Politics, Europe and your money

Hi Gang,

It’s the Saturday after Thanksgiving and most of the shopping insanity has happened. Largely the situation is rapidly approaching normal as the pre-Christmas season gets.

Everyone is busy with being busy.

Mostly no one is watching what is going on in the world, but it is getting ugly out there. I can’t believe that no one is paying attention. I am beginning to understand how Hitler began to consolidate power.

Europe is in big trouble. The southern countries are heavily socialist and have been quietly using the strength and productivity of the northern countries to sell debt at favorable rates and with the cover of a strong common currency. This may not stand. Remember, the Euro (currency) has only existed since January 1, 1999, only a dozen years. It was envisioned as a stepping to stone to a United Europe, similar to the USA and USSR. The latter, I remind you collapsed in 1991, only 20 years ago. The Political Union of Europe didn’t come to pass and the financial Union is under severe strain. It, too, may collapse. Why we think our Union will survive without care and attention is beyond me.

Currently we are a leaderless country, not in appearance but in reality. Barrack Obama has failed to lead the country, or more importantly the Congress toward improving the American experience. Most people ask themselves the same question every four years before they vote. “Am I better off now than I was four years ago”? Based on what I hear and see, yes including the ‘Occupy’ movement, I would venture that most people would say NO. Is it President Obama’s fault? Yes… and no. He made some rookie miss-steps. He trusted Nancy Pelosi too much and she was the leader of a part of Congress with an approval rating in the single digits. Really not the place to build upon. She pushed a liberal agenda and forced it through creating a lot of the hate and discontent now evident in Congress.

Since then, and even since the midterm election, she remains, along with Harry Reid, committed to protecting the well-intentioned but poorly written health care program. Rather than to admit that the plan is severely flawed, they have granted waivers to a large number of corporations and special interest groups, including themselves. Really if it’s that good, why is everyone (except Joe lunchbox) trying like crazy to get a waiver? And if it’s so good, why are they getting those sought after waivers?

Occupy should change its chant to throw the bums out. Maybe if we elect an entirely new Congress and Administrative leader in the White House, we get started making some real progress. We need a real pay-go rule. If you want it, you must fund it. No hanky-panky. If it applies to American citizens it must apply to members of Congress exactly the same. Social Security, Medicare, all of it.

Before you declare me ill informed, I know that not everyone is up for election at the same time. But in a four year cycle, we could have the opportunity to make meaningful changes in the makeup of Congress and its sense of mission.

The people I talk to around Washington have a smug, nothing is going to change attitude. They are in control and they will not permit real change. That is the attitude and perhaps they are right.

Military budget cuts may come, but watch where they hit. It won’t be the big military vendor machine. It won’t be the power brokers; it will be cuts that hurt the soldier. Less support for their families, retirement, health care. All the things we, regular Americans, think these people who sacrifice so much for us should get. These are the things that will quietly be taken away. Not one big military supplier will get damaged. Just watch, see if I’m wrong. I hope I am, but I’m betting I’m not.

Oh, and one other consideration, when the soldiers support programs are cut, what happens to the concept of an all-volunteer military? And what happens if the manpower volunteering isn’t sufficient to maintain critical size? Well, I believe we’ll be back to my childhood days of every man (today in the interest of equality perhaps everyone) over age 18 will be eligible for the draft. Forced to serve two to four years. Failure to report punishable by prison... military prison.

Moneywise, if Europe has a major default, and the odds are arguable but substantial, the fallout in the banking system there and here will be as bad, maybe worse, than 2008-2009. Are you ready for that again? It may well be time to be putting money, gold or other valuables away to tide you over. It could crush the housing market if you can believe that. If no lending is available the economic rebound we have seen in car sales and other big ticket items could stop. Unemployment could jump up again. This time well over 10%.

It is said that those who fail to learn from history are doomed to repeat it. Did you learn anything from 2008-2009? Will you be prepared if it happens again? Do you believe the government has any cards left to play if it does?

IF we have to borrow more, will the oil rich Russians, the expanding economy of China and the cash of the Arab world force us into a beggar nation? President Reagan spent a lot of money on Space and expensive weaponry and basically won the Cold War by forcing the USSR into economic disaster trying to keep up. That was in 1988. By 1991 the USSR collapsed. Today the shoe may well be on the other foot. We no longer have a significant space program, the Russians do, as do the Chinese. We are borrowing Trillions of dollars from others to pay our bills. How hard would it be for the Russians and Chinese to bury us making us try to keep up?

Mr. Putin is a smart man. He knows exactly what he is doing. He has control of the political situation in Russia and can lead from power both at home and in the world at large. The Chinese, on the other hand, are about to go through a government in transition and like much of the changes in the Arab world, we have no idea where that will end up.

On that same note, how chaotic was Europe in the 1930's when Adolf Hitler rose to power? What shape was the USA in? Oh, right we were in the Great Depression. Eerily familiar?

We need a leader who will tell the truth, who can lead people, who is willing to be held accountable and who will hold others accountable for results. Unfortunately I don’t see that person on either side of the aisle today. Maybe by the next election cycle someone will rise to the top like cream, but by then it may be too late if the American voter doesn’t get serious and get involved, informed and active.

I won’t bet against the United States but I’m not a lemming either. I am concerned, you should be too.

October 25, 2011

Politics and your money

For years I've been railing about the lack of attention to fixing the housing market as the key foundation block to the economic recovery. Now after TARP, Stimulous, Cash for Clunkers, First time Homebuyers incentives and heaven only knows what other monies have been spent as attachments to this or that bill the administration is trying to address the home owner issues and stabilize home values as a result. A little slow to the party but at least they are beginning to get an understanding of the real problem. Sorry Barney Frank but Fannie and Freddie weren't "doing a great job". The Occupy Wall Street Crowd should be staging sit ins at the offices of Fanny, Freddie and Mr. Frank. They caused the problems. The banks weren't without guilt, but in a free country you play the hand your dealt. They just got dealt a hand that let them win really big. You don't suppose that it was intentional, like dealing off the bottom of the deck or something?

Investors are starting to really split. Some have capitulated and are turning to cash and fixed annuities while others can’t/won’t believe that America is done for and continue to seek the upside that capitalism provides. Which camp are you in?


The facts are:

1. Transportation Indexes are well off their highs a few months ago suggesting that investors don’t see freight bookings growing for trucks, trains, planes and ships. That means they believe the economic activity is flat or maybe even slipping a little. Increased risk of a second dip into recession.
2. Leading economic indicators are trending downward over the past 9 months. Not the type of trend that foretells a recovery.
3. 2011 average capacity utilization is 3% above last year’s average and is above the 2011 average in September. That bodes well for employment.
4. Yet employment remains stubbornly weak. Tomorrow’s report is expected to show 405,000 new claims for unemployment insurance. This would be on trend with the year to date. Same old same old.
5. Consumer Confidence, probably a lagging indicator, has reached a low for the year. This could suggest that we are already in a modest recovery, especially when taken in concert with the slight uptrend in capacity utilization.
6. I’ve been tracking the Philadelphia Fed and the Empire State Index which are both surveys of local business expectations. For the first time since June the two are reporting essentially the same level of expectation. They are positive but scoring only an 8 when 0 is neutral. The last time they matched they predicted a minus 7.7. That is nearly a 100% turn around in three months. The accuracy is anybody’s guess but the trend in intriguing.
7. The employment picture as demonstrated by Monster.com jobs ad activity has been strong and slightly up-trending. This suggests that companies are looking to upgrade and even maybe expand their work force. The persistent unemployment problem points to the systemic problem of the workers available not having the correct skill sets to match the jobs available. That will take years to resolve and won’t be affected by any sort of stimulus other than educational/retraining support.
8. To say that unemployment remains a problem is an understatement. The 2011 average monthly announced corporate layoffs were, to date, 53,000 per month. This is a heck of a lot better than the 116,000 in 2008 or 107,000 in 2009 but it is upsettingly 20.5% higher than 2010. Whether this is due to the chatter we hear about China being more business friendly and the over regulation making it harder to do business here I don’t know. But it seems like businesses may be clearing the decks in the face of “Occupy Wall Street” and “Obama Care” and other regulations that they consider onerous. Since this is a free country, they are free to leave and sell us their products from abroad (open market agreements).

So do I know what is likely to happen? My answer is a resounding NO. Do I know what I hope happens, sure. But like many, I don’t have absolute confidence that my hopes will come true. And like many I’m afraid that the opposite may happen.

I guess I’m playing the odds here. I bet 70% that my hopes will materialize, 30% chance they won’t. I suspect that the economy will continue to struggle until a true leader comes forward and demands that we the people and our elected Congress face up to our responsibility and fix what is broken. I hope Congress can actually do that. We all need for them to do that because continuing on the path we are on now leads us to catastrophe. Without courage and strength we could end up like the United Soviet Socialist Republic, once a world power equal to or at least a close second to the USA in world influence and in military might. It tried to fix Afghanistan too, and failed. Today the USSR no longer exists. No tears in my eyes but could we be next? The European Monetary Union seems to be in dire straights. If it fails, business trade in Europe will take a giant step backward. Banks in the USA could be again in trouble if Europe can’t fix their problems. That will make more problems for us the US taxpayers and cause more negative pressure on our economy. It could be the trigger to a second dip into recession. So are we next to circle the drain? That is the question we must all be asking as the next election cycle approaches. Whatever your leanings, whatever your political bent, exercise your duty to learn about the candidates and vote. Vote as though your life depends upon it. Your way of life really does.

Live , Love and be Happy

September is here!

Hi folks,


Well September is here and the Republican and Democrat Party are going to start in earnest. The Republican Party must choose a standard barer to run against Mr. Obama. Party politics suggests that to beat Mr. Obama they will need a good quality candidate and must get there without giving the competition too much free ammunition in the process. In other words, they must campaign for the nomination based on why they are the best not why the others are flawed. If only they do that it will be so refreshing that the American public of all stripes may find the candidate appealing.

That said, it is unlikely that they will and it is likely that they may shoot themselves in the foot. Unseating an incumbent President is never easy but the tide is running in the right direction right now.

The economy is stalled and may slip back into recession. Never good for the ruling party. Unemployment remains stubbornly above 9%. Never good for the ruling party. Housing and construction still in a major funk. Never good for the ruling party. Lots of other headline news makers not looking so good. Never good for the ruling party. If the Republicans blow this, they may not get a better opportunity in my lifetime.

Expect talk but no real action from either party on taxes. As much as we hate it, we will need to generate more revenues (temporary tax increases across the board) in the short term to help bridge the gap as we continue to trim fat and waste from the bloated budget. Much of the reduction will come in the future, some of the softening of the economic decent is needed in the present tense to keep the economy from regressing into recession. But nothing meaningful is likely to happen until 2013, after the election so expect that the second half of 2011 is likely to be at near zero growth…or worse.

AT&T’s attempt to take over T-mobile was nixed by the FTC. I don’t think that is a done deal just yet but I do think that it was a good sign.

Hewlett-Packard (HP) is abandoning its interest in PC’s much like IBM did a few years ago. They have recognized that PC’s are a commodity like gasoline. The public really doesn’t care whose name is on it. They care about what it can do and price. As a result gross margins have been squeezed to the point that it has become very difficult to justify remaining in that business. HP management saw it and thought about how much more profitable they could be without the PC albatross. Then they took the obvious decision.

2012 may just be more of the same. Europe will either get its act together or fall apart. Either one would create a degree of certainty where none exists. We will continue to be directionless while campaigning for the November 2012 election. Leadership is needed but I fear none will be forth coming. This will add yet another year to the economic malaise that has gripped us since December 1999 when the Dow Jones Industrial Average was $11452.86. The Dow closed Friday 9/2/2011 at $11240.26. That is 10 years and 8 months to gain nothing. Glad I wasn’t invested in a DOW tracking fund all these years. Are we in for another extended period of this malaise? Has USA world leadership really begun its decent into the annals of history. As Lincoln said at Gettysburg, “our fathers brought forth, upon this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.

Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived, and so dedicated, can long endure.” “It is for us, the living, rather to be dedicated here to the unfinished work which they have, thus far, so nobly carried on. It is rather for us to be here dedicated to the great task remaining before us - that from these honored dead we take increased devotion to that cause for which they here gave the last full measure of devotion - that we here highly resolve that these dead shall not have died in vain; that this nation shall have a new birth of freedom; and that this government of the people, by the people, for the people, shall not perish from the earth.”

As Mr. Lincoln said, we are still engaged in a civil war, a struggle to define what this country stands for and what it will be in the future. Fortunately, we no longer use guns and waste young lives as the tools of struggle. We use words and laws and regulations to achieve the goals of each side in the struggle (and there are many more than two sides now).

Each time we go to the polls to vote (or fail to), we are engaging in our own battle in this great civil experiment and we are helping to determine whether this nation, so conceived, and so dedicated, can long endure.

Remember that no other country has ever come to be as this one has and no other country has achieved the greatness that this one has without the subrogation of others. Rome, Greece, the Ottoman Empire all invaded other countries, enslaved their peoples and pillaged their natural resources for their own betterment. Even our allies the French, British and Spanish along with others of Europe, conquered and pillaged foreign lands creating empires. The results are seen close by in Haiti where the French raped the country of its natural resources and then gave them their “freedom” to avoid cleaning up the social mess they created. The citizens of Haiti are still struggling in poverty.

We are unique and we need to understand that our survival is not a given. We must regain our world leadership position by leading the world economy out of this recession. We can do it but all parties must use sound business judgment and work together without letting rigid ideology stop the progress. On the other hand, the stupidity of the past pushing costs off onto future generations has to stop. We must live within our means as a country just as we must as citizens. Debt is fine when it is used to support growth and gets paid back some day…soon. Part of each dollar of surplus (and we have had them as recently as the 1990’s) should be used to assure future growth just as businesses do. Part should be used to pay down old debt and part saved. When that policy is followed, we have sustainable growth that provides the dollars needed to provide for increased services. We can then pay for the health care we want all citizens to have. We can then pay for a strong national defense. But until then, we must get the spending down to the level that income supports and the income up to where spending needs to be to fulfill our societies requirements.

Politics and Your Money: 8/26/2011

Politics and Your Money: 8/26/2011

8/26/2011

Hi all,


Today is Friday 8/26/2011, the day hurricane Irene makes its approach to USA mainland. It is expected to come ashore in North Carolina, about 50 -75 miles north of this writer and be a real problem for the Washington to Boston areas. The track as I understand it is reminiscent of Hurricane Hazel in 1954 and Donna in 1960. That was the last significant hurricane to hit the Northeast. Most may not remember it. That will be a problem.

Politically one has to wonder. An earth quake, a hurricane, all focused on Washington. The earth quake cracked the Washington Monument and shook some plaster out of the ceiling in the Capital. Maybe the hurricane will wash away some of the dirt in Washington. I guess we can only hope. Someone once wrote about the audacity of hope. Not sure he was taking about the same hope I have.

In the meantime the economy will take a short term hit if the storm really screws up the works in the northeast but a 10 billion dollar disaster could mean work for a few people. In fact, the winds may cause enough damage to create a mini employment boom for the housing industry.

Looking at the statistics the economy reportedly grew only 1% in the second quarter, with car sales being a bright spot. I, personally think that may wane this next month or two. Consumer debt jumped up more than $15 Billion this past month. What is that about? Did we so soon forget that debt is a real problem? Are we moving back to the habits of the past?

Corporate earnings for the second quarter compared to last year grew 0.0%. That is correct. It has grown 0.0%. Didn’t shrink but didn’t grow either. Of course this time last year they were growing around 50% over the prior year so there isn’t any immanent danger of massive corporate collapse. But there also isn’t any pressure to hire either.

Unemployment first time claims has been stubbornly around 400,000 per week. We get a little below that for a week then we pop back up above. The year to date average of about 411,000 is about 33% higher than the average prior to the financial crisis and subsequent recession. It takes about 100,000 new jobs created each month to absorb the new members of the work force like returning military, kids growing up and others re-entering the work force. To reduce the unemployment rate we need to create additional jobs beyond the 100,000 each and every month. Each .1% decline in the unemployment number requires a about 140,000 new jobs. Remember that is in addition to the 100,000 that we need to absorb the growing workforce. To just reach what President Obama told us would be the cap of 8%, we need to create 1million 600 thousand jobs in addition to the 100,000 per month each month that it takes up to get there. That will require an economic growth of around 8% per year. A very long way from our 1% current rate.

Congress does indeed have a tough job ahead. But it is of their own making. They refused to address problems when they were small now they are stuck with the mess. I liken their position to having failed to stop at a gas station because the price was too high and now we have run out of gas on a cold and snowy night without cell phone service. Not a pleasant situation. Unfortunately it is you and I who will have to walk in the cold dark and wet night until we reach help and I imagine that is going to be a very unpleasant journey.

Isolationists would say close off imports with taxation and duties and open up manufacturing at home. While that could work I suppose, the path is ugly. First you raise tariffs and trading partners do the same. Then your exports drop right now and unemployment rises in those sectors. Spooling up manufacturing in the USA isn’t easy. It will take a while to equip factories long shuttered, hire and train people and then actually produce and ship goods. This also takes an enormous amount of money. So the practical approach is to look at imports and exports and work at making our people/businesses more competitive so that this can happen without the intervention of tariffs and the subsequent dislocation that would bring. Oil being the major import, we need to address energy but going green is going to take decades. Drilling and pipelines are much faster. Not that we shouldn’t be working hard on green alternatives it is just that we have to avoid being bitten by the alligators while we work to drain the swamp. Once the swamp is drained the alligators will leave, we just have to prevail.

More competitive may mean lower business taxes and even corporate welfare where it is justified. Tax incentives for job creation. I remember when utilities were tightly regulated. They were allowed to earn a specified rate of return. The rate setting agencies would look at rate requests, look at costs and investment in infrastructure and calculate the rate that would yield the desired return. While consumer advocates argued that there was no incentive for the companies to be more efficient, I remember that they employed a lot more people and didn’t have to drag them across the country every time mother nature through a fit.

Not sure deregulation has worked to advantage. Not sure that the old method was fault free. Maybe we need to look at a hybrid approach of some sort.

Well, stay safe and dry this weekend. We’ll be back with you next week; the good Lord willing and the creek don’t rise more than usual.

August 18, 2011

Ok, so the world markets are in a tizzy. Congress is on vacation, the President is heading to Martha’s Vineyard with Michelle and the girls. I guess I shouldn’t be too concerned. If there was a real problem they’d all be at work…right?




The market is at it again. Greed is being defeated by Fear. What if Europe has a recession? What if the European Monetary Union collapses? What if our growth slips again and we have a double dip recession? Gold is trading over $1800 per share and the bubble, if there is one, is getting bigger and the bigger bubbles get the more likely they are to burst.



When the government stops trying to “fix” the economy and simply allows the market to wring out it excesses we will get to where we are going anyway, we will just get there faster. If the government wants to help, stop trying to bolster the auto industry with special incentives (cash for clunkers) and the real estate/housing industry (tax incentives for home purchases). They all simply postponed the inevitable. The pricing of these assets has to reach a sustainable point.



A better approach, in this writers mind, would be to assist families that need help (Unemployment insurance, support for COBRA costs and extend the COBRA benefits time window). These things allow the market to work but help protect families. Those whose greed resulted in pain, well that is the risk they knowingly took. I can’t feel sorry for them. Those who went to work every day and did what was asked of them deserve the help of their neighbors. If it takes government to accomplish that due to the scale of it, then so be it.



Just remember “We the People” as the Constitution describes us, is all there is. There is only us. Every dollar spent to assist one family must come from some other family. Those who are fortunate, smart, willing to work hard and are richly rewarded do have a responsibility to help their less fortunate neighbors. That is the way our tax system is designed. The question we face today is how much of the income the richly rewarded get should be taken from them and given to their neighbor.



When it comes to Europe, they are not the United Countries of Europe. They are independent countries which are trying to improve international trade efficiency (between themselves and others) by having a common currency and multilateral trade agreements. Remember, the Euro was only created in 1999. It is barely a dozen years old and this is its first real test. Whether it can endure is open for speculation. If it fails, each country will be impacted, as will the rest of the world as what new currencies will be introduced by each country and what the individual exchange rates might be. That could affect our investments (personal, business and government) that are denominated in the Euro but are placed in various countries.



We can’t avoid the fallout. Some investors want to cut to cash. US dollars are shrinking in purchasing power nearly every day, eaten by inflation domestically and by government monetization of the growing debt. Congressional inability to accomplish anything is making foreigners uncomfortable when it comes to buying our bonds and sooner of later the interest rate demanded for additional debt will rise.



Housing is still in the toilet, jobs remain scarce, the Mall seems to be less busy when I stop in yet retail sales are reportedly 3% + above the prior year. The US is a consumer driven economy with 65 – 70% of our GDP from consumer spending so a 3% up tick should result in about a 2% growth in the GDP. All that has to happen to achieve that is that none of the other aspects of the GDP are negative compared to last year.



2%, anemic by almost everyone’s measure, is still positive and we need 2 quarters of negative growth in a row to be technically in a recession. 2% growth does nothing for unemployment so although it is not a recession, it will feel like one.





I hate to be the voice of doom and gloom so I’ll say it like this. Unemployment is here to stay until 2014 or later. I’m still thinking 2017 which I said in 2008 or 2009. Won’t matter who is elected President in 2012. It could be sooner or later depending on who gets elected to congress in 2012. The more congress members that get returned, who have been there more than one term and are part of the problem rather than part of the solution, the longer it will take for the economy to recover.



We need new blood but it must be quality. Ideologues probably won’t help reach an appropriate consensus. We have a lot of long term ideologues whose my way or the highway attitude got us where we are. We have to find a leader who can set a course to sustainable growth and to lead congress and the country to progress. It will take time. It will cause a lot of change in the way we do things. States will have to stand up and be responsible for the quality of life in their region. The federal government shouldn’t mandate rules to the states…period. The need for “Federal Law” should be minimized and used only where uniformity between the states is really needed. All other law should be State specific reflecting the values of the people who live there and who pay taxes there.



Have a great weekend. The markets are closed so while you may not get richer, you won’t get poorer either. Congress and the White house will be on vacation so your life may not get any better but it likely won’t get any worse either.

August 8-09-11

So what happened today and what does it mean?

The Federal Reserve had an announcement after their regularly scheduled policy meeting today.

First let’s revisit the Federal Reserve. It is not part of the government. It is not owned by the government and it is not run by the government (directly, anyway). Huh?

The Federal Reserve Bank was created by Congress to issue the currency and to manage the banking system free from political influence. The Fed, as it is called, is owned by the member banks that it charters and over sees. There are 12 Federal Reserve Bank Areas or Regions each headed by a President elected by the member banks of the Region. They, along with a Chairman, appointed by the President and confirmed by the Senate make up the management of the “Fed”. The oversight of the “Fed” is the seven members of the Board of Governors, The Chairman, previously mentioned and six others appointed by the President and confirmed by the Senate. Today there are two open positions. The FOMC (Federal Open Market Committee) which meets regularly to determine appropriate strategy for the achievement of the objectives of the “Fed”; that is to keep inflation under control and then to assist the economic growth. The FOMC is made up of the seven members of the Board of Governors and 5 of the 12 Presidents of the Regional Federal Reserve Banks.

That said, the FOMC today said that it anticipated keeping the effective interest rates low for an extended period of time, perhaps until 2013. That is to say the economy is weak and we don’t see any significant growth out there that might be inflationary in nature.

What that means is that mortgage rates are going to stay low for a while, credit card interest rates are going to remain at current levels. HELOC’s typically based on 10 year Treasuries are going to remain at current rates. If you are in the market to refinance, now may be the time to lock in low rates. It also means if you are living off interest on your CD’s, you are not going to have much income.

The bond market liked that statement and bond yields declined as prices rose. The stock market wasn’t certain about it in the hour immediately following the statement, but seemed to decide that it was OK and retraced its declines today returning to substantially positive territory at the end of the day.

For those looking for a job, it is a mixed condition. Businesses now know that the “Fed” understands what we have known for some time. Growth is going to be slow and hard to come by. Competition is going to remain fierce. That isn’t good for job growth. On the other hand, low interest rates mean that additional plant and equipment will be affordable and loans may even be accessible. That could create jobs in other businesses.

The economy is like a bunch of dominoes. If one falls it pushes another and if that one falls it pushes another etc. etc. etc. We need to get the Dominoes to fall. To do that we may have to change our political precepts of taxing businesses on money earned overseas. If US corporations could bring home the money they make overseas without being taxed again (already been taxed where it was earned) then maybe they would spend it here and start the dominoes falling. Wouldn’t that be grand?

Sunday 8-7-2011

Well last week wasn’t fun. The Congress agreed on a debt ceiling bill which was hailed as a victory by politicians yet the stock market crashed, dropping 700 points in a week. Apparently they weren’t impressed. Neither were the analysts at S&P which downgraded the USA credit rating from Stellar (AAA) to Very Good (AA+).  While that move was well telegraphed to the markets and to the Congress, it is a clear signal, that using the same criteria as is used for other governments, we aren’t doing as well as we did in the past at managing our financial affairs.

Politically it gives others like Russia and China the opportunity to chastise us for our profligate ways and rebuke our holier than thou attitude.

What all this means remains to be seen as we have never been there before. What I am sure of is that there will be over reaction and the markets; both equity and credit are going to be volatile and a little chaotic for the next quarter. No one is sure if the 1.3% GDP growth in the second quarter is accurate or if it might be revised downward as was the first quarter. More uncertainty comes when such a modest growth could easily be revised to a negative growth, the first of the requisite two quarters to indicate a new recession.

What do you do when you are uncertain? I stop spending for a while. Until I have reason to feel more confident. That means I don’t hire, I don’t build and I don’t spend on anything I don’t need, I cut debt. None of that is positive for the economy.  I am considering buying a car; mostly because both of ours are getting older and I don’t want to need two at the same time. Apparently there is a KIA dealer in town near home that doesn’t believe in economic stimulus as he has window stickers with a $2000+ dealer markup over sticker? You’ve got to wonder if the showroom is a front for a different business. How can you sell cars in these times asking for more than sticker when your competition VW, Toyota, Nissan and even Honda are selling for a discount? Maybe they know something the rest of us don’t.

As for me, I’m playing watch and see but if Monday opens badly I am likely to reduce my exposure to equities and cut to cash. But that is just me. I’m afraid of the herd mentality.

Congress is on summer break and that is good. They can’t make mischief when they are home. If you should happen to see yours, or if you’d care to write to him/her, let them know that cutting spending is important but so is keeping key programs healthy and, as much as I hate it, may take a tax increase (no not a rate increase so much as an increase in what you can deduct). Second home mortgage interest (also applies to boats and RV’s) may have to go away and there are many other base broadening measures that may have to happen. I’m not thrilled but I can live with them if they are tied to a balanced budget law that could only be repealed by a super majority of both houses. That way they can’t spend what they aren’t willing to fund without borrowing. I’m sure we could manage a super majority if there were another Pearl Harbor or 9-11 to allow borrowing when it is a bona-fide crisis and not just to fund operating expenses when Congress members didn’t have the cahones to admit the real cost to their constituents or their incompetence at calculating the real cost.

Until we do that, S&P is not going to reconsider. Moody’s and others are likely to give little time before following suit and downgrading the USA debt in much the same way as S&P.

When your own internal debt rating agencies aren’t supporting your approach, isn’t it time to consider change, real change? In the business world changing corporate culture is one of the most difficult things to do. Often we have to fire the entire top echelon and replace them with new folks who get where we need to go and are willing to do what it takes to get us there.  Perhaps we need to do that in Washington. Perhaps every incumbent who has been there more than a few years (one term) should be tossed out and replaced. That makes a level footing for all interests and allows an entirely new culture to be born.

It is a thought.  Perhaps you might consider it when voting next year.  

July 25, 2011

Hi Gang

Well the 535 folks who we sent to represent us in Washington DC once again have put partisan politics ahead of the people’s business.

Yes, I understand that they have fundamental differences in the way they see America and the role of government they believe best serves the people. But I also understand that like the parent who never says no, they now have to deal with a child (us) that thinks because its shiny and they want it, they should have it. That, is just not sustainable.

We need to have additional revenue, at least temporarily, but we also must fix what is broken, pork barrel spending, fraud and waste in many programs, and a better budgeting mechanism. Many have called for zero based budgeting and have been told, rightly, that it is not practical because it is so voluminous. Computers have come along and now, maybe it is time to rethink that. Perhaps we don’t have to zero base every year, but every five might work. Take 20% of the agencies or other budget segments and zero base them every five years. That way we could at least be assured that every line item is looked at and justified every five years. Pretty sure that would make trend line analysis a useful tool. We could spot any segment of the budget that was out pacing inflation and challenge it. This would allow us to fix the problems a lot sooner.

Default. Is it unthinkable that the USA could be unable to pay its bills? Was it unthinkable for a lot of US citizens to be unable to pay their bills in 2007. Yet look at the foreclosures, the bankruptcies and the pain on Main St. USA. No it is not unthinkable, but it is avoidable. They say there are two competing emotions in human kind. Fear and Greed. We need to back off the greed a notch or two and cut the pandering to fear. There is a reasonable solution out there and we will find it. It is just like elephants mating. It happens at a high level and amid a lot of noise. Congress will work it out and do it in time. But if they don’t, the world as we know it won’t end. Just as CARmageddon in CA was much ado about nothing, this will pass quietly into the night also.

What will happen? The treasury will not be able to redeem some bonds that are due to the Federal Reserve Bank. Woo Woo.  They should have enough cash flow to handle the everyday things like payroll and Social Security. They may be a day or two late with the bloated payment to a defense contractor or they may have to force government workers to take a few days vacation. But Armageddon, I think not.

But what leverage is there is you can’t scare people? If this “default” happens and Social Security checks go out, the average American is going to lose interest. Then it becomes a political liability for both sides. Where does that lead?

So relax, read a good book and don’t worry, be happy.

July 16, 2011

Hi friends,

The headlines are filled with chatter about deficit reduction and tax increases matched with spending cuts. The news is filled with dire prediction about what bills won’t get paid if we can’t borrow more money. Think about that. This country, allegedly the richest country in the world won’t be able to pay its bills if it can’t borrow. Maybe we should send Rep. Boehner, Sen. Reid and President Obama down to the docks to see if they can get a payday loan to tide us over. Maybe we could call one of the many pawn brokers and see if we can get some cash for stuff we may no longer need.

OK, so none of those ideas would fly, we need too much money, but it points out the seriousness of the problem. We can’t pay our bills without borrowing more money. This is crazy. The Congress, both houses and the executive branch as well are responsible for this situation. This has been going on for decades. It is the system that needs to be overhauled.

Enough of that rant. What does it mean to you?

We need to recognize that, scare tactics aside, we really do need to pay our bills so there is no option but to borrow more. However, we need to spend less so that borrowing to pay the bills month in and month out is not necessary. In truth wasteful spending can be cut, over reaching expenses trimmed and we can get control of our finances. But it is unlikely that we can do that without additional borrowing and additional tax income.  Republicans and Democrats both have had a hand in creating the problem and now must have a hand in fixing it.

The President, Mr. Boehner and Mr. Reid must come together and work out a solution that puts the USA back on a sustainable course. To be effective it will have to contain new tax revenue, reduced wasteful spending and long term entitlement program reform. Yes, I said that long term entitlements (which we just expanded in terms of Obama-Care) need to be reformed. Social Security eligibility will have to change. People born after 1955 or so will have to wait longer to retire (early retirement - today 62 - will need to move to 65 or 66 and full retirement will need to move to 70). This can be phased in over time, one year longer for each year past 1955 until we reach birth dates of 1959. Top income earners will also need to contribute more. Income is income, so capital gains and ordinary income rates need to be the same. Warren Buffett is the leader on this and his income is mostly capital gains. Those of us who are living on our capital gains can afford to pay more in taxes. We won’t like it and a few politicians may have their careers shortened but it is a necessary step to regaining our financial footing.

The key going forward will be our ability to not repeat the mistakes of the past. We can no longer be the policeman of the world. We can no longer promise more than we are willing to be taxed. We can no longer put off or, in the presidents words, kick the can down the road. Obama-Care costs will kick in down the road in 2013. We need to be on a pay as you go basis by then and that is not long from now. If we fail to do this our borrowing costs (yes we will still have the existing debt to pay interest on) will rise, inflation will rear its ugly head and we will be far worse off that we are today. I don’t even want to think about that, do you?

Take notes during the next weeks and figure out who you think is a leader and leading in the right direction and more importantly those who are not. When you have an opportunity to vote again in November of 2012 be sure to vote based on their performance not their appearance, propaganda or sound bites, either pro or con.

In the meantime, check your retirement savings plan and take charge because at the end of the day you are responsible for you, now and in the future. Yeah, I know being a grown up isn’t easy nor fun. Get over it.

Car sales are improving, slowly but surely. Retail sales are up year over year by about 3% and manufacturing is actually doing quite well. It is manufacturing that employs technology rather than people, unfortunately. The economy is creeping forward and will continue to grow very slowly. Job creation won’t likely speed up to where it needs to go for a longtime. We need to add 100,000 jobs each month just to absorb the natural growth of the work force, forget bring down unemployment. Unemployment at 9.2% is likely under reported but it is surely not equally felt in all demographic sectors. When young people are affected to a great degree, you have the fuel for civil unrest. Remember the Newark and Watts race riots. I do and I don’t want to see them again.

Housing prices and sales will not recover for probably a decade and maybe longer. Housing is a world class example of unintended consequences of a well meaning government policy trying to make home ownership easier to achieve. We made it easier and easier until it was too easy and the bubble burst. Now young people will have to do what their grandparents or great grandparents did - work hard, postpone marriage and live with parents until they have saved enough to put a down payment on a home, a down payment of 20%. Seems wild but that will be the future. It is sustainable and it will take a long time to absorb the houses on the market today.

Education will be of greater importance than ever because even small business people (plumbers, electricians etc.) will need to know how to run a business as well as just be experts in their trade. New home construction will not recover nationally for a very long time, if ever. However, as immigrants came to the USA for work in years past, we may be going to other places to find work. IBM, I’m told is hiring in India and other locations outside the USA. Maybe going to work for them or other major employer in India will result in a good job in the USA in 10 or 20 years. Young people are going to need to rethink their career plans and adjust. Sorry, kids but our life style is no longer available to all.  The smart, the talented and those willing to do what they have to, will do well. The rest will be stuck scraping along until they can’t work any longer. Doesn’t sound like the America we were taught about but it is the America of the next 35 years.  

If you are young, think long and hard about your future. If you’re in your 30’s, 40’s, and 50’s start saving every dollar you can. You are going to need every one of them. If you are already in your 60’s be thankful that you have the benefits you have and talk with your financial advisor about making it last for the next 30 years.

Sorry to be so negative but I think I’m right and you need to know.

July 2, 2011

Happy Independence Day!!!




Today we celebrate all that is good about the United States. Tomorrow we must go about fixing what is wrong with the United States.

I believe it was Bill Clinton who said “It’s the economy, stupid”. And ours is in the worst shape it has been in since the Great Depression. It may actually be worse.

In 2009 I said recession is psychological. In a consumer driven economy such as ours, how safe and how rich the consumer feels determines how much the consumer spends, thus the direction and speed of the economy. Stable housing prices make consumers feel safe and rising housing prices make us feel rich. That translates into freer spending and a growing economy. “Until the housing problem is fixed we will not grow”. That was in 2009 repeated every so often in 2010 and now we are deep into 2011 and it is still a disaster. It could have been solved in 2010 and we could be leading the world into recovery but the government (House and Senate) was busy worrying about the wrong things and I’m not sure they get it yet.

If we’d have taken some of the $Trillions that we spent on ‘stimulus’ and bought up defaulted mortgages, took title to those homes and tore them down we would have stable housing values today. There would be no glut of distresses sales gutting the prices of nearby houses. Stable housing values would give a psychological boost to consumers who would have spent more freely, creating jobs and more demand for housing, resulting in rising values and still more consumer confidence.

We’re like the Army that wasted its ammunition shooting at mirages then when they had the opportunity to engage the enemy they were out of bullets. Our inept handling of the economy has left us with very few bullets. We now must use them carefully or risk being captured by the enemy.

We have spent $trillions to stimulate the economy trying for a quick fix. ‘Shovel ready projects’ were funded to create construction jobs. Unfortunately in this country even ‘shovel ready’ means months if not years away. A lot of money committed, not a lot of bang. Hence first time jobless claims are hovering around 425,000 each week. Better than 2009, but much higher (30% or so) from the levels of 2006.

G.W. Bush takes a lot of blame for two wars which cost us a fortune in money and lives but the current administration has done little to reduce that spending and has added Trillions in a misguided attempt to improve health care (which needs/needed improvement) while not focusing its energy on the economy until it had degenerated to the crisis level. The Obama administration owns that one. The real culprit was Speaker Pelosi and the real mistake by the current administration was letting her run loose. She led the health care charge on a partisan basis either not understanding the economic situation or, worse, not caring.

The American voter seems to have dealt with her, but the administration must lead us out of the crisis. At this point President Obama and his administration does not seem to have the skill or the credibility to do that. In retrospect, Hilary is looking good. Who will replace her as Secretary of State when she leaves in 2012? Who will be willing to risk taking over what could be a six month job if the Republicans unseat Barrack Obama in November 2012.

This is a real issue for all of us to consider. What will we do interms of paying down the deficit? How will we raise the money? Will we be brave enough to slowly raise taxes (to avoid dumping the economy back into recession) while recognizing that we must reduce spending, even when it hurts.

I’m no longer young and I look at Social Security differently than when I was younger, but we cannot afford to payout benefits for 20, 30 or 40 years. Retirement benefits must be tied to life expectancy. Retirement age has to rise. The government is talking about 67. Realistically, they probably need to be talking about 70 or even higher for people who are just being born today. They will live into their 80’s and 90’s. Benefits for 10 or 15 years is affordable, while 30 or 40 years is not. Ask your financial planner how much money you will need to equal Social Security payments (and its cost of living increases) based on retirement at age 65 and your life expectancy. My best guess is he’ll tell you that you need about $1 million. You may need more. On that basis, with a large portion of our population in the ‘boomer’ group, think about the government having to provide each one of us with a $1million. A Billion is 1000 million. A Trillion is 1000 Billion. So about $1Trillion for each 1 Million baby boomers. And there are 39 million people already over 65 and more coming each day. How much money do we need to support Social Security? I don’t know, but it seems like a lot. Medicare is another issue. Older folks, I am learning first hand, require more and more medical attention. Just like an old car requires more and more maintenance. As we live longer, we cost more to maintain. So Medicare expenses are going to rise as those in the system age and as the boomers enter the system in large numbers the base cost grows and the future cost grows exponentially.

So enjoy the Holiday and then get to work next week looking carefully at all candidate, local, state and nationally to find those who you believe have the best plan. But be sure to look for specifics. Generalizations and platitudes aren’t going to get it done. Neither is great skill as a speaker. For all our sakes, look at the substance, not just the package. Skin color, hair color, age, gender nor any of those sorts of things are important. Skill, intelligence and experience coupled with honesty and integrity are important.

Taxes are likely to increase in 2013, they have to. Spending cuts will be with us for the next decade, they have to as well. Accept that and evaluate candidates based on what they are saying relative to the reality you know. If they don’t recognize that both must happen, then they lack integrity and either honesty or knowledge, in which case I hope that you would disregard them and try to find a better candidate to support.

New economic stats are out next week and I’ll bring them to you with the usual attempt to explain what they mean.

Happy Independence Day!!!

June 11, 2011

Hi Readers,


So what is going on in the world of economics, politics and your money?

The market had a nice run in the first quarter of 2011 with the DJI rising from 11577 to 12810 on April 30. This represented a gain of 10.65%. Then the news started to turn sour.

So what is ahead? Don’t know but my cloudy crystal ball and Lipton tea leaves tell me that the transportation indexes are down which says that big money is pulling back from transportation stocks expecting that they will not have as much upside as they have enjoyed over the past year. Transportation is, to my mind, the key barometer of what the economy is doing. Whether goods are manufactured here of imported from anywhere, the transportation industry is involved. They are the first signs of spring. They are also the canary in the mine. When they fall, lookout below. Right now they are not falling but they are not blooming either.

First time jobless claims that had been slowly coming down (whether due to real job growth or folks just dropping out of the labor market by retiring). In the last six weeks we have seen the number of first time unemployment claims rising, back up to levels about 25% above where they were before the recession. That is not a good sign. A speed bump? Maybe, but it needs to end real soon. If it continues for two, three or more weeks then it is likely structural and we are in for a double dip.

Housing prices continue to be a thorn in everyone’s side. As prices fall, business people who have relied on home equity loans to finance their businesses, are finding it harder to do so. This could force more businesses to collapse and more homeowners to default, driving home values still lower. On that fear, pending home sales dropped big time last month while actual sales closing trailed 2010 by 14.4%

Auto sales dropped to their lowest levels since September 2010 after improving steadily for 6 months. Part of that could be the Japanese Tsunami effects. Whether that will persist or is just a ‘speed bump’ only time will tell.

On the plus side, job postings on the Monster job site are up 6.7% year over year. Whether that represents new jobs or employers seeking to upgrade employees buy attracting a better quality employee only to fire the current staff once the new staff members are on board is yet to be seen. The juxtaposition of the expanding job postings and rising first time unemployment claims suggests it might be the latter.

Personal Income and Personal expenditures average a flat relationship. We are not saving anything that we earn greater than the previous month. Part of that is likely rising fuel costs. Consumer credit jumped up in April. Credit card balances expanded, perhaps again due to fuel prices.

For those who believe lower taxes will help and those who believe that higher government spending is needed I have bad news. We are at the beginning of an election cycle and I suspect that neither party will want to do much of anything except spin the data. So it will be another year of doldrums. After the election, regardless of who wins, we will see action because we have no choice. We will see tax changes, spending changes both of which will affect Medicare and Social Security. It may affect Obama care as well in one form or fashion. The government will not be able to afford added costs without offsetting taxes. My opinion, it isn’t going to be pretty. By 2013, the hole will be much deeper, the job more difficult and the legacy much longer than it is now. And, like the Greeks, we aren’t going to like it.

Its the economy, its always about the economy

Happy Memorial Day!


A great big thanks to the veterans who have fought and died to give us the great country we have. From the Revolution, Civil War (War of Northern Aggression to some), WWI, WWII, Korea, Viet Nam, and all the Middle Eastern wars since, and continuing as we speak. It is easy to forget their sacrifice since we have never experienced war, real war for years on end, in our own back yards. The closest we have ever come to knowing the horror of war up close and personal was Pearl Harbor and the attack on the Twin Towers and Pentagon. Our service men and women have given us that great gift. As Mr. Lincoln said, “the world will little note nor long remember what we say here, but it can never forget what they did here”.

Memorial Day traditionally marks the start of the summer season in the USA. Yes, summer is upon us and we are left thinking about what is happening and what will happen during the hot months ahead.

The way too long election season is beginning. President Obama has the advantage of being guaranteed his party nomination to run for a second term while the opposition hasn’t a clue who to run against him. It gives him a head start.

It will take a really top notch candidate to make this a credible horse race. If the Republicans can find one, they do have the economy on their side (although I don’t think they have a lock on the vault of knowledge when it comes to fixing the economy). Jimmy Carter (D),and George H. W. Bush (#41) (R) both lost re-election because the economy was in the tank.

So what will the sitting President try to do? He will certainly try to create a plausible argument that the worst is behind us and that we are on the road to recovery. You will hear things like, I inherited this mess and while it was grim, my policies have helped us stop the free fall and get on track toward recovery. We have a lot of hard work ahead but I can see a light at the end of the tunnel. Four years from now we will be in a much better position than we are today because of the policies and practices I have installed and will continue to implement when I am re-elected.

The question we all have to decide for ourselves would be “Is he correct?” Or are we really no better off that we were in 2008. “Did he inherit a train wreck or did the Congressional focus on Health Care allow the train to wreck before they reacted to it?” Could the disaster been better and more timely handled? Is the USA in a better position in the world than we were in 2008?

Those are questions for voters to decide. What I think I know is this:

1. Housing sales continue to be flat with new housing being well below 2009 and down from even 2010 despite record low interest rates for mortgages.

2. On the consumer front (roughly 70% of the economy) we are seeing steady growth year over year of about 3%, so some growth in the economy is happening. Unfortunately imports are growing faster than exports so we are creating jobs but they are not here. Here, we are seeing more than 400,000 people apply for unemployment each week. That is fully 100,000 more than before the financial crisis began. That could translate into an unemployment rate climbing to 9.3% by year end. Friday, June 3rd, the next department of labor announcement is due. That will confirm my expectations … or be a pleasant surprise. Capacity utilization, that is the percentage of production that factories are currently running has remained at about 76%. Lack of growth in utilization signifies no job growth. Inventories are flat and there is no sign that anyone is confident in the future, at least confident enough to invest money in building more inventory. Perhaps we need to re-run the movie “Field of Dreams”. You know, build it and they will come.

3. Remaining on the consumer front, we have modest growth even in the face of continuing unemployment. We are seeing consumer debt rising again, albeit at a much slower pace than pre-crisis rates. That cannot be sustained without income growth and high unemployment dampens wage growth. So we have another concerning pattern developing.



So what to do?

Well, we can tax the rich and those corporations that are making so much money, some say. We can do that but taxing the rich, even a lot, isn’t going to be more than bucket full of money in the ocean of red ink. Corporations are legal constructs. They don’t really exist anywhere but on a piece of paper. If we tax them, they raise prices. So we basically tax ourselves more. But they don’t vote so they make an easy scapegoat. It amounts to the political equivalent of the shell game. Where is the pea?

Corporation profits, while quite healthy, are growing at a much slower rate than they did in 2009 and 2010. This means the stock market could see them as fully valued, and the stock market (and your 401(k) retirement money) may not see much growth going forward.



Cut spending some say. Also a good idea but the budget has relatively little discretionary spending in it. Most of the budget is entitlement programs (Social Security/Medicare) and military. Since we are still involved in wars in Iraq, Afghanistan and now Libya, there doesn’t seem to be much chance of cutting that either.

So what is the solution? I was once told that when you find yourself in a hole, the first step is to stop digging. We need to simply freeze spending at current levels or if you favor spending reductions let’s freeze spending at 2009 levels, for everything, for two years, longer if necessary. Then let’s raise taxes in a way that is fair and equitable. Then let’s start leveling the playing field by taxing imports to allow local US companies to increase their market share (and employment). The resulting increase in employment will result in an increase in tax revenue and pretty soon, who knows, we may once again have a budget surplus like we did not so long ago.

As the campaign season progresses, think about these issues and listen carefully to the candidates. Test their promises and slogans against logic. Sound bites can sound good but don’t take them at face value. Do your homework. If you don’t you will live under the government you deserve.

The Economy: Good or Bad?

Well Friends, it looks like the venerable American economy is starting to recover. Transportation companies are reporting more activity which means someone is shipping something someplace. Consumer debt, yeah credit cards and mortgage debt is once again growing. It grew each of the last three months which suggests either a lot of people are starting to feel more secure OR they were bound and determined to have a great holiday and when the bills come in January, Katie bar the doors…bankruptcy. I don’t know which it is but the next 6 to 8 weeks should help make that clear.


In the interim, Gold is down $37.50 for the first 7 days of the new year. Does that mean that Gold’s great run up is done? I don’t think so. I think there is some profit taking after a 25% plus run up in 2010. I think that there is some real concern about the worlds FIAT currencies, The British Pound, The Euro and the US Dollar as well as lesser known currencies. The concern about those currencies is inflation. Will the printers of these currencies reduce their debt and become fiscally responsible or will they simply print more currency to pay their bills. Until that doubt is removed I believe that Gold remains the inflation hedge of choice.

Oil is another issue. Black gold. As the recession abates worldwide and jobs appear, no matter how slowly, consumer confidence will grow and consumption will increase. This increased consumption will require energy to produce and ship to market. That will increase the demand for oil. As demand increases more quickly than the ability to produce and distribute that oil, we will see prices rise and rise rapidly as countries stockpile to assure their needs are met in the event of any interruption in the marketplace from political unrest or simply Mother Nature. As oil prices rise, gasoline, kerosene (Jet Fuel) heating oil (Diesel) and all the other petrochemicals will rise as well. We are beginning to see evidence of that at the pump. Locally the spike will come with the beginning of driving season (Vacation) in the late spring. Gasoline could easily reach $4 per gallon over the summer.

That will pinch the economic recovery reducing its vigor. Still, the recovery will continue slowly, jobs will appear slowly and energy will settle at its new level.

Politically it is a game of trying to claim credit for the small gains and cast blame for the slowness of the recovery. Neither party has the inside track here. They are both equally culpable for gains and the slowness of them. It took decades to get where we are. G.W. Bush didn’t do this alone. Barack Obama didn’t do this alone. Even Nancy Pelosi didn’t do this alone. Every administration back to Nixon had a hand in this mess. We have been education our young people for jobs that no longer exist. Kind of like planning and building a highway that is always too small for the traffic that wants to use it the day it is completed. We have been trying to preach a lifestyle that is not in step with the largest population groups. We will find it difficult to do business successfully with these people. We have created an entitlement mentality (here and in Europe) that we can’t sustain. Now we have come to the point where we are asked to fix this in two, four or even eight years. Not going to happen. It will take a long time, maybe 20 or 30 years to adjust our thinking and produce young people who have the right skills for the new world we have created through technology and social advancement. But first we have to determine what skills are needed. That is hard to do. Envisioning 4G phones just 10 years ago was not possible for most of us. How can we teach what we can’t envision? A fair and valid question I think. Business leaders like Bill Gates, Steven Jobs, and all the others who have invented hardware and software that has dramatically changed our lives need to take a little time to sit down with educators and say here is where the world is going and these are the skills that will be needed. Then it is up to our local and state governments to adjust quickly so that the academic offerings are in step with what is likely to be needed when the child completes his/her education. Our social entities have to help kids understand that while grandparents and even parents career paths worked fine for them, they may not be workable in the future. In my grandparents day a good job was a secretary or a switch board operator for the phone company. Both jobs, which have for intents and purposes, disappeared from the scene today. Great jobs then, non-existent today. How many more jobs can we name that were considered good jobs in the 1970’s and 1980’s no longer exist? Yet our schools still offer a similar curriculum. Those that still offer foreign languages are still offering languages that are no longer relevant in the global business world. English and Chinese are the two languages spoken by most of the people living on this planet (sorry France). Spanish may be popular but it is not one of the most important business languages of the world.

My prediction has been that job recovery, defined as an unemployment level of 5% will not be reached before 2017, if ever. The new jobs number this month was stronger than expected but didn’t absorb the growth in the workforce let alone reduce unemployment. The official number for unemployment went down but even the government admits that it is probably due to people who simply quit looking for jobs. They are still unemployed, we just can’t find them to count them. They have dropped of the radar so to speak. The real unemployment rate (which no one knows but some estimate is probably around 17%) is still rising, albeit much more slowly than it was a year ago. To make a real reduction in unemployment no matter which number you choose to believe is about 125,000 per month net of layoffs of private and/or public workers. If we could achieve and sustain this level of job growth, we could reach 5% unemployment in 4.5 years or by 2015. Each month we fail to create 125,000 jobs is one month longer to reach “full employment”. Of course that is based on national averages etc. Locally those numbers are either higher or lower and full employment is nearer or farther away.

Housing, my last item for the day, is still bumping along. Values have not yet stopped falling and an upturn in mortgage rates has caused the refinance market to slow a bit. Perhaps that refi-flurry during the month of October and continuing into November may have been what increased consumer debt and supported the holiday retail sales. Until housing values stabilize and the inventory of unsold new and existing homes is reduced, no one is going to be launching large developments. That employment engine is down for the foreseeable future. Maybe 2012 or 2013 we may see some spool up in the “destination” areas but the country as a whole will be trailing with some hard hit areas like Detroit taking a really long time to recover.

Keep watch, it is an interesting time in which we live.

Happy New Year!!


The old year is gone and 2011 is on the job. His will be a tough life. The world is in distress. Europe is struggling to keep its common currency afloat and old nationalistic feelings are creeping up. Germany is the strongest economy and the social fabric is the most pragmatic. Greece, Spain, Ireland are already in trouble, having borrowed way more than they can sustain. Portugal, Italy and others are also at risk. Germany once dominated much of Europe militarily and now it is becoming dominant economically. Perhaps there is something in the genes.

The United States, too, has borrowed much more than it can sustain in the long term. We can support the debt for awhile but ultimately we must get our house in order. We are no longer completely impervious to the concerns of the world. We are rapidly losing the distance between ourselves as the giant killers and the rest of the world. China is rapidly closing the gap. Russia is trying as well. The quiet one, India, is growing economically and is about as large as China when it comes to population. It too is growing at an annual rate well above the ‘developed world’ and is closing the economic gap.

These growth rates in Chindia, the new buzz word, will propel the demand for goods and services for the next decade. Together China and India (Chindia) contain about 33% of the world’s population, where the USA is only about 4.5%. As they grow and more want cars, refrigerators, washing machines and all the rest of life’s good things (not to mention the energy it takes to make them work) the demand for these goods and services will grow at an unprecedented rate.

Opportunity will continue to knock in these places. The USA will recover but by the time it does, the level of caring in the business world may have diminished significantly. The need for strong exports to the USA will be replaced by domestic demand in Chindia. This will make us less important to them and us ever more dependent on them. The net result is higher prices for imports in the USA. To many of us, that will feel like inflation unless the dollars strengthens sufficiently to offset the change. Unless we get spending under control, we will become less vital and critical to the world and more marginalized in world politics. Europe could find itself again dominated by Germany through its own decisions. Remember a United EuroZone is similar to the USA in population. Even together, we only one fourth as large as Chindia. By the way, Indonesia is only a little behind the USA and the EuroZone in population. If you look to all of Asia, we are out numbered by more than five to one.

Guess where business opportunity will lie between now and 2050? Where will the demand for Infrastructure, housing and all that goes with it, cars, clothes and more be?

It is time for us to be teaching our children Chinese; language, customs and traditions, so that they better understand the wants and needs of the largest customer segment in the world. Oh, India speaks English as an official language already which makes them easier. But we need to learn traditions and customs so that we better understand the other largest customer segment.

At home the new year means a new congress that must take the deficit seriously. They need to take a hard look at Obama Care and prune the parts that over reach to make the overall program healthy and sustainable. It may take more than one year for some challenges to work their way through the court system. Legislative modification could remove the premise for the challenge if it is handled properly. I’m not holding my breath.

We are two years out from another presidential election. Obama and the Dem’s will be posturing for that, while the Republicans are looking for a viable candidate. I just hope that doesn’t stop us from moving forward on issues that are important to the nation and our future.