The Las Vegas taxi driver was an old fifty-something, with a mullet
hanging out of the back of his battered baseball cap and a potato sack gut hanging over his belt. Having driven a cab myself, long ago and far away, I habitually engage in cabbie chat, as I did now.
“So, how’s biz?”
“Horrible. Thanks to Obama, my family’s going to starve!
“Really?” I asked incredulously, surprised by both the topic and the heat of his response. “How come?”
“Thanks to him trash talkin’ Vegas
, we’ve had 110,000 room cancellations. Once the March Madness basketball tournament is over, this place is going to go back to being a ghost town, just like it was last week, and the week before that. My family’s going to starve thanks to Obama!”
“But they’re not actually
going to starve, are they?”
“Yeah they are, I’m telling you. Starve, plain and simple. I ain’t making any money as it is, and once town empties out again, I’m going to go broke and my family is going to starve!”
“Wow,” I said, “so, what are you going to do? Move away?”
“Nah,” he said with no hesitation, explaining, “I like it here too much.”
With a quick and puzzled glance at the neon-illuminated cement wasteland through which the cab was speeding, I had a hard time imagining what attraction the place might have.
“What is it about this place you like so much?” So much, apparently, that he was willing to let his family starve in order to stay.
“Well,” he said in an almost professorial tone, “first, I get to see a lot of naked women. Second, I get a lot of ‘freebies’,” he said lustfully, sending a shudder down my spine. Call it rural naivety, but while I can understand that a working girl has to work, I had a hard time getting around the idea that she had to “work” with him. And for what, a free cab ride?
“Finally,” he concluded, “I like the weather. That’s about it.”
As I couldn’t think of anything else to say – at least not without risking offense -- to a man who was apparently comfortable with the idea of letting his family starve so he could continue to ogle, and apparently fondle, the women of this fair-weathered Sodom & Gomorrah, I turned my attention back to the surroundings.
And what surroundings they are. Lavish. Spectacular. Ridiculous. Some day in the future, perhaps 500 years from now, the gilded ruins of this testimony to humankind’s penchant for excess will be picked over and cataloged by archeologists for the benefit of primary school education.
Then again, with the way things are going, it could be just 50 years. I say that because City Centre, the world’s largest construction project, continues to be built on autopilot, even though it’s only about half finished. And this is just one of a number of other hotels and condo towers in a similar circumstance; started in a more optimistic time, but now merely adding to the unsold inventories that have made Las Vegas the epicenter of the real estate meltdown.
The place is in real trouble. Maybe the degenerated taxi driver will hang on, family be damned, but I suspect that an exodus from the place is inevitable. And can a cluster of mysterious large-construction project fires be far behind? (As an aside, if you own any insurance company stocks… run, don’t walk, to the selling window. It’s not just that certain doomed construction projects are likely to become fire hazards, but that insurance companies notoriously invest their capital in real estate and bonds, both of which are dead ducks, or soon will be.)
I am glad I saw Las Vegas when it was still at its prime. Soon, I suspect, it will be something akin to an urban war zone. As for Obama, the next time he gets an urge to take in a show, he might want to give the place a pass.
A Quick Musical Interlude, Then Something Different
I am going to try something different for the rest of this week’s missive, but before I get to that, I want to share a bit of music many of you may recall. But first, a little backgrounder.
A subscriber and new friend, the talented musical producer and film maker, Sadia Sadia, attended our Las Vegas summit and gave me as a gift a copy of Rick Wakeman’s autobiography, “Grumpy Old Rock Star.
Those who recognize the name will remember Wakeman as the talented organist for the mega-band “Yes”… as well as the composer/performer for a huge body of solo work, including his much-acclaimed Journey to the Centre of the Earth
While I wouldn’t count myself as a rock groupie and so Wakeman’s name evoked little in the way of recollection, I began to casually peruse his book, which is really just a collection of stories from his wild career, and got sucked right in. It was a big surprise… interesting, well written, and very, very funny.
As is the way with these things, reading the book reignited my interest in his music, and so I quickly stumbled back upon Roundabout
by Yes, a forgotten favorite and one of the band’s best-known tunes. You can listen to it here
(In the video, the guy dressed up in the glittery cape is Wakeman -- as gifted and as hard-living a rock star as has ever graced the stage -- so hard living, in fact, that he had two heart attacks at the age of 25.)
Now, as for the rest of this edition, I’m going to try to tell a story, but using snippets from other sources with, perhaps, a side comment thrown in now and again.
I am taking this approach because, frankly, since hopping on the plane to Las Vegas last week, the sheer volume of proposed new regulations, legislation, and plain idiocy have outstripped my processing abilities. It seems that every hour or two over the past week, there has been a breaking story that has me saying out loud, “What, are you kidding?” Or, “Wow… we’re really
in trouble now!”
It came to me as I started writing to you this morning, that these many stories – rather than just random spatters of inanity – together form a distinct pattern. And the pattern seems to point to a new paradigm now materializing here in the U.S. and, by extension, the world.
As I think the following stories demonstrate, the new paradigm is not one any thinking person will embrace.
Eat the Rich
"Prudent investments in education, clean energy, health care and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected. In the face of these trade-offs, Washington has ignored the squeeze on middle-class families that is making it harder for them to get ahead. There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few." (A New Era of Responsibility: Renewing America's Promise. The President's Budget and Fiscal Preview)
One finds many charts in a federal budget, most attributed to such deep mines of data as the Census Bureau or the Bureau of Labor Statistics. The one on page 11 is attributed to "Piketty and Saez."
. . . Thomas Piketty and Emmanuel Saez, French economists, are rock stars of the intellectual left. Their specialty is "earnings inequality" and "wealth concentration."
Messrs. Piketty and Saez have produced the most politically potent squiggle along an axis since Arthur Laffer drew his famous curve on a napkin in the mid-1970s. Laffer's was an economic argument for lowering tax rates for everyone. Piketty-Saez is a moral argument for raising taxes on the rich.
. . . Turn to page five of Mr. Obama's federal budget, and one may read these commentaries on the top 1% datum: "While middle-class families have been playing by the rules, living up to their responsibilities as neighbors and citizens, those at the commanding heights of our economy have not."
"Prudent investments in education, clean energy, health care and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected."
"There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few. . . It's a legacy of irresponsibility, and it is our duty to change it." (The Obama Rosetta Stone, by Daniel Henninger, from the Wall Street Journal’s Opinion Journal.Com)
Supporters of Capitalism Are Crazy, Says Harvard
Last weekend, Harvard University sponsored a conference called (I am not making this up) "The Free Market Mindset: History, Psychology, and Consequences." Its purpose was to try to figure out why, since everyone knows the current crisis amounts to a failure of the market economy, the stupid rubes continue to believe in it. The promotional literature for the conference opened with “that quotation” from Alan Greenspan — the one in which he suggested that there was, after all, a "flaw" in the free market he hadn't noticed before.
Well, that does it, then! If our Soviet commissar in charge of money and interest rates says the free market doesn't work, who are you to disagree? (FromMises Daily by Thomas E. Woods, Jr. )
Obama's Latest No-Banker-Left-Behind Scheme
“. . .According to Jeffrey Sachs…
Geithner's plan will have the Fed and FDIC "subsidize investors to buy toxic assets from the banks at inflated prices." If done, it will be another in a series of massive wealth transfers in the hundreds of billions of dollars "to bank shareholders from taxpayers." If investors incur losses, the Fed and FDIC will absorb them, meaning heads or tails they win.
"The investment funds will have the following balance sheet. For every $1 of toxic assets (bought), the FDIC will lend up to 85.7 cents, and the Treasury and private investors (only) 7.15 cents in equity to cover the remaining balance. FDIC loans will be non-recourse, meaning that if the toxic assets (bought) fall in value below the amount of FDIC loans, the investment funds will default on the loans and the FDIC will end up holding the toxic assets...."
In other words, "The FDIC is giving a 'heads you win, tails the taxpayer loses' offer to private investors.' " Economist Paul Krugman agrees, calling it a one-way bet, "a disguised way to subsidize purchases of bad assets." (From CounterCurrents.Org)
What’s Not to Support?
March 27 (Bloomberg) – President Barack Obama will seek support today from executives of the nation’s largest banks for his plan to stabilize the financial system and try to get beyond the furor over bailouts and bonuses. David again.
The White House meeting at noon Washington time is scheduled to include chief executive officers Vikram Pandit of Citigroup Inc., Jamie Dimon of JP Morgan Chase & Co. and Lloyd Blankfein of Goldman Sachs Group Inc., all headquartered in New York. They are among as many as 15 banking executives expected to attend.
With a deal that has the taxpayer lending the boys club 85.7 cents on the dollar, and assuming all risk should the loans failed to be paid back, who wouldn’t provide “support” to Mr. Obama? But at what cost? Well, at better than one trillion more dollars, if things go off the rails – as they almost certainly will. How do you spell dollar? D-O-O-M-E-D. By the by, click the following link for an exceptionally well done graphic representation of just how much money a trillion dollars is. Call the family around and give it a click (then pass it on)… http://www.pagetutor.com/trillion/index.html
New York Tax Rise on Higher Earners Hinted as Budget Gap Rises
March 27 (Bloomberg) -- New York Governor David Paterson said next year’s record budget gap could be $3 billion greater than the $16.2 billion he announced earlier this week and hinted a tax increase on higher wage earners is possible.
The $16.2 billion estimated gap for the year beginning April 1 was 25 percent above projections six weeks ago, he said.
“We are right now on the verge of cuts and service reductions that I would have to describe as life threatening,” Paterson said. “With situations like that, everything is on the table,” he said in response to a question about increasing the state’s income tax for high earners.
Not So Fast Remember Wen?
March 23 (Washington Post) Are the Chinese just worried about the sagging value of the $1.4 trillion in U.S. Treasuries they hold or are they really on to something? David again.
That's the big question now that China's central banker, Zhou Xiaochuan, has called for the greenback to be jettisoned as the world's dominant currency and replaced by a new type of benchmark controlled by the International Monetary Fund.
March 25 (Bloomberg) -- Treasuries fell for a fifth day after an auction of $34 billion in five-year notes drew a higher-than-forecast yield, spurring concern record sales of U.S. debt are overwhelming demand.
March 25 (Bloomberg) -- Treasury Secretary Timothy Geithner sent the dollar tumbling with comments about China’s ideas for overhauling the global monetary system, only to drive it back up by affirming that it should remain the world’s reserve currency.
Geithner was initially asked at a Council on Foreign Relations event in New York about proposals from People’s Bank of China Governor Zhou Xiaochuan for a new international reserve currency. He said “as I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that.”
. . . President Barack Obama said at a news conference late yesterday that “the dollar is extraordinarily strong” because investors are confident in the ability of the U.S. to lead a worldwide recovery, and also rejected calls for a new global currency.
. . . Geithner said in his interview with CNBC that “China is playing a very important stabilizing role in this financial crisis we’re seeing globally.” U.S. officials are “working very, very closely with them. I think they have a lot of confidence in the policies we’re pursuing,” he also said.
If these people are the smartest folks in the room, I wonder who’s cooling their heels in the hallway.
We’re from the Government and We’re Here to Help
9:02 p.m. David here.
In response to a question by Politico's Mike Allen, Obama gave a vigorous defense of his plan to lower the charitable deduction and mortgage interest deduction for wealthy taxpayers, from the 36 or 39.5 percent savings they would get under his proposed marginal tax rates to 28 percent, closer to the savings that lower-income taxpayers get from the deductions. The change in the charitable deduction, which alone is estimated could provide $180 billion over 10 years, has come under fire from charities and universities that worry it will reduce giving, and from key Democrats such as Charlie Rangel and Max Baucus, who have hinted the proposal will not survive.
But Obama rebutted such criticisms in somewhat tart terms. The rate would simply be going back to where it had been under President Reagan, and wealthy people would give to charities even if they were getting a slightly smaller tax savings, he said. "If it's really a charitable contribution, I'm assuming [the tax savings] shouldn't be the determining factor of whether you're giving to the homeless shelter down the street." The change in the deduction rate, he added, "is not going to cripple" wealthy taxpayers. As for charities, what would help them the most is a stronger economy -- which he said his budget proposal would help produce. (Alec MacGillis on the Washington Blogging site commenting on Obama’s online Town Hall meeting)
March 25 (Bloomberg) – President Barack Obama is putting former Federal Reserve Chairman Paul Volcker in charge of a tax-code review aimed at closing loopholes, streamlining the law and generating revenue, budget Director Peter Orszag said.
Volcker, 81, who heads the president’s Economic Recovery Advisory Board, is being asked to take a look at the laws in an effort to rebalance the tax system.
Orszag said the review, given a deadline of Dec. 4, is being ordered to make recommendations on steps to simplify the code, built over the last 96 years, in ways that would reduce tax evasion and what he called “corporate welfare.”
“There are hundreds of billions of dollars in uncollected taxes each year,” Orszag said in a conference call. The Volcker board “will be examining ways of being even more aggressive on reducing the tax gap.”
The tax gap is the difference between the amount of taxes owed by taxpayers and companies and the amount collected. Orszag cited academic studies suggesting that the difference is $300 billion or more. That is “ a lot of money,” he said, adding that the administration is going to be “as aggressive as possible” in reducing it.
Obama made a tax overhaul part of his platform during the presidential campaign. One goal is to close loopholes that he said reward companies that move jobs overseas.
But surely Volcker, that old cohort of President Reagan and champion of fiscal conservatism, won’t recommend punishing overseas investment or raising taxes by another $300 billion?
Sadly, you are laboring under a misconception (you’re not alone).
Given his skeptical views about the Reagan tax cuts, Volcker lobbied in secret against their passage owing to his view that they would lead to a massive revenue shortfall. While Fed Chairman Fred Schultz worked on House members, Volcker lobbied senators to vote against the cuts. (Real Clear Markets, The Paul Volcker Myth, Feb 2008) David again.
The former Federal Reserve Chairman urges Washington to overhaul the tax, instead of eliminating it completely. Mr. Volcker makes his appeal in the foreword to a new book by William H. Gates Sr. (father of the Microsoft executive and co-head of the Bill & Melinda Gates Foundation) and Chuck Collins (co-founder of Responsible Wealth, a Boston-based group). Their book is called: "Wealth and Our Commonwealth." The subtitle: "Why America Should Tax Accumulated Fortunes."
"I didn't get it last year. I still don't get it," Mr. Volcker writes. “Why, right now, in the aftermath of the greatest burst of paper wealth creation in all of American history (in all of history for all I know), in the midst of growing concern (even alarm) about the growing disparity of wealth and income in the United States, right in the face of increasing pressures on the federal budget, has there been so much effort to abolish the estate tax?" (“Paul Volcker Blasts Idea of Permanently Repealing Estate Tax,” Wall Street Journal, January 2003)
EPA Greenhouse Gas Declaration May Pressure Congress
By Catherine Dodge
March 24 (Bloomberg) -- The Environmental Protection Agency’s proposed declaration that greenhouse gases pose a health danger will ratchet up pressure on Congress to pass new limits on emissions from coal-fired power plants and factories.
Approval of the finding would clear the way for the EPA to impose the first limits on carbon dioxide emissions from carmakers such as General Motors Corp., utilities such as American Electric Power Co., along with steelmakers and other manufacturers. Administration officials said yesterday that the proposal had been sent to the White House for review.
… “Everyone is saying that tailor-made congressional legislation would be preferable,” said David Bookbinder, chief climate counsel for the environmentalist Sierra Club.
It would take several years to develop regulations through the EPA, and litigation is likely to follow, he said. “Congress can do it all in one shot.”
… Democratic lawmakers are developing proposals that would require industrial polluters to obtain a permit for each ton of greenhouse gases they release into the atmosphere.
Obama’s proposed budget assumes sales of permits for carbon emissions would raise $646 billion from 2012 to 2019.
Don’t you love the “Congress can do it all in one shot” comment. And, yes they can. Even mentioning this sort of legislation in the face of all that now challenges the economy is near criminal. Especially in that it is almost certain to chase away the remaining companies that still endeavor to engage in manufacturing in the U.S..
- Radio Worth Listening To. Do yourself a favor and find a comfortable seat and click here to listen to this audio interview of Lord Monckton from the G. Gordon Liddy Show. Monckton is one of the most well-informed – and entertaining – commentators on the topic of anthropogenic global warming on the planet.
“Hold the fort,” I can hear some of you saying. Liddy is a hard-core dogmatic. Hardly a balanced perspective. And you are right. While I have met Liddy on several occasions and enjoyed his company, a reading of his book Will
indicates that he is far more than dogmatic. Insane is more like it.
But he does a competent job as an interviewer, and Monckton does a brilliant job as an interviewee. You have to sit through some oddish music in the beginning, but it’s worth taking a listen – no matter where you come down on the issue of man’s contribution to global warming.
Worth Watching… Closely David, still here.
In the following article from the Wall Street Journal
, I have boldfaced the relevant words. Words have consequences, and the consequences of these words indicate we may be on the path to another ginned-up “conflict” of the “pay no attention to the man behind the curtain” sort. It could also be an early step toward gun control, a topic that many Americans pay close attention to (and, based on history, for good reason).
Here’s the article – as you read it, see if your mind begins to evoke, as mine did, visions of the author running around waving his or her arms at the new and impending “crisis!”…
Two Obama cabinet members work this week to assuage concerns both at home and abroad about the drug wars along the Mexican border.
On Wednesday, Homeland Security Secretary Janet Napolitano will appear on Capitol Hill specifically to address the crisis for the first time. The hearing, before the full Senate Committee on Homeland Security and Governmental Affairs, also will offer the highest level of attention from Congress on the issue thus far, following a string of subcommittee hearings in both chambers during the past two weeks.
… During the Senate hearing he is holding on Wednesday, Sen. Joe Lieberman, the Connecticut independent who is chairman of the homeland committee, is likely to raise his concerns about Ms. Napolitano's proposed spending plan on border defense for next year. In a letter to his Senate colleagues released last week, Mr. Lieberman pushed for an extra $100 million to counter Mexican drug-trafficking groups by targeting the guns and money from inside the U.S. that flow south across the border to the drug lords.
The government is girding for a possible Katrina-style disaster along the 2,000-mile-long Mexican border that would involve thousands of refugees flooding into the U.S. to escape surging violence in northern Mexico, or gun battles beginning to routinely spill across the border.
Obama Announces Plans for More Funding for Afghan War
President Obama this morning announced a new Afghanistan-Pakistan strategy that will require significantly higher levels of U.S. funding for both countries, with U.S. military expenses in Afghanistan alone increasing about 60 percent from the current toll of about $2 billion a month. (Washington Post) David here.
The End of Summer(s)?
…. the best laid plans of our remarkable president may be laid to waste by a bank rescue plan that is the product of exhausted ideas put together by men far too beholden to Wall Street.
Even if the president desperately wants the spotlight to move on from the bank rescue, we should not allow it to. So today let me turn the high beam on one of the main architects of the plan -- less in the news than Tim Geithner, but no less important -- Larry Summers.
To understand why a man as brilliant and accomplished as Summers can be so wrong about what to do with the banks and Wall Street, it would be useful to turn to The Innovator's Dilemma by Harvard Business School professor Clayton Christensen. The book explains how even very successful companies, with very capable personnel, often fail because they tend to stick to the strategies that made them successful in the first place, leaving themselves vulnerable to changing conditions and new realities. So you can have brilliant managers who miss what's needed for success in the future because they are too tied to the past.
This describes Summers to a T. (Adrianna Huffington writing in The Huffington Post)
Don’t you love the “our remarkable president” bit of sycophancy? It reminds me of a conversation I had at the Las Vegas summit with a friend of some duration – an interesting and intelligent individual. It started when she told me she had been a big supporter of Obama’s, but now she wasn’t so sure. The conversation went something like this…
“Why were you such a big supporter?” I asked.
“You know, because he was for change,” she replied.
“Sure, but what does that actually mean? What change?”
“Oh, you know, change from the way Bush was handling things,” she said with a certain uncertainty in her voice.
“So, your vote for Obama was really just a vote against Bush’s policies?” I asked, thinking that wasn’t altogether a bad reason.
“Well, no, I don’t think so,” she answered. “There is something else. You see my father was black and my mother was white, like Obama, so I felt a connection.”
“Fair enough,” I commented, “But was that it? I mean, wasn’t there some particular philosophical point that rallied you behind Obama?”
“Well, er, I’m not sure. But I sure am worried about him now.”
I have always found it remarkable how many otherwise reflective people have a hard time expressing why they support one candidate and dislike another… often viscerally. It is, I believe, strong testament to the ability of the campaign team, and the media, to paint a picture that resonates with the target audience… a picture that, while attractive, more often than not completely lacks a tangible foundation.
Americans may not be very good at manufacturing “stuff” these days, but we are whizzes at selling stuff through multi-channel media campaigns, including fine-talking politicians.
As for Summers, I have previously mentioned that Olivier Garret and I heard Summers at a White House conference last year. When it came time for him to speak, he gave a very lucid and even passionate argument for making Bush’s tax rollbacks permanent (for the not irrational reason that to let them expire will amount to one of the largest tax increases in history, an increase that the economy can ill afford at any time, but especially now).
While I don’t have a full grip on Summer’s broader philosophical and academic views of the economy, I took it as encouraging that he was brought onto Team Obama, though from what I have heard since, it seems like he has grooved right in with the statist views now dominating in Washington. But maybe not, and so, per Huffington, expect him to be an early casualty.
“Fusion Centers” Expand Criteria to Identify Militia Members David again.
If you're an anti-abortion activist, or if you display political paraphernalia supporting a third-party candidate or a certain Republican member of Congress, if you possess subversive literature, you very well might be a member of a domestic paramilitary group.
That's according to "The Modern Militia Movement," a report by the Missouri Information Analysis Center (MIAC), a government collective that identifies the warning signs of potential domestic terrorists for law enforcement communities.
"Due to the current economical and political situation, a lush environment for militia activity has been created," the Feb. 20 report reads. "Unemployment rates are high, as well as costs of living expenses. Additionally, President Elect Barrack [sic] Obama is seen as tight on gun control and many extremists fear that he will enact firearms confiscations.
… MIAC is one of 58 so-called "fusion centers" nationwide that were created by the Department of Homeland Security, in part, to collect local intelligence that authorities can use to combat terrorism and related criminal activities. More than $254 million from fiscal years 2004-2007 went to state and local governments to support the fusion centers, according to the DHS Web site.
During a press conference last week in Kansas City, Mo., DHS Secretary Janet Napolitano called fusion centers the "centerpiece of state, local, federal intelligence-sharing" in the future.
"Let us not forget the reason we are here, the reason we have the Department of Homeland Security and the reason we now have fusion centers, which is a relatively new concept, is because we did not have the capacity as a country to connect the dots on isolated bits of intelligence prior to 9/11," Napolitano said, according to a DHS transcript.
"That's why we started this.... Now we know that it's not just the 9/11-type incidents but many, many other types of incidents that we can benefit from having fusion centers that share information and product and analysis upwards and horizontally.
But some say the fusion centers are going too far in whom they identify as potential threats to American security.
People who supported former third-party presidential candidates like Texas Rep. Ron Paul, Chuck Baldwin and former Georgia Rep. Bob Barr are cited in the report, in addition to anti-abortion activists and conspiracy theorists who believe the United States, Mexico and Canada will someday form a North American Union.
"Militia members most commonly associate with 3rd party political groups," the report reads. "It is not uncommon for militia members to display Constitutional Party, Campaign for Liberty or Libertarian material." (FOX News, 3/23/09)
Be afraid… be very, very afraid.
Glimmers of Hope Gordon Gets a Thrashing
Gordon Brown is way behind in the polls and has to call an election within a year. The tide has turned, and now two-thirds of the British public think his stimulus policy is wrong and that the UK is creating far too much debt through its huge deficit spending. David again.
An influential speaker in this area is a young, British, conservative member of the European Parliament. Gordon Brown recently visited Strasbourg and had to listen to this guy give a terrific speech. I cannot imagine any politician in the U.S. having the guts to make the same comments to Obama. It is now all on YouTube and has been getting very high ratings. Go to YouTube and search for Daniel Hannan MEP, it is MUST VIEWING. It is only 3 1/2 minutes long. (“General Watson,” friend and occasional Casey Research European correspondent).
Here’s the video… and it is definitely a “must see” -- if you haven’t yet done so, and most of you probably will have, given the amount it is being emailed around. Click here to watch
Given the amount of play this video has received, there is hope that the media will look to boost their ratings by finding other champions of fiscal sanity and providing them a soap box. Could happen. Probably won’t.
AIG, I Quit! David again.
Another item that has made the rounds this week is the letter of resignation from an AIG employee
There is so much to the “evil bonus takers” story that the media, falling back on Ye Olde Witche Hunt
as a circulation booster, has ignored, either deliberately or just because they are stupid.
The now famous AIG resignation letter sheds some much needed light, so read it if you haven’t.
Meanwhile, the net result of all of this grandstanding and outright thuggery (for a definition of the word, look up Andrew Cuomo in the dictionary) is that the top executives from AIG and other leading financial institutions are handing in their bonuses with one hand while signing new employment agreements with firms overseas that, as part of those new agreements, are agreeing to replace those bonuses as recruitment incentives.
Even without the enticement, who would possibly want to work for AIG these days?
And so, the American taxpayer, who is already into AIG for $200 billion, has just assured that the asset “we” have paid so dearly for is little other than a gutted shell run by second-rate people. Oh, and those second-raters will be forced to deal with trillions in remaining derivative contracts. It will be akin to asking monkeys to repair jet engines.
Of course, as the next wave of planes begin to fall from the sky, the government will again rush in… with your money.
In any event, the “Glimmers of Hope” part is that the soon-to-be-former AIG employee’s letter may, just may, help cool down the mob psychology that bordered on violence last week.
A Politician I Can Support
Czech Prime Minister Mirek Topolanek, whose country currently holds the EU presidency, told the European Parliament that President Barack Obama's massive stimulus package and banking bailout "will undermine the stability of the global financial market."
. . . He slammed the U.S.' widening budget deficit and protectionist trade measures -- such as the "Buy America" -- and said that "all of these steps, these combinations and permanency is the way to hell."
"We need to read the history books and the lessons of history and the biggest success of the (EU) is the refusal to go this way," he said.
"Americans will need liquidity to finance all their measures and they will balance this with the sale of their bonds but this will undermine the stability of the global financial market," said Topolanek.
Obama insisted Tuesday that his massive budget proposal is moving the nation down the right path and will help the ailing economy grow again.
"This budget is inseparable from this recovery," he said, "because it is what lays the foundation for a secure and lasting prosperity." Obama also claimed early progress in his aggressive campaign to lead the United States out of its worst economic crisis in 70 years and declared that despite obstacles ahead, the U.S. is "moving in the right direction." (Press TV, March 25)
Some Concluding Thoughts
David again. Remarkably, I could go on, but I fear I have tried your patience enough for one day. So, what are we to make of all these stories?
First, the Obama administration is clearly statist. And they apparently have set their sights on taxing the productive elements of society to the fullest possible measure. As I have noted in the past, however, businesses don’t pay taxes – rather, they just pass the taxes on to their consumers (or they go out of business). And so every time you see a new business tax, cover your wallet.
While the higher net worth individuals will, for a time, accept higher and higher tax burdens, unlike the proverbial frog in a pot of water that is slowly approaching boil, those with the assets to move will – when the temperature reaches uncomfortable – hop out of the pot and head to friendlier grounds.
Recognizing this truth, the Obama administration is already working on exchange controls. That is clear in the Obama campaign promise to use tax policy to punish companies that ship jobs overseas, a promise he is now putting into effect ala Volcker. Once those particular bricks are laid, adding on a few more layers in order to also wall in the individual is a snap.
Now, some of you – many perhaps – arrive at this point in time as supporters of Obama, and so bristle at my remarks. Just as do those of you who favor the views of the strident opposition from the “right,” unhappy at my quick jibe at Bush’s policies.
It behooves me, as the managing director of a company that makes its payroll by offering solace and substance to its subscriber base, to caper and scrape to our clientele. You, to be specific.
To the extent that I offend, I apologize. But only because that is not my intent, no matter the tone of voice I might use in these weekly musings. Rather, I sit here, like you, an observer of the world around us, and I try to make sense of things. Last week, I expressed outrage at the scramble to foist our current problems onto the backs of our progeny. Today, the pattern that is visible in the collection of articles here tells me things are moving quickly beyond the matters related only to the economy. And so, looking over the landscape, I am touched by an entirely different emotion… one of deep concern for the very nature of our society.
What does all this have to do with investing, some of you will angrily write?
That, of everything, has a simple answer: with a clear, albeit disturbing pattern now emerging, so, too, are the personal opportunities to protect yourself and to profit. Gold, silver, foreign investments, contrarian stock market opportunities, strategically structured futures and options strategies to take advantage of volatility – all those and more.
These are, of course, topics we cover in great detail in The Casey Report and our other publications. And to a lesser degree, these weekly ramblings.
Regrettably, because of my duties related to getting the next edition of The Casey Report out by this time next week, I need to leave it at that, despite my promise last week to share some of the highlights from our just concluded Crisis & Opportunity Summit in Las Vegas.
I will endeavor to do so next week. I just felt the material I covered here was more important, and hope you concur.
Miscellany… Tokyo Phyle.
One of our subscribers in Tokyo is looking to start a phyle. If you’d like to meet up with other Casey subscribers in that city, drop Kristen a note at email@example.com. You Are the Best!
A quick note to say, as I have before, how wonderful it was to spend time with so many of you at the Las Vegas summit. After the event ended, virtually every speaker I talked to told me that the audience was the finest, most intelligent, and impressive they had ever come across. I couldn’t agree more.
Finally, because it’s sort of funny, I wanted to close by updating the story of my quick short on the S&P, using Scottrade. As you may recall, I used words to the effect that one of the advantages of an online trading account is how quickly you can short the market (in that case, using RSW, a 2X inverse S&P ETF). At one point during the day that I was writing that issue of The Room, I was up about $800 and was going to close my position with the quick profit, but got distracted by my son asking me to check out something he was doing on a video game. By the time I remembered my short, the market was closed. Long story short (excuse the pun), that gap in attention has, so far, cost me about $15,000.
I am, however, unconcerned. There is so much bad egg now baked into the cake that the rally of late simply can’t be sustained, and today appears to be wobbling. And so I will hold my inverse ETF shares and even add to them on any further rallies. I’ll let you know how it worked out when I finally close out the position.
In the meantime, I hope you gain some benefit from my experience. Namely, because something is easy – i.e., popping into an online trading account to make a quick trade – it also makes it more likely you will take the action, based on little more than impulse and a quick flush of emotion.
On that note, I will share with you Terry Coxon’s dictate. Which goes something like this, “The next time you spot a really, really exciting investment opportunity, one that you absolutely have to act on immediately, the first thing you should do is to look around for a comfortable chair, sit down in it, and take a few deep and relaxing breaths.”
Always good advice.
And with that, I sign off, thanking you for reading and for being a subscriber to a Casey Research publication. We work only for you, and it is a pleasure to do so.
Casey Research, LLC.
03-27-2009 10:31 AM