| Author |
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Alchemy
| | Posted on Saturday, February 07, 2009 - 04:40 pm: | 
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FB, the way I see it (being just a novice granted and thanks for your comments) is that the market saw a red flag in obstructionism when the house vote went along party lines. (In another day the market would like this but not now, the old, used to be good, Gov't gridlock would be catastrophic) As the party lines are breaking down it is more likely that a stimulus will get out there quickly. Market goes up.
There is need for a quick stimulus to generate orders, empty inventories and save manufacturing jobs TODAY. Three months down the road the products are being delivered and trade jobs are picking up as the crappy weather breaks and the dirt flies.
I understand the appeal of tax cuts but if you think it through it does nothing in the short term. Tax cuts or not, companies are not going to begin hiring until their inventories are low and they have some big orders in the pipe. Right now it is simply about stopping the immediate hemorrhage in employment.
Down the road, sure tax cuts in targeted industries that provide durable US jobs is a GREAT idea.
It would be shortsighted (not meant to be insulting in the least) to think that the republicans are not focused on what they can do TODAY that will be the most important 2 years down the road when the next elections are. THEN it will be tax cuts that will be the big focus and they will have something to crow about. It is a smart strategy if holding/regaining power is your number one priority (which is what both parties are about). They are likely to just hold up the bill a few days and make a lot of noise about tax cuts because that is the issue they hope to be running on. And it is a good one 2 years down the road. Today we need lots of buying to pull down inventories quickly so the job loss bleeding stops. Buying requires someone to spend and it this case the only possible spender is the Gov't. Both parties know this and there will be a bill and it will be enormous. The only question is this month or next. The market wants it NOW.
As for HD, it is a great stock (I listen when buffet's money moves) and I plan to hold it. But with a 20+ percent profit in 2 weeks I know quite dearly the results of being piggish. Next year at this time it could be 16 or it could be six. I have no idea which it will be. 2-3 years down the road it will probably be 20+. I would expect to buy and sell it a few times as the market bounces around.
If I am wrong and it surges to 20 this month then that means the rest of the market is probably at 9500 and I am happy for that and I still have my 20% profit. If it sags to 11 then I can buy even more with the profit secured. |
Court
| | Posted on Saturday, February 07, 2009 - 08:42 pm: |
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>>>Why doesn't Uncle Sam buy up the good mortgages?
You are kind of on to something and it has been pointed out that about 25% of the ridiculous "stimulus" program would have paid off ALL the bad mortgages. |
Court
| | Posted on Saturday, February 07, 2009 - 08:44 pm: |
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>>>There is need for a quick stimulus to generate orders
One of the reasons, in the infrastructure funding, that "shovel ready" (the Big O's words) projects are given priority.
The bad news is that congress has timed most (about 60% of the funding) to come into play during the 2010 elections when they are all up for reelection and can run around touting the big programs they are brining home. |
Ft_bstrd
| | Posted on Saturday, February 07, 2009 - 09:41 pm: |
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FB, the way I see it (being just a novice granted and thanks for your comments) is that the market saw a red flag in obstructionism when the house vote went along party lines. (In another day the market would like this but not now, the old, used to be good, Gov't gridlock would be catastrophic) As the party lines are breaking down it is more likely that a stimulus will get out there quickly. Market goes up.
There is need for a quick stimulus to generate orders, empty inventories and save manufacturing jobs TODAY. Three months down the road the products are being delivered and trade jobs are picking up as the crappy weather breaks and the dirt flies.
I understand the appeal of tax cuts but if you think it through it does nothing in the short term. Tax cuts or not, companies are not going to begin hiring until their inventories are low and they have some big orders in the pipe. Right now it is simply about stopping the immediate hemorrhage in employment.
Down the road, sure tax cuts in targeted industries that provide durable US jobs is a GREAT idea.
It would be shortsighted (not meant to be insulting in the least) to think that the republicans are not focused on what they can do TODAY that will be the most important 2 years down the road when the next elections are. THEN it will be tax cuts that will be the big focus and they will have something to crow about. It is a smart strategy if holding/regaining power is your number one priority (which is what both parties are about). They are likely to just hold up the bill a few days and make a lot of noise about tax cuts because that is the issue they hope to be running on. And it is a good one 2 years down the road. Today we need lots of buying to pull down inventories quickly so the job loss bleeding stops. Buying requires someone to spend and it this case the only possible spender is the Gov't. Both parties know this and there will be a bill and it will be enormous. The only question is this month or next. The market wants it NOW.
As for HD, it is a great stock (I listen when buffet's money moves) and I plan to hold it. But with a 20+ percent profit in 2 weeks I know quite dearly the results of being piggish. Next year at this time it could be 16 or it could be six. I have no idea which it will be. 2-3 years down the road it will probably be 20+. I would expect to buy and sell it a few times as the market bounces around.
If I am wrong and it surges to 20 this month then that means the rest of the market is probably at 9500 and I am happy for that and I still have my 20% profit. If it sags to 11 then I can buy even more with the profit secured.
Alchemy,
The quickest way to get money into the economy is to cut taxes. Every dollar that is earned has fewer taxes imposed against it. More money is showing up in the paycheck every week. If you gave a 5% across the board tax cut, you would receive a 5% (or more) pay raise right now.
If I make $30,000 per year and paid 15% in taxes (not exactly how it works, but bear with me), I would normally owe $4,500 in taxes. A 5% rate cut would result in a $1,500 savings. That's an additional $125 per month of money that would normally be on it's way to Washington DC that is now in my pocket allowing me to pay off debt, save, invest, buy, etc.
The problem with the stimulus package as it's currently written is that 2/3 to 3/4 of the spending ISN'T "shovel ready". Let's say that you have given $5B to renovating federal buildings, who will do the renovation? What will be the bidding process? How long will the bidding process take? How will the winning bidder be selected? How long will it take for the architects to draw up the plans? How long will it take to hire the construction workers? How long will it take to gear up the materials suppliers?
Let's say that we have selected a bidding company(s) for this job. Where will the majority of the profit from that business go? To the labor or to the owners of the company? Who's taxes are higher the laborer's or the owners of the company? How is the economy helped when much of the money pumped into the economy is paid to the owner's of the companies awarded government contracts and then paid back to the Federal, State, and Local governments as taxes?
The market knows, better than Washington, the best way to pump money into the market sooner rather than later. Tax cuts today mean money in the pockets of buyers today. That money clears out inventories and provides the fuel to begin putting workers back to work replacing that inventory.
The market knows that if the bill passes, as it's currently written, that two things will happen. First there will be very little immediate benefit because of the length of the fuse on when the allocated monies will actually hit the market and the narrow focus of the expenditures. If you are in construction, great! You are going to see a huge influx of cash. If you are in retail, you won't get much. If you are in the durable goods market, you won't get much. Look at the component companies of the Dow Jones Industrial Average. Many of these companies will receive little or no direct benefit from the "stimulus package".
The second result of the package the market sees is higher deficit spending with little to show for it. This deficit spending will require higher taxes today and in the future. Higher taxes result in cooler, slower market growth. In addition, the Federal Government will have to sell larger and larger amounts of debt in order to fund the deficit spending. That debt is sold in the open market to domestic investors as well as foreign investors. The Federal Government will be crowding out corporations for investment dollars. If the Federal Government is paying 7% on it's debt in order to encourage investment, how much more will corporations have to pay to get those investment dollars. Just like the higher interest rates would price consumers out of qualifying for a house or car, the higher interest rate required on corporate investment will price new companies out of the market for new start-ups. Struggling companies will also not be able to afford the higher costs of expansion and growth. The market knows that the bill, as it's written will result in slower growth and a slower recovery.
As you mentioned, the Republicans voted straight lines (and added 11 Democrats). The market reacted badly to the news of the passage of the bill. Why if the bill was good news would it matter how the Republicans voted? The bill was done and they had no way of knowing how the Senate would vote. If the Republicans (along with several Democrats) are blocking the vote and the passage of the bill is viewed as a good thing, why did the market rally at news that the bill was stalled and would probably be altered to be smaller and include more tax cuts?
The "market" doesn't exist as an entity. It is merely the culmination of the individual decisions of millions of people. Those people create a direction by aligning their individual decisions into a cohesive trend. If I, as an investor, believe that taxes are going to be higher and the economy is going to continue to languish, I am going to work to diminish my long term exposures and work to be more liquid in the short run. I don't bet long, I bet short and wait and see.
There is more to all of this than the financial porno you see on MSNBC or Bloomberg. |
Ft_bstrd
| | Posted on Saturday, February 07, 2009 - 10:03 pm: |
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Buying debt is what started a lot of this mess, right?
Buying debt is central to the financial markets. Without it, our economy comes to a complete halt.
Bonds are "debt". The Federal Government sells "debt" every time it sells a treasury bill in the open market to fund short term and long term spending as well as to fund and refinance deficit spending. State governments sell "debt" every time a state or municipal bond is sold in the open market to fund road programs, schools, etc. Corporations sell "debt" in the form of corporate bonds to fund expansion programs, to fund acquisitions, or to finance more favorable lending options. Banks sell "debt" in the form of mortgages. Selling mortgages allows the bank to continually refresh the supply of money available for lending. If a bank can't sell the mortgages it has originated, the bank can not make another loan until deposits are sufficient enough to provide lending money.
Banks receive funds in the form of deposits. These deposits come in the form of checking accounts, savings accounts, certificates of deposit, etc. Banks have what is called the Fractional-Reserve Rate. For every dollar the bank brings in, it must retain a certain fraction and can loan out the remainder. Let's say that that rate is 20%. Out of every dollar the bank brings in, it must keep $.20 on hand, and can lend out the remaining $.80. This rate is controlled by the Fed. A troubled bank system would have a higher fractional-reserve rate so that more money is liquid and on hand and less is tied up in long term lending obligations.
Without selling debt in the open market, a bank must bring in $1M in new deposits in order to be able to make a new $800,000 loan. If the bank can sell an existing $800,000 loan in the open market, the bank can make a new loan for $800,000 today.
What kicked the foundation out of the house of cards was the refusal of Fannie Mae and Freddie Mac to meet debt guarantee obligations on CRA debt rather than the selling of the debt itself. The mark to market rules crushed the bank's and debt buyer's ability to cover the bad portions of the purchased debt, and the house of cards imploded further.
Warren Buffet is a smart guy. If he feels that buying $300,000,000 of HD debt is a good deal, you can pretty much bet it's a good deal. |
Alchemy
| | Posted on Sunday, February 08, 2009 - 12:47 pm: |
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FB,
Great comments and I agree with much of what you so clearly lay out.
However,.....
I welcome your example of a tax cut but I will take the money and pay off my meager debt, buy stock (only on serious pullbacks) and sit back and watch and pray my wife does not lose her job. With no job, the tax cut idea is largely impotent.
Nothing I do for my own present capitalist interests will significantly add any jobs or keep existing jobs as I see it.
That is the fundamental problem with tax cuts. They work fine in a "normal" market as a gentle stimulus but not so surely in the situation we are in now.
What keeps jobs short term is to empty the inventory and warehouses of existing large employers and do it quickly. This will help (but not guarantee) the stability of some jobs over the next 30 to 60 days as manufacturers refill their warehouses.
We have to keep people working and paying taxes in order to even begin to fund any of this stuff be it tax cuts or "shovel ready" projects that will kick in down the line.
It might be instructive to remember the Bush stimulus plan of last Summer. I hardly ever hear it mentioned but the consensus was that people that got stimulus checks would simply paid off debt. That was not what was billed to be its function. It was supposed to be a short-term stimulus.
We have a two party system where the 2 parties have different views. One likes to trumpet tax cuts as the solution to everything and one like to trumpet gov't programs to be the solution to everything. Sometimes the situation benefits more from one approach than the other yet neither party will be quick to admit that. Right now the better plan to help avoid a full blown depression is not nearly as simplistic as tax cuts.
And again, this is only my opinion and probably wrong but it makes some sense to me.
The problem we are in right now has several sources but all of it points back to a scary realization.
We as a nation can be seen as having a governance system based on a constitutional republic and bill of rights. We have a political system based primarily on a two party organization. And we have an economy based on capitalism.
It is the capitalism part of our system that is sick. Our gov't and two party system are trying to fix our economic system with the tools and levers at hand. The problem is that capitalism has fallen down pretty hard. It is evident that our titans of capitalism, our banks and markets have been used to defraud the nation even world. It is vastly too simplistic to lay blame at the feet of Fannie Mae and Freddy Mac. It is far worse. Easy credit does not cause fraud. Fraud is a human problem. Fraud destroys trust. Fraud destroys markets.
One of the questions before our nation going forward is if capitalism has reached some sort of ceiling beyond which it does not work very well. To "fix" capitalism and make it safe/acceptable going forward we may have to fundamentally restructure it.
One idea to wrestle with is credit. There is nothing fundamental to capitalism that requires credit. If we removed the concept of credit from our system could it work?
"Credit" could be essentially removed in my opinion but it would change many things. I don't think we as a nation have the moral courage to do something like that but it may be something similar in basic thinking that is required to be changed.
Lots of fun/scary things to think about. Now time to go for a ride on the warmish day. |
Court
| | Posted on Sunday, February 08, 2009 - 01:57 pm: |
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>>>>If we removed the concept of credit from our system could it work?
No, not at all.
But . .. I think you have "consumer" credit in mind . . . the borrow over 3 years to buy a car sort of stuff.
The credit that makes our economy work is stuff like fed funds (banks overnight loans to each other and from the fed) and clearing accounts.
My wife is in hedge funds and when she buys $50M of equities in South Africa she can't run over there and plop cash on the desk. It's "cleared" through a broker-dealer and the concept of credit is what makes the process work.
Most folks never have any concept of or contact with anything but consumer credit. |
Ft_bstrd
| | Posted on Sunday, February 08, 2009 - 03:32 pm: |
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Alchemy,
Let's look at a few of your statements and see if there isn't an alternative point of view to be had.
I welcome your example of a tax cut but I will take the money and pay off my meager debt, buy stock (only on serious pullbacks) and sit back and watch and pray my wife does not lose her job. With no job, the tax cut idea is largely impotent.
Nothing I do for my own present capitalist interests will significantly add any jobs or keep existing jobs as I see it.
What do people do with their money?
You can spend it (buy goods or services)
You can save it (invest in stocks, bonds, CDs)
You can use it to retire debt (pay off loans)
All of these contribute to creating jobs. If you spend it, you are buying a good produced by someone. That someone was paid a wage to produce it. Those wages provided the ability for that person to be employed and to be able to purchase goods, save, or retire their own debt.
If you save your money, you are buying stocks of companies desiring to raise capaital for company growth providing them with the capital they need to expand, hire new employees, provide engineering and R&D, etc. You could also invest in bonds. Bonds are how companies raise money for expansion. Buying a CD would allow banks to raise capital to lend.
Hopefully each of these investments would yield a gain that you would either spend, save, or use to reduce debt.
If you retire debt, what happens? Every dollar you pay down in home equity, home mortgage, auto loan, credit card, etc. has a two fold benefit. Firstly, the repaid debt frees capital for use in new loans. If you pay off a $1000 loan, the lender how has $1000 to lend to someone else. Secondly, the income that was being utilized to service the debt is now free to do something else, spend or save.
All of these activities generate multiple levels of "stimulus".
That is the fundamental problem with tax cuts. They work fine in a "normal" market as a gentle stimulus but not so surely in the situation we are in now.
What keeps jobs short term is to empty the inventory and warehouses of existing large employers and do it quickly. This will help (but not guarantee) the stability of some jobs over the next 30 to 60 days as manufacturers refill their warehouses.
We have to keep people working and paying taxes in order to even begin to fund any of this stuff be it tax cuts or "shovel ready" projects that will kick in down the line.
Tax cuts work in every market. This market isn't any different (despite what tragedy television might have you believe). This is a deep recession no doubt, but it isn't a collapse. Even if the market were to collapse and every one lost everything, the free market would still be at work and lower taxes (keeping more money in your pocket besides sending it somewhere else) would still be preferential to higher taxes.
If we were all reduced to poverty and had not a dime to our names, we would still be able to create a market where someone could trade a good or service of for the goods or services of another. If those goods and services were needed and wanted, many more people would come to that person and trade goods or services. That person would grow in wealth and would buy the goods and services of others. In order for the free market to work, we merely need to have two people who possess something the other values and of which the other person has none. "I have an extra coat and need a knife. You have an extra knife and need a coat." Viola! You have a free market.
Now if someone rolled in and stated that you had to give up a portion of the goods and services you received, you would end up with less buying power and less ability to drive the commerce of those around you.
The problem with the stimulus bill as it's currently written is that there are far too many impediments between the release of the cash and the market. These impediments result in two main consequences, longer time horizon for impact and greater likelihood of inefficiencies.
If you want the recovery to be widespread and pervasive, you must provide it in a manner that allows ALL to share in it. Directed growth, as it currently stands, provides benefits only in certain areas and to certain industries, and to certain people but not to all.
If, as you say, long term growth is the goal, what is the expected benefit after these pork projects are completed? After the pool in the school in Connecticut is completed, then what? After the water park in Florida is complete, then what? After $150,000,000 in condoms are distributed, then what? After ACORN provides $2B of job training, then what?
What provides long term growth is expansion. What provides long term growth is innovation.
I don't create a new company the products of which I can't sell in the open market. If I know that there is money to be had in the market, I will create a company to create a product, market it, and sell it. That new company is expansion. That new product is innovation.
While we are at it, I'd like to dispell the idea that there is a company "too big to fail". If a company is unhealthy, unwieldy, unprofitable, poorly run, ect., why save it when the death of that company would create a space for 1000 new, better run companies to fill in and provide that growth? If GM, Ford, and Chrysler failed tomorrow, would there be no cars produced in the US? Would we all walk? No, Nissan, Subaru, Honda, Toyota, etc. would fill in the space and hire those workers. Maybe there would be a new company never before created that would come from the ashes of these failed companies.
But I digress.
It might be instructive to remember the Bush stimulus plan of last Summer. I hardly ever hear it mentioned but the consensus was that people that got stimulus checks would simply paid off debt. That was not what was billed to be its function. It was supposed to be a short-term stimulus.
We have a two party system where the 2 parties have different views. One likes to trumpet tax cuts as the solution to everything and one like to trumpet gov't programs to be the solution to everything. Sometimes the situation benefits more from one approach than the other yet neither party will be quick to admit that. Right now the better plan to help avoid a full blown depression is not nearly as simplistic as tax cuts.
And again, this is only my opinion and probably wrong but it makes some sense to me.
The problem we are in right now has several sources but all of it points back to a scary realization.
We as a nation can be seen as having a governance system based on a constitutional republic and bill of rights. We have a political system based primarily on a two party organization. And we have an economy based on capitalism.
The problem with the Economic Stimulus Act of 2008, was that it wasn't large enough. It was a band aid for a gushing wound. If you remember, the package was only $152B. Seems kind of meager compaired to $933B.
Had the bill been $500B (with the reform of Freddie Mac and Fannie Mae that should have been done before), we might never have gotten to the place where we are today.
The Federal Government has not one red cent that it didn't pilfer from the pockets of it's citizens directly or obgligate them to repay by selling debt in the open market. "Government Spending" is the other end of the see-saw from capitalism. If you take government spending to it's final conclusion where the is 100% government spending and zero capitalism, you have communism where 100% of all production as well as the vehicles for that production are controlled by the government. If you take capitalism to it's final conclusion, you simply get capitalism. Every component of government intervention and government spending comes at the price of capitalism. There is no government spending that generates capitalism. Period. In order to spend money, the government must take money out of the market in order to place it back into the market.
Unfortunately, when the government does anything, there is fantastic levels of waste. The free market is much more efficient at bringing goods and services to market than the federal government ever was.
The lines are clear in that you have one party who believes that less government is the best government (some of Bush's policies didn't follow this belief) and that individuals working toward their own benefit are better arbiters of their lives than is the federal government.
The other party believes that less choice, less control, and less responsibility is the right answer. That government can take the role of provider and consumer. Our system is sick, but left to it's own devices with the maximum capital available in the market, it will recover swimmingly.
It is the capitalism part of our system that is sick. Our gov't and two party system are trying to fix our economic system with the tools and levers at hand. The problem is that capitalism has fallen down pretty hard. It is evident that our titans of capitalism, our banks and markets have been used to defraud the nation even world. It is vastly too simplistic to lay blame at the feet of Fannie Mae and Freddy Mac. It is far worse. Easy credit does not cause fraud. Fraud is a human problem. Fraud destroys trust. Fraud destroys markets.
One of the questions before our nation going forward is if capitalism has reached some sort of ceiling beyond which it does not work very well. To "fix" capitalism and make it safe/acceptable going forward we may have to fundamentally restructure it.
One idea to wrestle with is credit. There is nothing fundamental to capitalism that requires credit. If we removed the concept of credit from our system could it work?
"Credit" could be essentially removed in my opinion but it would change many things. I don't think we as a nation have the moral courage to do something like that but it may be something similar in basic thinking that is required to be changed.
Lots of fun/scary things to think about. Now time to go for a ride on the warmish day.
Please provide the evidence of "fraud".
If anything, there was "fraud" on the part of the federal government via Freddie Mac and Fannie Mae and via the Community Reinvestment Act.
The idea of these "greedy unscrupulous preditory banks screwing the little guy" is false and incorrect. I believe it harkens back to an earlier discussion about how credit is created.
A bank makes money when it holds loans paying interest and when it can originate a new loan. A bank works to originate a loan that it can then sell on the open market. These loans are packaged together and sold on the open market. Loans are either "naked" or "guaranteed". A naked loan would have no additional guarantees from forfeiture added to it by a third party. These loans would need to be pretty good for someone to want to buy them. These are the Prime mortgages to good borrowers. Riskier loans would be hard to sell because the risk of default would be so high. Riskier loans, loans to minorities, lower income borrowers, borrowers in urban areas, etc, are desired (and were required under CRA). In order to make these loans sellable in the open market, Freddie Mac and Fannie Mae guaranteed these loans from default. What the banks did was package these guaranteed loans with more aggressive, riskier naked (unguaranteed) loans in order to spread the risk across the package and raise the rating of the portfolio.
The idea was that some of these naked loans would default, but not all of them. These loans would be offset by the Prime loans as well as the guaranteed loans. What happened was that when Freddie Mac and Fannie Mae failed to make good on the guarantees placed on the CRA loans, the value of the entire portfolio fell. Companies holding portfolios of mixed loans (guaranteed, naked, and naked prime) had to mark the expected decline of ALL or a large portion of the mortgages withinthe portfolio). This caused a direct impact on the balance sheet and required immediate emergency borrowing to cover the decline in the mortgage portfolio. The lending money wasn't there, and the companies were driven into receivership.
The feeling of "fraud and greed" is misplaced. Banks don't originate loans which the bank can't sell in the open market. Without being able to sell these loans, the bank would be forced to hold these loans for the entire term. That would mean that these loans would have to be held for 15 to 30 years. The bank wouldn't be able to originate new loans during the duration of these loans. So if 20% of the portfolio of overall loans were these sub-prime mortgages, the bank would have to forego income generating opportunities on 20% of their portfolio for 15-20 years. Banks were simply not going to do this. Freddie Mac and Fannie Mae stepped in an stated that they would guarantee the CRA sub-prime mortgages. These guaranteed mortgages would serve as the backbone of mortgage portfolios sold in the open market.
We have to have credit in order to provide economic expansion. Without credit, the growth potential would be limited to the profit margin on the profit margin of last year. If I had $1M cost invested in a product and when I sold 100% of my product I made 15% ($150,000, I would have only that $150,000 to use to grow the company. If I could use that $150,000 to pay the debt service on another $1M, I could produce $2M of product, make $300,000, and repay the $1M of debt at the end of the year. The credit allowed me to create another $150,000 of profit.
You can have capitalism without credit, but the growth potential of that form of capitalism would be greatly reduced. |
Ducxl
| | Posted on Sunday, February 08, 2009 - 04:31 pm: |
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Please provide the evidence of "fraud".
A lady named Linda Thomson,who is the enforcement director over at the Securities and Exchange Commision reported to Congress last Tuesday that her commision intercepted over 70 Ponzi schemes in 2008.
I wonder how many they missed.
It's like the people who get paid to disguise
the CEO's earnings in order to fend off paying taxes.It's like the ever creative fund manager that takes that risky,illegal trade in order to increase their profit margin just a "little" more.
I believe Capitalism IS sick,and has created immoral,law breaking traders.
I agree we need to offer tax breaks to companies that can generate jobs HERE in our homeland.That way,our people get back to work and we become a productive society again.
Tax cuts will only send more money to China |
Ft_bstrd
| | Posted on Sunday, February 08, 2009 - 05:17 pm: |
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A lady named Linda Thomson,who is the enforcement director over at the Securities and Exchange Commision reported to Congress last Tuesday that her commision intercepted over 70 Ponzi schemes in 2008.
I wonder how many they missed.
Please explain how THAT pertains to the sub-prime market issues. We are not here because of Ponzi schemes.
It's like the people who get paid to disguise the CEO's earnings in order to fend off paying taxes.
Excuse me? There are either legal ways to mimize taxes exposure or fraud. Those who commit fraud go to jail.
What bank CEO has gone to jail?
I believe Capitalism IS sick,and has created immoral,law breaking traders.
Socialism/Communism is the answer?
I agree we need to offer tax breaks to companies that can generate jobs HERE in our homeland.That way,our people get back to work and we become a productive society again.
I agree. Let's drop the overall tax rate. Let's provide incentive tax breaks for those companies growing domestic jobs.
Tax cuts will only send more money to China
Maybe some of it, but not all of it. Remember, we only pay the children in the factories pennies per day. |
Ducxl
| | Posted on Sunday, February 08, 2009 - 05:31 pm: |
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Remember, we only pay the children in the factories pennies per day.
It's not just the children.I hadn't considered them.It's the whole Communist society that we're helping to support.
With the great Ronald Reagan i became a supporter of the "trickle down theory".
I was (WAS!) a staunch Republican.The greedy have hijacked "trickle down" |
Ft_bstrd
| | Posted on Sunday, February 08, 2009 - 05:40 pm: |
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Why fight Communism? We're working very hard to create it here.
The "stimulus package" will do more to move more jobs to China than any piece of legislation in the past 50 years. |
Ducxl
| | Posted on Sunday, February 08, 2009 - 05:52 pm: |
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The "stimulus package" will do more to move more jobs to China than any piece of legislation in the past 50 years.
Why??? How??
Eventually,we'll become poor enough not to be ABLE to afford those Chinese products.
Only then,will manufacturing HERE in MY Country become attractive.
I MAKE things(tangible things) my employer SELLS.We currently have too little of this.
(Message edited by ducxl on February 08, 2009) |
Ft_bstrd
| | Posted on Sunday, February 08, 2009 - 09:27 pm: |
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Why??? How??
Deficit spending that will result in no growth of the economy (as the stimulus package is currently written) will require higher taxes. Higher taxes will be levied progressively more at the higher tax brackets. These folks are the ones creating companies, running companies, and are companies.
The higher taxes at the upper levels will shrink profit margins resulting in higher prices and, more importantly, a drive to reduce the costs of the components of your products. These components include materials, R&D, marketing and LABOR.
If I can source my labor cheaper, I will. As long as I can hire domestically and make the margins desired, the labor stays here. Once the margins get squeezed (or go negative), labor is one of the components that can be sourced less expensively elsewhere.
Now, you and I have had this same argument several times. My guess is that your first volley will be that business owners are just being greedy and that they can afford to cut back their income by the amount of extra taxes. They should also be willing to do this out of American price and loyalty to American workers.
It doesn't matter if you make $2M a year or $40,000 per year. Taking a cut in pay isn't always possible or desireable. If you were given a choice of keeping a $40,000 a year income or losing $5,000 a year in income cut, you'd chose not to take the cut in pay. If keeping your income meant being hired and the person holding that job would be fired, you'd take the job. You'd feel bad about the other person, but you'd sooner they lose their job than you lose the income. You have bills to pay.
Like it or not, labor is not any different than machining, tooling, advertising, or R&D. It's a cost of the process to bring a product to market. At no point in time is your boss not keeping close track of EVERY component of the cost levels of components to production.
If you are in an area of labor where the margins are thin, the technology is old and established, and the companies are heavily impacted by taxes, you will see your job shipped over seas as a result of the stimulus package.
If you are in an area of labor where the margins are thick, the technology is unique and difficult to replicate, and the companies are not as heavily impacted by higher taxes, you will see your job maintained domestically.
My friend works at AMI Metals. They take giant slabs of aircraft grade aluminum and mill it down for aircraft parts and for aerospace applications. Their company has significant margins in that there are few companies that can perform the work that they do. The machinist for their company receive larger incomes in comparison to the market price of machinist labor, and they are confident that their jobs are not going to be outsourced because of the special nature of their work.
In the end, your employer only needs you as long as your employer can make a product that allows the employer to make the profit margins that justify the work the owner expends in bringing that product to market. The OWNER gets to determine what that margin is. Fair or unfair, it's the owner's decision as to what is the fair market price (margin) for HIS work. Just like YOU would not work for $8.00 an hour as an expert machinist, your owner places a price on HIS time and WAGE.
If you feel that this equation is unfair, strike out on your own and create your own company. You are a smart guy and are good at what you do. Put yourself in the driver's seat with your unique skills. Don't depend on the income motivations of another to provide you with security.
I'd bet, you'll find the decision on how and where to source labor isn't as cut and dried, black and white as you see it now. |
Alchemy
| | Posted on Sunday, February 08, 2009 - 11:36 pm: |
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Hi FB,
Let me summarize my comments after some of your well organized comments.
>All of these activities generate multiple levels of "stimulus".
You quite rightly outline how commerce stimulates more commerce. However, your analysis treats all activities as roughly equal. I don't see it that way. Some are far more stimulative of job creation. When I buy stock (unless it is an initial issue) my transaction is with an individual and has little or no benefit to the corp. If I go out and buy sixty lawnmowers then I am likely giving or keeping a job for someone for another month.
Retiring debt does not generate loans at this time. Loaning money is extremely risky until the housing market is clearly on the upturn. The housing market has increasing risk as long as unemployment is rising.
The issue before us today as I see it is how to avoid a depression. The primary tool to fight a depression is employment/jobs.
Evidence of Fraud. My concerns are that the fundamental institutions cannot be trusted at this point. The gas crisis was the result of market manipulation rather that expanding demand. It might be technically legal to try to corner a market but it is at that point not a true market since supply is artificially constrained.
Derivatives are at a certain level a fraudulent effort as in credit default swaps that are foisted as a financial instrument when they are fundamentally unknowable even by the executives that sell them.
You may have something regarding the Fannie Mae and Freddie Mac guarantees but I really think that is too simplistic by far.
Fraud in banking. I was personally pitched a very risky mortgage strategy when I simply wanted a 30 fixed. They clearly wanted me to borrow way beyond good judgment and as much as said they could get a very sympathetic appraisal (above what I felt was reasonable). They as much as said their bank was too big to let fail and not to worry. They are now gone BTW. Not one charge against any officer of that bank as far as I know. The whole banking industry is in the crapper as I see it ever since the S&L meltdown.
Banks have inflated not only themselves but gotten into business they should not be in. A prime example is BoA buying ML - very bad idea. They are still trying to be too big to fail. Banks would better serve their depositors by being regional. BoA want ML so they can avoid having to sell their loans in the open market. They want to fix the market so it works for them. "Fixing" the market is a theme I see coming up a lot in these schemes. Independence is what serves us well.
I am not saying that all of these goofball projects (in the stimulus plan) will generate long term growth but neither can you say that tax cuts can generate long term growth. It is your hope and belief and sincere understanding but it is not guaranteed. We are way beyond the operation of the normal tools and levers of the economy as I see it.
I am all for tax cuts once the housing industry has clearly turned up and unemployment is dropping for a few months.
And as for fixing the sickness that capitalism "might" have, it would be a false choice to think we have to look back to some previous system like socialism or communism. They won't work either but neither is capitalism working so well. We have to think far more creatively and I think we are not well served as a nation with the speed of growth we have seen in the last 20 years. We need to secure our fundamentals and establish some independence. Maybe along with credit we might want to take a look at "leverage" as well.
FB, I really appreciate your extensive comments. It is getting late and I have to end here.
I did get some nice riding in today and it was great! |
Ft_bstrd
| | Posted on Monday, February 09, 2009 - 01:59 am: |
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Retiring debt does not generate loans at this time. Loaning money is extremely risky until the housing market is clearly on the upturn. The housing market has increasing risk as long as unemployment is rising.
Most lending is NOT for mortgages. Retiring NON-MORTGAGE debt frees up funding for lending for NON-MORTGAGE financing (consumer electronics, business loans, inventory, raw materials, cars, etc.).
The primary tool to fight a depression is employment/jobs.
I agree, but the stimulus package, as it's currently written, is not as effective at creating jobs as it could be. It's about 50% effective. You are seeking the end product, jobs, without looking at the best ways to create them. Just hiring people to dig ditches and others to fill them in is not job creation or employment and it is only sustainable as long as the government money keeps flowing.
Evidence of Fraud.
Still looking for some.
The gas crisis was the result of market manipulation rather that expanding demand.
False. There were TWO Congressional investigations into price fixing, market manipulation, and fraud. NO evidence was found. Believe me, they wanted to find some.
Derivatives are at a certain level a fraudulent effort as in credit default swaps that are foisted as a financial instrument when they are fundamentally unknowable even by the executives that sell them.
Corporations are big boys. They new what they were buying. They just didn't know that the portion that was supposed to be guaranteed wasn't. Corporations can't be both the villains of fraud and the victims of the dupe.
Fraud in banking. I was personally pitched a very risky mortgage strategy when I simply wanted a 30 fixed. They clearly wanted me to borrow way beyond good judgment and as much as said they could get a very sympathetic appraisal (above what I felt was reasonable). They as much as said their bank was too big to let fail and not to worry. They are now gone BTW. Not one charge against any officer of that bank as far as I know. The whole banking industry is in the crapper as I see it ever since the S&L meltdown.
This isn't fraud. This is sales/marketing. It is up to YOU to determine what financial decisions you make. People can not be protected from themselves. If I do something stupid, it isn't someone elses fault for the bad decision I make.
Banks have inflated not only themselves but gotten into business they should not be in. A prime example is BoA buying ML - very bad idea. They are still trying to be too big to fail. Banks would better serve their depositors by being regional. BoA want ML so they can avoid having to sell their loans in the open market. They want to fix the market so it works for them. "Fixing" the market is a theme I see coming up a lot in these schemes. Independence is what serves us well.
BOA saw the opportunity to buy a marque broker dealer at a greatly discounted price. Regions bank bought Morgan Keegan. The majority of work that ML does is group benefits and individual asset management. There is very little outlet for ML to move BOA loans in the open market. I'm not sure what you mean by "fixing".
I am not saying that all of these goofball projects (in the stimulus plan) will generate long term growth but neither can you say that tax cuts can generate long term growth. It is your hope and belief and sincere understanding but it is not guaranteed. We are way beyond the operation of the normal tools and levers of the economy as I see it.
We know from past experience that government spending projects create greater waste and larger inefficiencies than does private sector spending. When was the last time you heard about a government contractor coming in under budget and delivering a project on time?
Answer me this, though, how does higher government spending AND higher taxes benefit the market. Infuse the market with money and then syphon it back out?
Name a single project that you feel uniquely drives market growth.
I am all for tax cuts once the housing industry has clearly turned up and unemployment is dropping for a few months.
The housing market won't turn until the jobless claims drop. Jobless claims will not drop without substantial tax cuts.
Period.
And as for fixing the sickness that capitalism "might" have, it would be a false choice to think we have to look back to some previous system like socialism or communism. They won't work either but neither is capitalism working so well. We have to think far more creatively and I think we are not well served as a nation with the speed of growth we have seen in the last 20 years. We need to secure our fundamentals and establish some independence. Maybe along with credit we might want to take a look at "leverage" as well.
What broke capitalism was government intervention in order to create social engineering. The answer isn't more government manipulation in order to create social engineering. Banks are not suicidal. Without the CRA and the false backing of Fannie Mae and Freddie Mac, the banks WOULD NOT have originated the sub-prime mortgages because they simply couldn't sell them in the open market. The problem was then exacerbated by the lack of regulation of these governmental entities.
Unfortunately, we have done nothing to prevent the NEXT collapse. We have learned nothing. We are going to micromanage banks and corporations and yet we are STILL not regulating Fannie Mae and Freddie Mac. We tried to utilize the CRA to create social engineering, but we STILL haven't altered that law to make sure that the same problem isn't created.
Latest poll shows that only 37% of Americans support the stimulus bill as it currently stands. Maw and Paw Kettle know this bill is bad law and will do nothing.
Obama's approval rating has dropped from 83% of 59%. I suspect that he will be below 50% in less than a month. Congress' approval rating is at 27%.
He's got about a year and a half before the mid-term elections. I see a repeat of 1994. |
Rfischer
| | Posted on Monday, February 09, 2009 - 09:41 am: |
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Interesting all. But, to understand what caused the financial collapse all you need to understand is "Glass-Steagall" [and its repeal on Slick Willie's watch].
(Message edited by rfischer on February 09, 2009) |
Court
| | Posted on Monday, February 09, 2009 - 10:41 am: |
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quote:The year before the repeal, sub-prime loans were just 5% of all mortgage lending. By the time the credit crisis peaked in 2008, they were approaching 30%.
And the subsequent action by the federal government which subsequently forced banks to do really stupid things . . . .had the federal government not stepped in to "help" us banks would have never given loans to folks that required 3 times their monthly income to make the mortgage payment.
I watched as those loonies invaded that guys lawn in Connecticut this weekend. . . what an indictment of the education system. The poor folks haven't a clue who to blame so they look for someone, anyone, who has more than they do.
The paper this morning had the first several pages devoted to government chicanery . . including . . .
quote:A city lawmaker yesterday called for a "crackdown on abuses" after The Post reported that more than seven in 10 firefighters have been retiring on disability pensions, costing cash-strapped New York nearly $1 billion a year.
Firefighters have boosted their pensions to unprecedented levels, partly by claiming job-related injuries or illnesses.
They're also putting in huge amounts of overtime in their final years on the job, The Post disclosed exclusively yesterday.
I'm not entirely sure I want the government helping me . . . |
Rfischer
| | Posted on Monday, February 09, 2009 - 11:59 am: |
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I smell a tax revolt brewing... |
Ft_bstrd
| | Posted on Monday, February 09, 2009 - 12:07 pm: |
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I think we all just tell the IRS, "Thanks but no thanks. You work for me. I don't work for you.", and refuse to send in our tax payment for 2009. |
Court
| | Posted on Monday, February 09, 2009 - 12:31 pm: |
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The beauty of the USA is that we can likely change this without a revolt. But, for the most part, the group that has appeared in Washington over the past several weeks would be denied entry into the United States military, they'd never pass muster where I work nor could they get an NYC Contractor's License (mine took 18 months of background check by Carco) . . . so whey in the heck would we pay them to tend to our affairs.
They are, plain and simple, an embarrassment and I'd call it about a dead heat between the parties. |
Rfischer
| | Posted on Monday, February 09, 2009 - 12:47 pm: |
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Well, at least the Bushies could.......ah,er....on second thought, never mind.  |
Ft_bstrd
| | Posted on Monday, February 09, 2009 - 01:15 pm: |
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You can try to blame this on Bush, but there is only so much blame that will stick to one man.
What's odd is the blind allegiance to party in support of Dodd and Franks who actively thwarted the oversight that would have prevented this mess. What's odd is the blind allegiance to party that will allow Charlie Rangel to continue to serve in his current position in spite of being a tax cheat. What's odd is the blind allegiance to party that would allow the nominations of tax cheat after tax cheat and believe these folks are the best we can do. |
Rfischer
| | Posted on Monday, February 09, 2009 - 01:35 pm: |
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actually, my point was the same as Court's - they're all corrupt, venal, and/or mind-numbingly stupid, whatever the political stripe.
Tho' I will allow that the Dems are especially so. And Barney Frank deserves a special place in our hearts in that regard. No disrespect intended towards Nancy Pelosi of course.. |
Gowindward
| | Posted on Monday, February 09, 2009 - 01:45 pm: |
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"I think we all just tell the IRS, "Thanks but no thanks. You work for me. I don't work for you.", and refuse to send in our tax payment for 2009."
That's funny!! No only not pay but send a nice letter of Non-Performance explaining that once acceptable performance has returned you would be more than happy to start paying your taxes again.
Yep it would go over like a lead ballon...but funny! |
Court
| | Posted on Monday, February 09, 2009 - 02:24 pm: |
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Forgive me . . . . I'm part student.
A.) corrupt
B.) venal
C.) mind-numbingly stupid
D.) All the above
I'm torn between "C" and "D" but am going with "C" since you used the word "all". I think MANY are corrupt (I mean can you believe that Daschle thing? . . "no lobbyists my my administration" and who does he nominate . . . a guy who got $5,000,000 from a Lobbying law firm . . a guy who is neither a lawyer nor a lobbyist but a mere "consultant") but I've got high confidence that ALL are mind-numbingly stupid.
Ask yourself . . if you were the CEO of a major corporation, had listen to this guy in the confirmation hearings . . . would you hire him?
We should be ashamed of the rat's that have been drug before us to serve. |
Oldog
| | Posted on Monday, February 09, 2009 - 02:25 pm: |
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Thanks for the incites and information shared.
Elections are coming again in 2 years,
no incumbents stay in, Unless the challenger is a bigger crook.
Can we Fire em-all You bet! |
Oldog
| | Posted on Monday, February 09, 2009 - 02:26 pm: |
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Hey Jeremy you want to run for prez? |
Ft_bstrd
| | Posted on Monday, February 09, 2009 - 02:49 pm: |
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My wife suggested that I run for office.
I'm not sure it would work. I don't suffer stupid well. |
Oldog
| | Posted on Monday, February 09, 2009 - 02:58 pm: |
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I don't suffer stupid well.
Then perhaps not,
I cant recall who wrote it {Heinlin I think} but in some novel I read in the distant past, it was put forward by the writer that the best political officials were the ones that were drug screaming and kicking to the post. then served their term and left after having done a good job.
some of the crap that has hit the media lately makes me think of blazing saddles.
harrrrummmmph.} |
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