far seems to be the final act in the long, slow grift of transferring wealth from the bottom of the economic ladder, and from public into private hands. The show is over ? the “prosperity” of the last eight years or so fading away without most of us getting to enjoy it ? and we get to sweep up after (pun intended) the elephant act.
Economic growth and tax cuts, we were told, were an inseparable pair. We definitely couldn’t have one without the other. And if we looked up and saw all that prosperity at the top, we were told to “just wait” for it to dribbled down our way, like champagne from an over-filled glass. Turns out we were sold a bill of goods, and by the time we realized it, the party was over, leaving much to be cleaned up and paid for. Again, Krugman, circa 2006.
Finally, there’s the government’s most direct method of affecting incomes: taxes. In this arena, Bush has made sure that the rich pay lower taxes than they have in decades. According to the latest estimates, once the Bush tax cuts have taken full effect, more than a third of the cash will go to people making more than $500,000 a year — a mere 0.8 percent of the population.
It’s easy to get confused about the Bush tax cuts. For one thing, they are designed to confuse. The core of the Bush policy involves cutting taxes on high incomes, especially on the income wealthy Americans receive from capital gains and dividends. You might say that the Bush administration favors people who live off their wealth over people who have a job. But there are some middle-class “sweeteners” thrown in, so the administration can point to a few ordinary American families who have received significant tax cuts.
Furthermore, the administration has engaged in a systematic campaign of disinformation about whose taxes have been cut. Indeed, one of Bush’s first actions after taking office was to tell the Treasury Department to stop producing estimates of how tax cuts are distributed by income class — that is, information on who gained how much. Instead, official reports on taxes under Bush are textbook examples of how to mislead with statistics, presenting a welter of confusing numbers that convey the false impression that the tax cuts favor middle-class families, not the wealthy.
In reality, only a few middle-class families received a significant tax cut under Bush. But every wealthy American — especially those who live off of stock earnings or their inheritance — got a big tax cut. To picture who gained the most, imagine the son of a very wealthy man, who expects to inherit $50 million in stock and live off the dividends. Before the Bush tax cuts, our lucky heir-to-be would have paid about $27 million in estate taxes and contributed 39.6 percent of his dividend income in taxes. Once Bush’s cuts go into effect, he could inherit the whole estate tax-free and pay a tax rate of only fifteen percent on his stock earnings. Truly, this is a very good time to be one of the have mores.
Truly, it was. It was a good time to be Countrywide CEO Anthony Mozillo, whose total compensation in 2007 was $132 million, and in 2008 the lender went bell y up and was bought by Bank of America. It was a good time to be Freddie Mac CEO Richard Syron, who made about $10.6 million the year before his company lost $821 and was taken over by the governmnet.
And it still is a good time to be one of the have mores, especially if you’re an executive of one of the many firms taxpayers have bailed out this year. Assuming you’re not one of the 165,000 New Yorkers who may lose their jobs in the wake of the economic crisis. While 159,000 of us lost our jobs last month and the rest of us are nervous about keeping ours in what’s reported to be the worst job market in 5 years, they’re lining up for $70 billion in bonuses.
Financial workers at Wall Street’s top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.
Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government’s cash has been poured in on the condition that excessive executive pay would be curbed.
Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany’s Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.
The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.
And that’s not all. Salaries on Wall Street are higher than they would otherwise have been without a little help from us, c/o the government bailout.
Uncle Sam has a new name on Wall Street ? Sugar Daddy. Bonuses for investment bankers and traders are projected to fall 40% this year. But analysts, compensation consultants and recruiters say the drop would be much more severe, perhaps as much as 70%, were it not for the government’s efforts to prop up financial firms. “Year-end pay on Wall Street will be higher than it would have been had it not been for the government and mergers,” says Alan Johnson, a leading compensation consultant. “You would expect it to be down much more.”
Johnson predicts that the average managing director at an investment bank, a title typically earned after eight years on the job, will receive a bonus of $625,000. That’s down from nearly $1.1 million last year, but it is still 15 times the income of the average American household. Top bankers could receive as much as $1 million. Even a bond trader just out of business school could see his or her bank account enriched by as much as $170,000 this Christmas. “The firms have had an extremely difficult year,” says Joan Zimmerman, a Wall Street career coach. “But they can’t afford to lose talent either.”
While the government rescue limits the salaries of five top executives from each of the participating financial firms, Congress did nothing to restrict Wall Street firms from using taxpayer funds to boost the compensation of rank-and-file investment bankers. “Some people might argue that these bankers should not be penalized if they weren’t personally involved in the risky mortgage-backed securities,” says Sarah Anderson, project director of the Global Economy Project at the Institute for Policy Studies, a progressive think tank in Washington. “My response is that the average taxpayer wasn’t either, but she is being asked to take a hit.”
And what a hit. Credit is still tight-to-nonexistant for a growing number of consumers, but banks borrowed up to $105.8 billion per day from the Fed, last week. They’ve borrowed billions ? $50 billion here, $75 billion there ? since the Fed launched a loan program a year ago, with an eye towards jumpstarting our credit-driven economy. Since then we’ve spent $250 billion partially nationalizing nine banks, and another $125 billion to infuse banks with capital and coax them into regular lending.
I use “coax” only semi-facetiously, because since being loaned the money thy’re intended to lend to others, banks have been sitting on the cash, and Washington has been reduced to begging them to behave like banks again.
Remember those billions the Treasury Department lent America’s banks to get them lending again? Well, not much of it is getting lent, despite pleading from Washington.
“We’re trying to get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money,” White House Press Secretary Dana Perino said in a press briefing Tuesday. “And we’re starting to see some evidence that that’s starting to happen.”
Really? Where? The lending market is virtually shut down, according to analysts, as companies and banks wait on the sidelines until the market turbulence subsides. For the first 28 days of the fourth quarter, banks have arranged just 75 syndicated loans totaling some $22 billion. That’s down from the 209 loans arranged in the same time frame last year, totaling $178 billion.
Breaking it down by day, loans totaled just $786 million, according to data from Dealogic. In the third quarter, when banks underwrote 555 loans worth $207 billion, the per-day breakdown was $3.2 billion.
And what they’re doing with the money is anbody’s guess. AIG received an $85 billion bailout, and less than a week later sent several of its executives on a luxury retreat at St Regis Resort in Monarch Beach, CA, spending $443, 000 on the spa treatment for seven to 10 executives. At least that much of the the $123 billion of AIG’s emergency loans (they ended up getting another $37.8 billion) can be accounted for. We don’t know what they did with the rest of it.
The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analysts say at least part of the shortfall must have been there all along, hidden by irregular accounting.
?You don?t just suddenly lose $120 billion overnight,? said Donn Vickrey of Gradient Analytics, an independent securities research firm in Scottsdale, Ariz.
Mr. Vickrey says he believes A.I.G. must have already accumulated tens of billions of dollars worth of losses by mid-September, when it came close to collapse and received an $85 billion emergency line of credit by the Fed. That loan was later supplemented by a $38 billion lending facility.
But losses on that scale do not show up in the company?s financial filings. Instead, A.I.G. replenished its capital by issuing $20 billion in stock and debt in May and reassured investors that it had an ample cushion. It also said that it was making its accounting more precise.
It’s the same deal, whether its the bailout or taxes, where conservatives are still spreading disinformation about our “high corporate tax rate,” despite evidence that corporations are not overtaxed, but most corporations pay no taxes (including some 60,000 who owed $8 billion in unpaid taxes as of April 2008). And, despite conservative rhetoric to the contrary, it’s everyday Americans who pay the price.
It’s hard not to wonder about the pure contrarian inanity of the current conservative position. Our military is by far the strongest in the world, while our trains are among the slowest and our sewers are collapsing. So they propose raising spending on the military and cutting domestic investment. We suffer Gilded Age inequality, with the wealthiest 15,000 families ? one-one hundredth of one percent of the population ? capturing fully one-fourth of the entire income growth from 2000 to 2006. Their average income rose from $15.2 million per year to $29.7 million per year. Meanwhile, the rest of us ? 133 million households that make up 90 percent of the country - divided up 4% of the nation’s income, adding about $305 to our average $30,354 income. So conservatives push for more tax cuts for the wealthy, while proposing to tax employer based health benefits. Corporate profits (prior to the recession) have catapulted to what is by far the highest percentage of national income in the past half century. So they want to cut corporate taxes, inevitably increasing the burden on labor. The economic future looks dim because consumers, drowning in debt, are cutting back. So they suggest cutting taxes on corporate investments will generate new investments and growth ? as if companies don’t need someone to buy the products they make.
(That last sentence is strikingly similar to Obama’s answer to “Joe” the “Plumber,” about how Joe — in his businessman fantasy — would be “better off if you?ve got a whole bunch of customers who can afford to hire you…”)
At a time when famlies are preparing to be homeless for the holidays, stay-at-home parents have to look for paychecks, city mass transit systems risk collapse as banks call in billions of dollars in loans (meaning that some who still have jobs won’t have buses and trains to get them to work), military families are struggling even as parents and partners are fighting overseas, and desperate times lead more to depserate action, there’s talk of expanding the scope of bailout … to include insurance companies and privately-held banks.
Meanwhile, we’re still waiting for a “rescue for the rest of us,” and congressional Republicans and White House aides dismiss the idea of a second stimulus package that might finally be aimed directly at Main Street as “irresponsible” and the “wrong approach.”
As both Krugman and Klein point out, the message and the real outcome — whether it’s the bailout or taxes — don’t match up and probably weren’t intended to, for reasons rooted in a debate as old as our country.
A couple of days back, right-wing radio nut Dennis Prager had this to say at a Republican rally to help Michele Bachmann, Erik Paulsen, and Norm Coleman:
Equality, which is the primary value of the left, is a European value, not an American value.
Some folks I was talking to were saying “wow, that’s really crazy, what an extremist.” And they are right, of course, in one way. But the fact is that this kind of philosophy, while rarely these days stated quite so bluntly, is actually very much in keeping with traditional American conservatism, dating back to country’s founding.
I have a book coming out in January, entitled The Progressive Revolution: How the Best in America Came to Be, that is about the historic debate in America between progressives and conservatives and how that debate relates directly to today’s political battles. The fight over equality, along with those over trickle-down vs. bottom-up economic policy and elites running things, vs. a government of by and for the people, have been big battles ever since the country was founded.
… Conservatives have never liked equality, or democracy, or giving economic or political power to regular people rather than elites. When John McCain rails against progressive taxation or universal health care as socialism, and warns against the plague of ACORN registering people of color to vote, his rhetoric is as old as the rhetoric of conservatives from the beginning of American history. And when Obama embraces equality of opportunity and investing in the middle class and progressive taxation and health care for all, he is harking back to progressive thinkers and activists throughout that same historical period.
And the reasons for the rhetoric has become so red-hot in this election, and “final frantic looting” are the same.
We have reached a tipping point, a few steps before the precipice, with a few feet of earth still under our feet; a point from which we can see the abyss, and still have a chance to change direction. We have reached a point where more and more of us realize that neither the “prosperity” of the last eight years or the “bailout” of the last few months have “trickled down” to our communities and our families.
We have reached a point of realization that government by the wealthy, for the wealthy, and of the rest of us doesn’t work. And that means we’ve reached a point of possibly considering that perhaps “government of the people, by the people, and for the people” isn’t “government taking care of us.” It’s us, taking care of our communities, our families and one another.
links for 2008-10-29 (The Republic of T.)
Robert Reich Dismisses Trickle-Down Theory - FORA.tv
(tags: economy)
Say It Ain?t So, Joaqin! (The Republic of T.)
Tell me it’s a lie. Tell me you’re not giving up acting!
Oscar-nominated actor Joaquin Phoenix made a shocking announcement to “Extra,” saying, “I want to take this opportunity…to give you the exclusive … that this will be my last performance as an actor… I’m not doing films anymore.”
Probed further by “Extra’s” Jerry Penacoli, “Are you serious?” Phoenix, who was curiously being followed by his own camera crews, reiterated, “Yeah. I’m working on my music. I’m done. I’ve been through that.”
Penacoli, still suspicious, followed up with Casey Affleck who was standing next to Phoenix. Penacoli asked, “I take it that he’s kidding?” Affleck responded, “I don’t think he’s kidding. He’s got music and stuff.”
Today, “Extra” contacted Phoenix’s rep for clarification and got this response: “That is what he told me.”
*sigh* Well, I guess I’ll have to look forward to his next music release instead hi next movie.
Joe the Crooner (The Republic of T.)
You gotta be kidding me. This guy, first of all, should have zero credibility left. But after he’s expose as a fraud, he’s talking about running for Congress. That’s bad enough, but we already have a number of politicians who also know-nothing poseurs. But a record deal?
Move over, Sanjaya, and tell William Hung the news: Joe the Plumber is being pursued for a major record deal and could come out with a country album as early as Inauguration Day.
?Joe? ? aka Samuel Wurzelbacher, a Holland, Ohio, pipe-and-toilet man ? just signed with a Nashville public relations and management firm to handle interview requests and media appearances, as well as create new career opportunities, including a shift out of the plumbing trade into stage and studio performances.
On Tuesday, Wurzelbacher joined country music artist and producer Aaron Tippin to form a new partnership that includes booking-management firm Bobby Roberts and publicity-management concern The Press Office to field the multiple media offers he?s received over the past few weeks.
Among the requests: a possible record deal with a major label, personal appearances and corporate sponsorships. A longtime country music fan, Wurzelbacher can sing and ?knocks around on guitar? but is not an accomplished musician or songwriter, according to The Press Office?s Jim Della Croce.
By inauguration day? I don’t know if he can sing or not, but anything turned out that fast is probably going to sound like a guy singing along with a mediocre karaoke track.
Charges in Uzi Death? (The Republic of T.)
Well, I’d hope so. Anyone stupid or careless enough to put an uzi inthe hands of an eight-year-old ought to be charged with something. The D.A. looking into “whether anyone committed a reckless or wanton act” by allowing the child to fire a weapon. Oh, I’d say that qualifies as reckless and wanton. If it doesn’t, then nothing does.
$43 Million by Friday? (The Republic of T.)
Well, as it D.C.’s transit system didn’t have enough problems’ from the bus that arrived late to pick me up yesterday morning, to the delay on the red line in the afternoon, to the rather inconvenient construction project at Silver Spring.
Now it looks like NDC’s Metro system may be in financial trouble.
The Washington area’s transit agency is seeking a temporary injunction against a Belgian bank that is demanding a $43 million payment by Friday.
KBC Group is requesting the money following the collapse of insurance giant American International Group, which had guaranteed a financing deal the bank made with Metro in 2002.
But AIG’s financial problems have triggered a clause that allows the bank to demand the money all at once.
Now, I know DC doesn’t count as “Main Street” or the “real America,” but it looks like the credit crisis has arrived on Main Street, by bus. Besides Metro 30 other transit systems could be forced to pay up now.
I don’t want to think about what happens if Metro has to fork over $43 million by Friday, but my guess is that it’s probably something a lot worse than non-working escalators.
Where To Put Your Money Right Now (blog maverick)
This is for anyone who has under 250k dollars in stocks and bonds and also has debt.
If you listen to me, I GUARANTEE YOU that you will earn a greater return than 90pct of the richest, supposedly smartest money managers ON THE PLANET. All those Wall Street fat cats, they can’t earn as much on their money for you as I can help you earn.
Sound too good to be true ? Read this and decide for yourself.
First thing to understand is that Wall Street wants you to believe that if you give them money, every month, forever, to buy stocks, that you will most likely will earn 7 or 8pct per year. When compounded, your money will double every 9 or 10 years. Sounds great, right ? One problem with it. You know what you would call someone on Wall Street who made you 7 or 8 pct a year, every year without ever losing money in a year ? Non Existent. Those managers don’t exist.
You can however do what they can’t and even better if you do the following:
1. Write down a list of every penny you owe to anyone and the interest rate that you pay on that amount. Your mortgage, your car payment, your student loan, the Rent A Center TV and Dell Computer Loan, your loan shark, your uncle or grandparents and most of all your credit cards
2. I’m willing to bet that you have absolutely no idea what your true, effective interest rate is on any of the above. Between penalties for using the wrong type of stamp, being 37 seconds late, and moving interest rates that are triggered by every crazy thing, its hard for anyone to know. However, a glance at Citibank Platinum Select Mastercard details as an example, would tell you that if you are late on your payment, your rate is:
“All default APRs equal the greater of (1) the Prime Rate plus up to 23.99% or (2) up to 28.99%. PLUS LATE FEES of 10pct OR MORE ON BALANCES UNDER $250 !!!! (There may be something in the fine print that asks you to bend over too, but my eyes couldnt focus on print that was that small….) “
All of Wall Street would give you the choice of either testicle to be making returns that high. A quick glance at IndexCreditCards.com tell us that not only are the average rates for any card, higher than the biggest promises from the best Wall Streeters, but they have been trending higher.
So in a nutshell, while the interest rate on your credit cards is going up, the return on your investments has been going down. You know what they call someone who keeps on giving money to their stockbroker, mutual fund or 401k, but doesn’t pay off their credit card balance in full every month, BROKE AND STUPID !
The first thing you do with your money is if you have money market funds, you take the money out and pay down your credit card debt. If that doesn’t pay it off. This is what you do next:
You make a list of every stock, bond, fund, whatever you own, and mark what your cost is, the current market price, the current dividend yield on your cost basis, if any and whether it is in a 401k, fund or brokerage account. For any stock or bond at a brokerage account that is yielding less than what you are paying in interest rates on your credit cards, and for which the current price is less than what you paid for it. YOU SELL IT. When you call your broker to get the prices, you do not let them give you a bunch of BS about why you shouldn’t. YOU SELL IT.
You dont hold it to see if you can make money with it. If you love it, you immediately fall out of love with it. ITS A FRICKING STOCK, not a family member, and you sell it. You take that money and you pay down your credit card debt.
Then you start with the stocks/bonds you have made money on. Beginning with the stock/bonds you have made the least amount of money on, if it isn’t yielding you more than the interest rate plus late fees that you pay, you start selling, and selling and selling. Sell as much as you need to until you can pay off your credit card balance.
Once you have sold enough to pay off your credit card balance, you RIP UP YOUR CREDIT CARDS and replace it with a debit card. The only way Credit Cards cost you less than 9pct, or possibly as much as 40pct or more is if you pay it off monthly. Debit cards make that happen automatically. You cant afford to pay 9pct, 40pct or more. Both are far more than you can expect to make in the stock market, or any market. If you have gotten here to this point, and you just tore up your credit cards, YOU HAVE JUST EARNED A GREATER RETURN ON YOUR MONEY IN THAT PERIOD OF TIME THAN ANYONE ON WALL STREET COULD EVER EARN YEAR IN AND YEAR OUT.
If you still arent to the point of paying off your credit card, its time to borrow against your 401k. Switch all your money from whatever funds to insured, guaranteed funds like money markets. Then find out the rate of interest you pay, how long you have to pay it off (usually 5 years), and then borrow the money to pay off your credit cards. I have never seen a 401k that charges more than credit cards in interest. Credit cards accrue interest and penalites a lot faster than you can earn and accrue interest and returns in your 401k. So borrow the money, pay off the credit card, and start paying back your 401k with what your credit card payments were. You will have your 401k loan paid off a lot faster than you could ever pay off your credit cards.
Once your credit card is paid off, then you go to your debt list and pick out the next highest interest rate and start the process all over again until all your debt except your mortgage is paid off.
If after paying off all your non mortgage debt, you still have money left, then you need to sit down with someone who knows your tax situation. Since mortgage loans are usually deductible, ask them to help you figure out what your effective interest rate is on your mortgage and what your outsanding balance is. If you are fortunate and your net effective rate is less than 7 or even 8pct, and you can make the monthly payments, then you probably don’t need to do anything with your mortgage.
If you have a mortgage that is variable in any way , shape or form, you are probably paying more after tax in effective interest rate than you can earn on your money anywhere that is legal. With this information in hand, you and your accountant or whoever you turn to for help (and please make it someone who really knows what their doing, not someone who got a refund using some tax software) can set up a meeting with your banker, or whoever happens to own your mortgage if you can find that person, and start discussions on how to buy down, pay down , buy out, or pay off your mortgage. They may say no, but if you can get them to renegotiate, and these days thats a very real possibility, you should be able to get a greater return from this process than you can get from the money being in stocks, bonds, or any thing else for that matter. This is particularly applicable if you have a subprime , ARM, or any type of variable rate mortgage.
If you have read this far you have hopefully picked up on the basic principle of debt vs investments. The people who lend you money can guarantee you that they are going to charge you a ridiculous percentage, and throw on top of it, any and every fee they can, thereby increasing the effective interest rate you pay. They can do it every year forever.
On the other side, no one in the universe can guarantee you that they can earn you more than what Consumer lenders like credit card companies charge you in interest. No one. If they could, the lenders wouldnt lend the money to you, they would give the money to those people to invest, right ?
If it takes selling every stock, bond and whatever you have to pay off your debts, do it. If it means borrowing against your 401k and paying back yourself instead of the credit card or finance company, do it. It is a far better return than you will ever make putting that money elsewhere.
If none of this applied to you. You kept your debt at levels that you could afford and at rates that were fixed and low, congrats. Hopefully this just reinforced what you already knew.
If on the other hand, this set you on the right path, and you still have money in stocks and bonds, you are fortunate. You probably need to make sure that what you own is very, very safe and not at risk. My recommendation is 6 month CDs, you can probably go to your bank and convince them to pay you 4 or more percent. If you havent heard, there is a bank liquidity crisis. Banks want your money. They have been ripping you off with credit cards all these years, go take some of their money…
One last point. It would not be out of the realm of possibilities to see a collapse of credit card debt like we saw in mortgage debt. Default rates are going to go up. That means credit card company income is going to go down. You know what banks do when their income goes down ? They try to figure out more ways to charge you more money to make it up. Which of course pushs up default rates. Its a viscious circle and you pay the price.
Get out now while you can.
The Stock Market: The New Normal ? (blog maverick)
“Past Performance is No Indication of Future Results”. Its a statement attached to every financial salespitch ever offered. So why is it no one believes it ?
Turn on CNBC, Fox Business, Bloomberg, and every other comment from the “experts” mouths are “historically when the Dow ….fill in the blank….” or “for the last X years, every time the market did X, then Y has happened within Z months”
Folks, it is different this time. Until this past year, at no other time in the history of the US Markets has there been Investment Banks investing for their own accounts to the tune of 30 or more to 1 leverage.
At no other time in the history of the Markets are there 17k mutual funds and more than 10k hedge funds. All competing with each other for the right to make a ton of money off of your money.
At no other time in the history of this country did savings fall as far below zero pct of income
At no other time in the history of this country were net effective interest rates as far below zero
At no other time in the history of our markets have the words “blue chip” completely lost their meaning.
At no other time in the history of our markets has the money of consumers been so portable and movable between hedge funds and mutual funds. Which means that at no other time have mutual funds and hedge funds been so susceptible to redemption runs.
At no other time have consumers been so in the dark about what is happening with our funds. At least George Bailey could see the line at the bank and know what was happening. We as consumers have zero transparency as to whether or not there is a run on our funds, so we run to take out our money first, just in case. The result is a virtual run on the fund where we hold our money, except that no one knows about it but the fund itself, and they aren’t going to say a word for fear of making it worse.
At no other times have financial engineers and investors been so in the dark about how bad the runs on funds have been, so we sit on the sidelines, dribbling in cash, not wanting hedge and mutual funds to dump their shares into our bids.
At no other time have their been 3 financial news networks and thousands of websites providing so much financial information and opinion. The sum of which has definitely lead us into a situation of “Paralysis by Bullshitalysis”. Everyone is afraid to buy. Everyone is afraid to sell or short. Sales forced by de-leveraging is the catalyst for the market. However, there are so few buyers, the de-leveraging sales are taking forever.
Who knows what the new normal is. No one has any idea what is going to happen in this market. NO ONE. Personally, I am completely hedged. I bought puts, sold them. Sold Puts, bought them back, then decided to hedge every long dollar and then some with big puts on the market. This allowed me to be protected on the down side, and tip toe on the long side. As stocks go down, my hedge allows me to buy more of the stocks I like. If the market takes off on the up side, hopefully my longs will more than cover the cost of my puts. If the market does nothing. I’m stuck right where I am, with my puts losing time value every day.
Maybe it will work, maybe it won’t. What I do know is this, everyone is a genius in a bullmarket. The last 5 years, that wasn’t a stock market. THIS is a stockmarket. This time it is different. This may just be the new normal.
The Only Mavericks That Matter (blog maverick)
Is our Dallas Mavericks. The Preseason starts tonight. Not only can I not wait to get things rolling, but I can not wait for the election to be over. Watching Tina Fey on SNL is hysterical, but its time to return the Maverick name where it truly belongs. On our jerseys.
Any one know of any decent players named McCain and Obama that I can sign for the preseason ?
Should I just put McCain on the back of a Mavericks jersey and have someone selling them at Republican rallies and on their website ?? Now thats an idea !
Think Tina Fey of SNL might have some fun with that ?
Go Mavs !
The Fed Should Buy Down Consumer Credit Card Rates - Fast (blog maverick)
Lets say I owe the bank behind my credit card 1k dollars and Im paying 10pct interest because the best I can do is a little bit more than the minimum payment.
You come to me and tell me you are going to take out a loan for at least 25k dollars, get me to cosign for it, and garnish the taxes I will pay in the future to pay back the loan. Then you tell me you are going to take the 25k dollar loan proceeds and give it to the bank that I have my credit card with and charge it 5pct plus some warrants to in turn loan that money back to me if i want to increase my balance.
The problem isnt that the Fed is doing this (Yes I know we could argue this, but its too late now). The problem is that they are not asking for more from the Banks for doing it.
The same banks they are pumping money into, the same banks they want to work with to help save people’s homes, are many of the same banks that are pounding credit card holders with 10pct plus interest rates and fees that can pump up effective interest rates past 40pct !
In exchange for Bailout Funding, the TARP should require banks that issue credit cards, whether in their names or others, to limit interest rates and fees.
The usurious rates and charges in place today increase credit card defaults, which in turn increase mortgage defaults, which in turn cause people to have their live’s turned upside down and put the banks that we are bailing out in court to sue , garnish wages and all the other terrible things that can happen when a user defaults on their credit cards. All of which extend and deepen the recession we are in.
Its not like the Fed trusts banks that offer credit cards. They had to pass laws trying to protect consumers from banks trying to rip us off. You would think they would have recognized that the BailOut is the way to protect consumers even further.
If our country thinks the velocity of the decline in the housing market was fast. If our country thought the impact of banks , homeowners and hedge funds deleveraging was bad, what does the Bail Out BrainTrust think will happen when a quickly growing number of people default on their credit cards ?
Think compounding 10pct plus credit card interest rates on cards will extend or contract the recession ? Would we rather see families buying food and consumer items, or spending the money on interest and late fees ? Which will help the economy more ?
Normally, there would be no standing to ask banks to reduce their interest rates and eliminate their fees. Credit card junkies would just get what they deserve. Normally those same credit card junkies wouldn’t see their tax dollars loaned to banks at 5pct so they can borrow it at 10pct plus.
Now is the time for the Bail Out BrainTrust to be proactive. Tell Banks that when they take bailout money, they must limit interest rates to 6pct, eliminate late fees on balances under 1k dollars, and create extended term payoff options as an alternative to default. The TARP has evolved, it has to evolve to deal with consumer credit card debt.
I realize that this could lead banks to be less likely to issue new cards because of the reduced profit opportunity. I think we should take that chance.
I also realize that this will reduce profits for banks that need every bit of profit they can get to pay the 5pct interest on the preferred stock they are selling the Fed. This is not a problem at all.
There is 962 Billion dollars in credit card debt outstanding. Lets guess that the average effective rate is 10pct and 1/3 of people pay off their bills every month . Lowering that to 6pct means that the banks will lose about $25 Billion Dollars in interest and fees per year.
I would be ok with crediting lost interest against the 5pct coupon the Fed is getting from them. I would be happier if we said that if they dont do this, the next dollar we give them will pay us 9pct instead of 5pct.
When the Fed buys down credit card rates and fees there is a long list of benefits:
It acts as an immediate fiscal stimulus by putting money in the hands of people who need it the most and more importantly, are most likely to spend it. This will help the economy and hopefully limit the depth and duration of the recession we are in.
It reduces the number of mortgage defaults. People who cant pay their credit cards, cant pay their mortgages.
It reduces the write offs of credit card debt that banks would have to take. I know 100 to 200 Billion in credit card write offs may not seem like much these days, it is. More write offs means more BailOut money lent to them . It also eliminates the ultimate privacy disaster. Could you imagine if the Fed decided they needed to buy defaulted credit card debt? Could you imagine having the IRS calling you about your credit card debt ?
Of course there is the undesired consequence that more people will use their credit cards which readers of this blog know i think is a mistake. Unfortunately, desperate times call for desperate measures. This is credit crack and we are begging consumers to sample it and become addicted. I guess this is where my self interest takes over. Lower rates, and more people using credit could lead us out of the recession.
What if the Fed doesnt buy down credit card interest rates and fees ?
If you think its bad today, you ain’t seen nothing yet. Deleveraging of the consumer society we live in will QUICKLY take more money out of the system then we can possibly imagine and thats not good. In a nutshell, the people who can afford to spend using credit cards, will use their credit cards less and spend less because the interest rates are too high, their is uncertainty about jobs and they fear not being able to pay it off in 30 days. Those who can’t afford to use credit cards and are in a bad situation, will use their credit cards more, because they have no choice, and a quickly growing number of them will default on those growing balances. All of which is a negative for the economy.
Please call your state representative and senator and ask them to act on credit card debt. Tell them we want them to be proactive. Before its too late.
The Cure To Our Economic Problems (blog maverick)
I would hate to be the winning Presidential candidate. Both candidates are delusional in thinking their economic policies will drag us out of a recession or even improve the economy. The reality is that the solutions offered by both are the equivalent of shuffling the deck chairs on the Titanic. They are meaningless.
You can cut taxes for 95pct of Americans and raise taxes for the rest. You can cut taxes for businesses and retain the Bush Tax Cuts. You can increase or decrease the capital gains tax 5 or 10pct either way. Under both programs the deficit for the country will increase, we will borrow and print more money. 5 or 10pct variance either way, given the big hole our economy is in wont matter.
The cure for what ails is us the Entrepreneurial Spirit of this country. We are a nation of people who encourage , support and invest in those of any and all age, race and gender who will use their ingenuity and come up with a new idea.
Its always the new idea that re energizes this country. Industry, manufacturing, transportation, technology, digital communications, etc, each changed how we lived and ignited our economy and standard of living. Tax policy has never done that. The American People have.
Entrepreneurs who create something out of nothing don’t care what tax rates are. Bill Gates didn’t monitor the marginal tax rate when he dropped out of Harvard and started MicroSoft (btw, it was a ton higher than it is today). Michael Dell didn’t wonder what the capital gains tax was when he started PC’s Limited, and then grew it into Dell Computer. I doubt that any great business or invention started with a discussion or even a consideration of what the current or projected income or capital gains tax was or would be.
The impact of tax rates on productivity and development is something economists masterbate about, enterpreneurs don’t waste their time thinking about it. We have business to do.
Entrepreneurs live to be entrepreneurs. I have never had a discussion with anyone about starting a business that included tax rates. Ever. If anyone that wanted an investment from me made a point of discussing tax rates as an impact on their business, I wouldnt invest in them. Ever.
Entrepreneurs live for the juice of making their dreams come true. Of having a vision and fighting to see it come true. The joy of mission accomplished and the scoreboard of the financial rewards.
We are in an economic mess right now. It doesn’t matter who caused it. It’s here. It doesn’t matter what our Presidential candidates and their economic advisors come up with. Its meaningless.
The cure to our economic problems is the Entrepreneurial Spirit of All Americans. Instead of bitching at each other, could one Presidential candidate please show even the least bit of leadership and character and stand up for and encourage the entrepreneurs in this country ?
i dont care who is friends with whom, who preached when you went to church, whether you know the actual role of the Vice President, whether you voted with President Bush. I dont care about any of the mudslinging going back and forth. All it does is waste the time of every potential voter. All of that is meaningless.
What we need is our candidates to stop yelling at each other and starting looking at the American people and encouraging the best of who we are. That is who I want to get behind. That is what I would like to see for our country. That is what will energize and motivate people to create companies and invent products that will turn the economy.
The best time for little guys to start a business is when the big guys are worrying about surviving in theirs. You dont need to raise money. You need to be smart and be focused. I had no idea until this current financial crisis that when I started MicroSolutions, my first company, it was in the middle of a very bad recession. I had no idea whatsoever. I didnt know what the tax rates were, and I didnt care. I had an idea, a floor to sleep on and a lot of motivation.
Now is the time for Entrepreneurs to step up and do our part for our country. Its up to us to start businesses and create jobs. That is the cure to this country’s economic problems.
To stick with this theme, I want to republish, again, one of my favorite previous blog posts:
The Best Equity is Sweat EquityThe Rules of Success
As MicroSolutions became more and more successful, and as I paid attention to the common traits of businesses that I saw succeed and those I saw fail, I came to realize that there are ?Rules of Success? that I saw in companies that excelled. Where companies failed to follow those rules, inevitably, they failed. I found myself checking with ?My Rules? before I made decisions. When I traded stocks or considered investments in companies, I applied The Rules to their business before I made a decision.
The Rules are not infallible. They have their limits. I?m an entrepreneur. My businesses have had hundreds and now more than a thousand employees. My world has been limited to starting, building, growing and running businesses that are never going to make the Fortune 500. My dreams were never to build the biggest corporation in the world. So, if you are a middle level manager in a Fortune 500 company, these rules may not help you manage your department. If you are the CEO of a Fortune 500 company with tens of thousands of employees, some rules will apply, some won?t, but where they will help you is to know how little guys coming out of nowhere are going to disrupt your business.
Where The Rules will help you is if you are considering starting, or currently run your own business. There are always exceptions to any rules, but I can assure you that those exceptions will be rare. Entrepreneurs that don?t follow the rules are far more likely to fail. There is no doubt about it.
So let?s start at the beginning.
Rule #1: Sweat Equity is the best start up capital.
The best businesses in recent entrepreneurial history are those that have been started with little or no money. Dell Computer, MicroSoft, Apple, HP and tens of thousands of others started in dorm rooms, tiny offices or garages. There weren?t 100 page long business plans. In all of my businesses, I started by putting together spreadsheets of my expenses, which allowed me to calculate how much revenue I needed to break even and keep the lights on in my office and my apartment. I wrote overviews of what I was selling, why I thought the business made sense, an overview of my competition and why my product and/or service would be important to my customers, and why they should buy or use it. All of it on a piece of yellow paper or in a word processing file, and none of it cost me more than the diet soda I was drinking while I was writing it up.
I remember the foundation for each of my businesses. MicroSolutions was very simple. To use microcomputers and software to help our customers become more productive, profitable and gain a competitive advantage. AudioNet, which became broadcast.com was simple as well: use the internet to enable real-time, worldwide communications of entertainment and business applications. HDNet is to create great entertainment, originated in High Definition format to allow our distributors to compete for the highest margin customers.
Once I could put the idea on paper, I gave the company a name. From there, I took the most important