Category Archives: Economy - Page 2

Please Lend $$$ to My Unemployed Friend

Posted by on 11/19/2009 No comments

I doubt highly that you will indeed lend money to my unemployed friend, and/or to my other buddy that has a strong chance of losing his job any day. I don’t blame you; I fully understand you. I only wonder why you want your local community bank or high-flying banks like Citi and BoA to lend you money when you are on the verge of losing a job.

Let’s be real here. If you are self employed, chances are that your business isn’t doing well these days. In this case, why should the bank trust you with money? If you are employed by a firm that recently fried (yes, fried) people, chances are things will get worse and your head might be next. If you are at a firm that did not cut any jobs in the last year or two, you should really watch your head because every industry and business felt this recession, and your place will likely be next. In this case, why should the bank lend you money to buy a car or a house?

The banks shouldn’t lend money, and this is exactly what they are doing. Of course you will say, “If we want a recovery, we need to get the credit flowing again.” I don’t disagree, but if we get credit flowing the way we did until last year September, we will be flowing straight into another crisis, and this is what banks want to avoid.

If you don’t understand the Bank’s point of view, no problem, go ahead and leave me your phone number, and I will send my friend to you. Let me please know in advance how much money you are ready to lend him.

p.s. Banks bailouts were not made for them to lend money without you knowing how to pay it back. Bailouts were installed to keep banks away from bankruptcy, which in turn held back the public from making run- on-banks, which would have caused people to know that the money they think is in the bank, isn’t really there. In turn, we would have had a REAL crisis. No I am not a conspiracy theorist. Read up on the way banks keep and lend money, you will learn startling facts.

Why Buy Gold? Buy Bread and AIG Stock

Posted by on 11/17/2009 No comments

Are you buying Gold these days? I mean really, can you go by listening to a talk show host, flipping an advertisement magazine, or have a talk with friends without the Gold issue (and the need to buy it) being mentioned?

Considering that the US dollar is plunging, I think Gold is indeed a valued commodity, but if you don’t have money, i.e. U.S. dollars to cover your weekly and monthly bills, why would you stash up on Gold? To be protected for doomsday? You don’t have money as is, so why does it make a difference to you if the dollar slides even more and Gold rises to $1,400 an ounce? Furthermore, Gold is an investment, so as long you don’t have money to buy stocks, or whatever thing you dream of investing, you should not be carried away by the talk of GOLD. It is just not made for you. End of discussion.

My point here is, that if you are a poor man out there with no extra money, the Gold Rush is not cut out for you, regardless in what context it is: If you look at it as a safety reserve for a doomed era, you will be better off stacking up on food, drinks and medications, or perhaps going on with life as is and wait for Pelosi to help you. If you look at Gold as a rising investment, you had and still have a better chance of doubling and tripling your money faster by jumping into a few good stocks available on Wall St, rather than buying Gold.

All in all I am saying, If you are an average earner, do yourself a favor and let the Gold rise or fall without your participation, just as the price of AIG shares went this year from $22 to $9, before rising again to above $37 a piece without your participation. Ouch, I just killed you: The AIG stock doubled and quadrupled at a time when Gold didn’t even do half as good.

The Right Saw it Coming

Posted by on 11/06/2009 1 comment

Today, the Labor Department reported that 190,000 jobs were lost in October, worse than the 150,000 consensus in a Market Watch survey of economists. The Unemployment rate hit 10.2%, up from 9.8% a month ago, and much worse than what was expected.

Politically speaking, those on the Left will say that the current jobs report is better than in January when “we lost 700,000 a month.” I wrote already once that this excuse is lame, and the claim is false altogether. Besides, rest assure that those who lost their jobs this month don’t care for a dime how many more or less people lost jobs in this same month.

Those on the Right knew all along that the disasters job market is here to stay, and to get worse than what it was a while ago. On May 15, three months after the signing of the stimulus; a time when people were seeing “green shoots” and expecting wonders from Obama’s Stimulus; a time when the unemployment rate was at 8.9%; a time when Fed Chief Bernanke said that the unemployment rate won’t hit the 10% mark, and two months before Buffet warned of an 11% Unemployment Rate, I wrote the following on lohud.com (the article has been pulled since then):

“Sure, these and other statistics are “better” than November’s numbers, yet November and the immediate months after it were “depression era,” hardly an index against which to one would want to measure “better” times. Add to that the disastrous lagging indicator (jobs) that can itself destroy the economy. This leads me to conclude that for regular people on the street, though economic times have yet to reach full scale, and an unemployment rate of more than 11 percent might be here before we get to count the next twelve months.”

I know we are not close to 11 percent; however we are not yet at May ’10 either. Frankly, I was surprised that the Unemployment Rate didn’t crack the 10% figure two-three months ago, considering that so many things in the economy are still very bad. Yes, they are portrayed as “good” just on the basis that it’s not as bad as a year ago. But as I wrote in May, November of 2009 is hardly an era that you want to measure success against it.

As long Obama’s economy does not show a net gain on a monthly basis, and as long the unemployment rate doesn’t cool off, a spin of “saving or creating” jobs will, politically fall on death ears, and will economically keep the recovery down.

At Last it’s Working

Posted by on 10/28/2009 2 comments

I will not delve into endless statistics or explanations why I believe it is working. I will just point to one thing, and you decide if you agree.

The only thing, besides the stock market, that saw strong improvements in the past half year, is the housing industry. No, not the full real estate market got better, but only the housing industry has now better days. Their improvements (through constant positive statistics) are actually fueling partially the market rally, and are expected to play a major role in a better economic growth (GDP) report due out tomorrow.

Credited by every objective economist for this housing improvement, are two things. 1) Cheap home prices. 2) The $8,000 tax credit for first time homebuyers that was placed into the Stimulus Bill after requested so by Republicans. This gives for Conservatives and Republicans two major points, economically and politically.

Economically: we see once again that tax cuts work, and work very well. In fact, from the whole stupid stimulus package, it appears that the homebuyer’s tax cuts are the only thing that had swift and strong positive results, thus helping to heal the economy in general.

Politically: I think the Republicans need to get/take credit for this considering that it was their idea, and they need to point out that they wanted an even more robust and wide-ranging homebuyers tax credit plan than what the Dems actually agreed to place into the stimulus.

It’s NOT the Economy, Stupid

Posted by on 10/20/2009 No comments

Everyone in politics knows the phrase that was coined in ‘992 by James Carvil, the political mastermind of then-Arkansas Governor and presidential candidates Bill Clinton: “It’s the Economy, Stupid.” This meant to say to voters, ‘don’t get distracted by other issues. The economy is the problem now, so vote in Clinton for President.’

This phrase 17 years later is still relevant from a political and economic perspective, becouse when debating these days Reaganomics, the Left points to the weakened economy of under Bush the First, and when debating “political strategies” some point to that “”masterful” phrase which “propelled Clinton into the White House.” Both, however, are the longest-standing economic and political myths that I have ever seen.

Consider some facts:

A)  In March of ‘991, the U.S. economy was officially out of recession. In English it means, that nineteen months before Clinton won the election, the economy (GDP) was actually growing again, following a very short and light recession.

B)  You can claim that the GDP growth at the time didn’t translate into prosperity to people. Well, first, at least the economy was growing; it wasn’t in a recession as some try to believe until today. Secondly, the Dow Jones Industrial Average, which in the current Stimulus Economy is a gage for success or failure, grew from a recession low of 2,398 in the week of October ‘990, to a high of 3,398 in the week of June first 1992. (The Dow didn’t have a disasters fallback as we had starting last year September, so it was not shooting radically upwards like we experience in recent months, nut it had a healthy growth).

C)  Seeing that the GDP and the Dow are not friendly to this “economy stupid” myth, you will turn to jobs. “Jobs growth is what counts in a REAL recovery.” Fine, let’s count jobs: In the last six months of Bush’s ‘992, the economy gained on a monthly average 129,000 jobs, and in the first half of ‘993, the monthly average was 208,000. Considering that jobs are a “lagging indicator,” meaning they lag the rest of the economy, it is fair to say that the healthy job growth (plus the declining Unemployment Rate) of the second half of ‘992 and the robust job growth of early ‘993, reflected a turned-around, BOOMING economy that started months before Team Clinton had its election night plans ready. While I am at it, get this: the last six months of Clinton’s ’00, the economy gained a poor monthly average of 100K, and the following half year the economy lost 73,000 jobs on a monthly basis, which confirms again that GW Bush inherited a recession, whereas Bill Clinton inherited a booming economy.

D)  Politically speaking, Bill Clinton won a poor 43% of the popular vote in ‘992, one of the weakest showings for an outside candidate, yet he still won the election, due to a third party candidate – Ross Perot running to the Right of Bush – picking up 18% of the popular vote, leaving Bush with just 37% of the vote. In other words, Carvil’s phrase resonated with only a small portion of the population, as we see that Clinton got  only 43% of the vote, of which a big chunk were African Americans who regularly vote 9-10 for Presidential Democrats, regardless the state of general affairs.

Dow at 10K. Why Do ‘They’ Care?

Posted by on 10/14/2009 No comments

Obama, his supporters and the media are excited that the Dow Jones Industrial Average reached today 10,000. It means that the thirty stocks in the Dow index climbed a lot since the Dow’s 6,500 low back in March.

This is funny, because I remember that just a year ago people on the Left were excited with the Dow’s fall because the “rich” on Wall St, “the wealthy,” were losing money. So… why are they now excited with the Dow’s 10,000? Furthermore, in late ’03, under President Bush, the Dow in a period of just a few months reclaimed 10,000 of its 7,600 low. I do not remember the left calling that a “recovering” economy, and in November ’06 when the Dow was at 12,000, the Left didn’t call it a “good” economy either. In fact, some until today believe that the Dems regained control of congress in November of 2006, in part, due to the “weak” economy.

So again I ask: Why does the left care that the Dow is at 10,000?

Indebting Ourselves, NOT Our Children

Posted by on 10/13/2009 1 comment

Ok, ok. I know the “real” news stories today are Health Care Reform (HCR) and Limbaugh’s quest to buy an NFL team, but let us not lose focus of the overwhelming thing which affects everything from your energy bill, to the greater US economy, to international affairs alike… Debt.

You sure know that in fiscal year ’09, which ended late September, the federal government ran up a $1.4 trillion deficit, triple the amount of fiscal year ’08, a deficit that the Democrats last year (already controlling 2/3 of the budget process since wining control of Capital Hill in late ’06), decried as unsustainable, and Candidate Obama, alone a member of the deficit-enlargement Congress, led attacks against it on the campaign trail.

At any rate, as a way to scare the nation and the Congress to control spending, deficit critics warn about the debt that will “be left for our grandchildren.” The problem is that such a warning permits people to say: “our economy is in trouble now, so let’s spend our way out of it, we will worry about the deficit another time.” This of course is nonsense because the debt of now creates messes now (let alone for the future too).

Here is one example: Due to a loss of confidence in the dollar as results of deficits, the dollar falls, oil prices – which of course trade in dollars –go up because oil-producing nations need to compensate the loss of the dollar value. As a result, gas and energy prices on the retail level go up, and therefore less people have money to spend on other stuff, like shopping, paying mortgage bills, etc. This pulls back the economy with all perils that follow, as it happened in late 2007 and got worse the following year largely in result of the unsustainable gas prices.

Here is another example: in order to make their bonds more attractive to a skeptical market, the U.S. government needs to pay a bigger interest. When Uncle Sam pays more on a loan, homebuyers, colleges students, new business owners and everyone who wants to borrow a buck, pays even more interest, and when interest rates go up, spending goes down. When spending goes down in an already weak economy, no real recovery can take place. As a result, more people are out of work; more consumer default on credit payments, etc, etc, etc, and there goes your economy to hell in a hand basket.

In total: all the talk of indebting our children, permits people to believe that the deficit danger is one that can be pushed off for the future, when in fact it kills you and your neighbor every day, let alone your grandchildren too.

The Dollar is Being Rejected!

Posted by on 10/01/2009 1 comment

If you thought the global population will wait for world bankers to decide the faith of the U.S. dollar, you are dreaming. Instead, bankers, money exchangers and venders worldwide are rejecting the US dollar (USD), plain and simple.

Last night I had a schmooze with a NY businessman who travels a lot to Canada where he has business interests, and follows world economic news since his business interests extends to China too. He says that just days ago, he was at a money exchange in Canada, and got 0.95 in Canadian dollars (CAD) for every US dollar he wanted to exchange, despite the fact that in the official currency market you get these days $1.08 CAD for every USD. He claims that in Israel some will give you now 3 New Shekels (ILS) for each USD instead of the 3.77 ILS the current market rate. In other places (mainly in Europe), as per this businessman, some venders flatly reject the USD, whereas just 12-18 months ago they were willing to accept it in exchange for goods.

I didn’t independently vet these specific incidences, but I recently heard from travelers that they indeed encountered such shtick all over the place (more specifically in Israel and in Europe). Not only do these stories make sense to me, it actually is expected too: people around the world have zero confidence in the U.S. money system regardless the hyped rhetoric about a recovering economy. The world population sees the unsustainable annual deficits. They see how the FDIC is in effect out of money, and they are aware that Social Security has no dime to its name. In the eyes of the world population, the U.S. dollar is now a piece of junk waiting to be burned by the heat of China and Russia asking for a new global currency.

Regardless where this global currency plan will lead, and regardless where the U.S. economy will be in a year from now, the U.S. dollar as it stands today is basically being rejected.

Make Up Your Mind, Obama

Posted by on 09/21/2009 2 comments

In his CNN interview this Sunday, President Obama said that people should expect a weak job market. He claimed that an economy adding 150,000 jobs a month is needed to keep up with the current population growth, but for now people should not expect such job numbers.

This is a little confusing, because less than a month ago, the White House economic team proclaimed that the Stimulus bill “created or saved” 1 million jobs. Considering that only six full monthly job reports were published since the signing of the stimulus, it means that an average of 166,666 jobs were “created or saved” on a monthly basis.

So Mr. President, make up your mind: is our economy getting the needed 150,000 jobs per month, or not?