Monday, July 27, 2009

China, Healthcare, Fed Chairman, Housing Sales

A formal summit between China and us started today. They are concerned about the devaluation of the dollar given the amount of our debt they hold. The Treasury Secretary reassures them that the U.S. is committed to a higher savings and lower deficit. These words sound good, but I have yet to see action taken that reflect it. We are still spending like there is no tomorrow, and I have concerns about the 'healthcare' push. Too much haste means much more waste that we cannot afford. I am for everyone having access to care. In 2006, I signed up with Blue Cross as an individual and had to pay $300 a month for a $5000 deductible plan. I was in the 'healthy' group. After a year was up, they sent me a notice raising the monthly premium although I had not used their insurance. Their response was to cover their costs. I cancelled my policy and continued uninsured as I had for the 10 years previous. During that time when I needed medical assistance, I told the doctor I was a self-payer and negotiated a smaller fee by paying cash. I think one step that would help our system is having more competition amongst the insurance providers. Second, as has been acknowledge, keeping people out of the emergency room when it is used for what a clinic or doctor's office could handle would create immense savings. Setting up a government program will not do that because the government does not have to make a profit and these are for profit companies. Also, history shows that the government collectively does not have a business mind and therefore the waste is immense with no one there to cut it away as a private or public company is forced to do.

The words of Fed Chairman Bernanke seem to be carrying less weight now. He said he is for a stronger dollar policy yet the dollar keeps falling overall. And he continues to justify his behavior in rescuing the banks because he did not want to be in his position with a 'second Great Depression'. I think that concern colored his lens on doing what would have helped this country in the long run. It seems time to replace him.

June new home sales are up 11%. That is good news yet remember the price of homes continue to decline. Based on this statistic, it seems that the lower housing prices are reaching the level where buyers are beginning to see it as a good deal. When the number of foreclosures start to turn around, then the bottom will be reached.

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Friday, July 24, 2009

The President's Recent Remark 'Stupidly'

President Obama recently inserted himself on part of the famous black university professor by calling the behavior of the arresting officer as acting 'stupidly.' This is a clear view of the president's own prejudice by deciding to respond the way he did. Here is a man who is careful to know what he is talking about regarding government business, and comes across as a knowledgeable. Yet in this case, he did not know the full story and responded in ignorance. Again, this reflects his own prejudice.

A president has the responsibility to rise above these types of situations or opportunities to participate. The position he is filling should always come before his own personal preferences and opinions. This example is important enough to me to highlight here. Humble pie is on the menu for the president. That would be the just action for for him to take.

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Tuesday, July 21, 2009

Backpacking and Financial Comments

I returned a few days ago from the annual backpacking trip to the Marble Mountain Wilderness which has been a ritual for me for over 30 years now. As the aging process continues, I noticed this year at age 60 and wearing a 40 pound pack, I had a more difficult time. It's a reminder that power walking isn't enough to prepare me for that trek.

Upon my return, I noticed the following:

* The bailout may hit $23.7 trillion. This number is so large that it loses its significance with the human mind.

* Talks continue for a second stimulus package, yet less than 25% of the $700B of the TARP money has been spent. And where is the accounting of the first stimulus package to see how effective it has been? Congress continues to create ways to throw the money our way yet needs to take restrain themselves, understanding how the process works: increased unemployment continue months after the recovery is silently underway.

* California has reached a budget agreement. I noticed that $4B is coming from local governments which will put the squeeze on them and the fallout will continue. Also, some of next years income will be shifted into this year by accelerating income tax. These are creative examples of using debt to finance this state. The next fiscal year may be more challenging than this one because of these maneuvers. We didn't bite the bullet. We just delayed the inevitable.

Hope everyone has found a way to take a meaningful break from their hectic lives. In my opinion, there is nothing like living with Mother Nature and her inhabitants for a short while.

Wednesday, July 8, 2009

North Korea, China, and Tidbits

Fingers are pointing at North Korea for the recent cyber attack on South Korea and several different U.S. agencies; National Security, Homeland Security, the State Department, Pentagon, White House, and New York Stock Exchange. The news is that the software attack was successful with the Treasury Department and the Federal Trade Commission. I don't think we will be told the depth of the other successful penetrations because of national security. I am surprised that North Korea has this kind of enterprising ingenuity. The picture by the mainstream is that it is an impoverished nation and using the threat of nuclear missiles to get attention. Perhaps this country is doing a lot more behind the scenes while it keeps our attention with the surface threats.

China's behavior with its citizens is consistent with their communist system. It's a good reminder for those who only focus on the economic interdependent relationship we have. China has been around for thousands of years and our country only 233 years. We need to learn to look far ahead, economically, like they do and act accordingly. This is the biggest benefit that I see they can teach us.

51% of all foreclosed homes have had prime loans, not subprime. Yet all the news for the last couples years have blamed this on subprime and the associated actions from banks, mortgage brokers and so on. This statistic shows that as home prices continue to fall, more people who are underwater are going to walk again from their mortgage.

The market is getting close to testing the 8000 mark again. Watch the patterns that show us repeated cycles and invest accordingly.

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Wednesday, July 1, 2009

China and Underwater

China had a net outflow of U.S. Treasuries in April 2009. In the past they have been one of the biggest buyers. Their motto is now 'liquidity, safety, and returns.' This is a trend that we need to be alert to. Without foreign borrowers our ability to keep printing money and expanding debt will be curbed. It seems that we as a country have no self-control around money, so it does make sense that the outside would control us.

Also, a disturbing new action has come from Washington regarding refinancing mortgages that are underwater. The loan value will be raised to 125% of the value of the home. This is an example of how far off the business path we are headed. Would a prudent business person act in this way when the values of houses are still in decline? I don't think the government can keep acting in such a pervasive contrary way to our capitalistic system and not have it backfire.


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