Tuesday, September 22, 2009

Behind the Scenes - Potpourri

The Federal Reserve Board has rejected a request by the U.S. Treasury Secretary for a public review of the central banks' structure and governance because they feel it is a threat to their independence. Again, I think that 'transparency' is very important at this time in our country and this is a second attempt to prevent the public from seeing clearly, the first refusing to provide the list of banks receive government loans that I discussed in previous blogs.

The FDIC is looking at borrowing money from the big banks to get their funds to cover ongoing bank failures versus from the U.S. Treasury. Bankers and lobbyists strongly support this so there is a red flag here. This marriage is interesting in the respect that these banks have government loans and here is the government borrowing their own money in some respect. Does this make sense?

Also, on a similar subject, AIG's CEO has requested that the government trim the interest rate and extend the time to repay their loans back. And the government is actually considering it as reflected in the stock price. This example of taking care of the 'big' guy and letting the individual follow a less apealing path is inconsistent and another red flag.

As I mentioned in previous blogs, when the foreclosures reach bottom, then we know that recovery is underway in a practical sense, although in a statistical sense all the experts say that the recession is over. We know that the banks having been holding off putting foreclosed homes on the market, and they also have been holding back from foreclosing on delinquent mortgage holders. Given this delay, I see the housing recovery extending at least another year. And I saw that commercial real estate prices declined 1% in June and 5.1% in July; an overall decrease of 31% since last year. So this sector is now picking up steam and guess who holds the mortages; banks. Keep an eye on these statistics. It makes practical sense that this part of the real estate market will follow the path of the residential market. I won't be surprised if the government tries to intercede.

Watching the stock market barely moving up or down during this month, on a daily basis is very interesting. It is acting contrary to its historical past and I'm wondering what is going on behind the scenes.

Finally, I want to mention a subject that I usually don't. The top general in Afghanistan said that without more troops, the battle will be lost within a year. Ms. Clinton came out and pushed back against his warning and said that there are 'very expert military analysts who say the exact opposite'. The general also has been told by the Pentagon not to request troops. This situation creates much consternation for me as I lost high friends in the Vietnam war, so I have some experience with this kind of behavior by those who don't listen to those who are in the know. To be in the know, you have to experience it, then you move away from theory and opinions. I definitely think we should withdraw from that country. History shows that more troops is not the answer. Ask Russia. They spent years fighting in Afghanistan and finally withdrew because they could not win. Yes, they were there for a different reason, but it does not matter. This one time we can history and change the pattern of this country. Otherwise, history will be given the opportunity to repeat itself, and it seems that is what the human does.

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Monday, September 14, 2009

Justice Prevails

I'm breaking a record with two posts in one day. :) I just saw the news that Judge Rakoff ruled against the $33M settlement agreement between the SEC and B of A regarding accelerating $3.6B in executive bonuses before closing the deal to acquire Merrill Lynch. B of A paid these bonuses despite a record $27.6B loss and being a recipient of one of the largest federal bailout funds. The judge said, "the proposed settlement suggests a rather cynical relationship between the parties: the SEC gets to claim that it is exposing wrongdoing on the part of B of A in a high profile merger, the bank's management get to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth." He said it will go to trial on February 1, 2009.

I am so elated to hear this ruling. May the jury set a standard that will make banks and regulators think more than twice before trying to sweep something this large under the rug for such a small amount. The word 'truth' stands out and once it has cut a path in the darkness with the help of this judge, this one individual, it naturally lights the way to expose that which does not want to be seen.

Now I'm waiting for justice to prevail in the case of the Treasury Department trying to prevent us from seeing how the money was divided up between the banks. It will be interesting to see what the judge rules after seeing their appeal.

On the healthcare subject, when I heard that the President had the backing of the pharmaceutical industry, I saw that as a huge red flag of politicking and rubbing shoulders behind the scenes versus an honest agreement that puts the citizen first. That industry is very profit motivated and whatever transpires between the two continues their profit goals.

Also, regarding justice, I firmly believe that tort reform is necessary when it comes to suing doctors and hospitals. I don't see it in the current plan that is in writing. Perhaps that is in the plan that is still in the ethers being discussed.

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Healthcare, Importance of Experience, Personal Responsibility

On my July 27, 2009 blog, I shared what my personal experiences have been with medical insurance and also my opinion regarding what the current administration is attempting to do along with what I think would be prudent steps. As a country, we need to change our perspective as to how the individual is perceived. Instead of encouraging the victim energy with the 'government will take of you scenario', we need to be helping others learn how to be more resourceful and how to live within their means. This is a conservative viewpoint, yet I see that the continuation of our democracy and capitalism depends on this magnitude of a change. All the actions from the government should stem from this way of looking at us collectively. I am concerned that we are headed down the primrose path, but it is an exciting time and shows the importance of the individual standing firm in his/her integrity. The government at all levels does not know what is best for us. We have to influence them in a way that they listen and act accordingly, not just give us lip service and then act from what they think is right.

I see signs of our inexperience in our government showing up in the last few days. For example, we put a 35% tariff on the tires coming from China. They are in great consternation which tells me that there was no greasing of the wheels before acting. I wonder if anyone thought this whole process through, given the leverage that China holds because of their ownership of our debt to a tune of close to a trillion. Imagine the interest rate increase on this debt if they decided to protest against this tariff by dumping some of it.

There is great eloquence of self-expression coming from Washington D.C., but the actions are not matching what is being said. They have lost touch with the people. I am giving them credit that they had some connection in the past. An example is my personal experience with my two senators and representative, especially from their response around the TARP. They were receiving 95+% against, as was my vote, and still thought they knew better. They don't realize that their strength comes from us who see differently, more at the ground level, from living our own life experiences. A democracy has to include the people because the President's office, Senate, and House of Representatives are individuals mainly with law backgrounds who are affluent. It's easy for them to abuse their power, taking care of their needs/wants first as is reflected in their health care program. We as citizens are responsible for keeping them in check. Your power of influence is greater than you would believe. Don't hesitate to make your own words known when you know that others are not operating with integrity or ethics, or are just plain ignorant.

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Wednesday, September 9, 2009

U.S. Dollar and Foreclosures

Gold is over $1000 an ounce and other commodities are going in the same direction. The U.S. dollar is down. For the first time since 1976 the Canadian dollar is equal to ours. The Euro has reached a new high against the dollar. Countries are diversifying out of the dollar. For example, Russia use to hold 90% in dollars and now it's 45%.

Today, the Treasury Department acknowledged that 'there are millions more in foreclosures.'

These facts are reconfirming what I have written about in this blog. Given the markets continued climb in the month of September when historically it has been different, it seems that psychologically investors will hang onto any piece of optimistic news and invest.

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Tuesday, September 1, 2009

Perspective

Home sales are up and the experts are telling us the recession is over. Yes home sales have increased because there is a rush to get the $8000 tax credit as a first time home buyer. And if you haven't owned a home in the previous three years you qualify. That ends in November and unless the government extends it I think sales will fall off dramatically. Also, foreclosures continue with a momentum of their own, even though the banks are holding back from putting homes on the market. The prices of homes continue to come down. With the combination of these participating in unison, the current increase in sales is temporary.

Now that the 'cash for clunkers' has ended, watch the dramatic decline in car sales. Again, only a momentary improvement in sales.

These types of government interventions only delay what needs to keep unfolding; getting back to the ground from the clouds we have been in with home prices, using debt for accumulating material things and so on. Keep saving, paying down debt, and being conservative with your investments. Be prepared so the 'bear' doesn't take a big bite when he comes back to eat.

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