It is March

Well gang its March and the clocks change next week. Our new president has been in office for 40 days and the stock market has gone from bad to worse, down 18.8 % as of today, 3/3/09. At this rate he’d better start doing something to stop the slide or there won’t be any wealth left to redistribute. That decline in the market represents the destruction of $478 Billion dollars of wealth. That’s $12 Billion a day, and you thought the war in Iraq was expensive?

What can he do? Stop throwing good money after bad. Detroit needs to go into bankruptcy and emerge lean and mean and competitive. The Treasury and the Fed need to simply buy up all the loans that were not prime and the derivatives still on bank books and create a resolution trust like group to resolve this just as they did the Savings and Loan crisis in the 1980’s. Congress needs to pass legislation to assure that banks don’t repeat the stupid mistakes of the past (Liars loans, etc.) under penalty of incarceration for the CEO and let banks get back to doing what they do. Once the toxic assets are off everybody’s books lending will return to a more normal (read that normal for the 1970’s or maybe even the 1960’s). Qualified people will be able to get credit cards and mortgages. Unqualified people will rent or live with family until they save enough to put down a reasonable amount (20%). Nothing less is going to work because as Warren Buffet put it “it was the “web of mutual dependence” they create among financial institutions. Derivatives contracts keep various parties entangled for years, which, as he vividly explained, can create real hazards once those assets start deteriorating.”
“Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease,” he wrote. “It’s not just whom you sleep with, but also whom they are sleeping with.”
Hence, no one trusts anyone, absent a blood test. Until the Treasury and Fed provide such assurances that each bank is not diseased no one will risk sleeping (lending) with anyone, no matter how attractive.
The auto industry is uncompetitive. It has been for years and modern marketing, which I teach convinces us that we have a need for something that is neither necessary nor good for us. Large SUV and Pick up trucks ARE NOT necessary to commute to work. They are likely unnecessary and uneconomical for the average owner of them. U-Haul, Pensky and others have been around providing trucks of all sizes when the need arises. Farmers, workmen and a few others actually need large and powerful vehicles. The rest of us drive them because we WANT to. It is time for all of us to get over it. We are not the most important thing in the world. We are simply a blip on the radar screen of a life continuum that started Millions of years ago and will likely continue millions of years after us. Our role is to make this place no worse than we found it, better if possible and to provide a link between those who came before us and those yet to come. We are NOT the center of the universe, we are not the reason the sun rises and sets and we are not the most important thing in the world today. Buy a small car or smaller van if you truly need that many seats. Place function over style.

A Fiat 500 will go over 110 miles an hour, carry 2 people in reasonable comfort with room in the back for an occasional two more and get 30-40 miles per gallon. (Rumor is that it will be available in the USA as a 2011 model).
What more do most of us need? Why can’t Detroit produce something reliable, fun and smart? Maybe GM needs to be sold to or merged with someone who knows how. The last time Detroit tried it on their own they dumped Chevy Chevette’s and Ford Pinto’s on us. Clearly they need assistance.
Change is always difficult but it is necessary and as I tell my students, change is going to happen. You have three choices, embrace it, lead it or get run over by it. The choice is ours. We can lead it, embrace it or get run over by it. The latter may include a national language other than English… or Spanish for that matter.
Speaking of Spanish, what is the President going to do to seal the boarder not from poor Mexicans coming here to work and build a better life but from the Mexican drug czars that are crossing the boarder to do “business”. Mexico is rapidly becoming an ungovernable country and it shares a common boarder with the United States. We have had a relatively peaceful relationship with the Mexican people since the Spanish American War. Perhaps that is about to change. Forget Iraq and Iran, Palestine and Israel. We may soon need all our troops at home just to protect Arizona, California, Texas and New Mexico.
Times are gloomy and things are not going to get better anytime soon. So make the most of it. Money can be made in the recession just as it can in boom times. You just have to think it through and lead. The lead dog has an ever changing view while the other dogs on the team have the same ugly view of his behind all the time.