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Friday, July 31, 2009

Seniors Are Scared of Obamacare...and They Should Be

I first heard Dick Morris make this point. The main reason, electorally, that Obamacare is falling apart is that the elderly are rejecting in great numbers. Morris cites a poll in which elderly reject the plan by about 16 points. This is a massive political problem because folks over 65 have about a 70% voting attendance. About 30% of all health care expenses are spent on the last year of someone's life. So, it is the elderly that are the most affected by any health care reform idea. Frankly, the elderly are rejecting Obamacare with good reason.

First, President Obama has proposed, along with the Democrats in Congress, have proposed to pay for some of the health care reform with cuts in Medicare.

Nobody is talking about reducing Medicare benefits," Obama said. "Medicare benefits are there because people contributed into a system. It works. We don't want to change it. What we do want is to eliminate some of the waste that is being paid for out of the Medicare trust fund that could be used more effectively to cover more people and to strengthen the system."

Such assurances haven't stopped Republicans from stepping up their criticism.

"Using massive cuts to Medicare as a way to pay for more government-run health care isn't the kind of change Americans are looking for," Senate Republican leader Mitch McConnell of Kentucky said Thursday in a speech on the Senate floor. "Americans want savings from Medicare to be used to strengthen Medicare, not to create a system that would ... lead to a government takeover of health care."

While the President continues to insist that Medicare cuts won't lead to cuts in Medicare benefits, it's hard to see what else that would lead to. By cutting the fees paid to doctors for Medicare patients, that will eventually lead to less doctors accepting Medicare. The elderly should be worried that cuts in Medicare will lead to cuts in Medicare benefits because there's really nothing else that could happen.

Of course, the fear only starts in the cuts in Medicare. Pages 425-430 mandates advanced care planning for seniors. This will mandate that seniors meet regularly with a counselor to plan for their treatment as they near death. On page 429, the Advance Care Planning Consultant will be used to dictate treatment as patient's health deteriorates. On page 430,the government will decide what level of treatments you may have at end-of-life. This is mandated so this is no option. This is a requirement. Since most health care costs come at the end of life, they will be the first to be rationed.

Pages 272-274 analyzes and studies the treatment of cancer. Within this section, the bill mandates this...

The Secretary shall conduct a study to determine if costs incurred by hospitals exceed costs incurred by other hospitals

It's followed by a section on AUTHORIZATION OF ADJUSTMENT. As such, this section will lead to the rationing of cancer care.

On page 268 the bill even regulates the sale and rental of electric wheel chairs.

The reality is that elderly are very worried about what effect this bill will have on them, and they should be. This bill will ration care and since an enormous amount of care happens at the end of life it will be that care that will be rationed first. The bill will cut Medicare costs and that means cuts in Medicare benefits. It will force seniors to see advance care consultants and it will even have government bureaucrats make decisions for end of life. It even regulates electric wheel chairs.

Why Employer Funded Health Insurance is So Corrosive

In an earlier post, I gave my policy ideas for fixing our health care system. In my hypothesis, I made the point that the nexis of many of our structural problems in health lie in the fact that employers are the ones that overwhelmingly provide health insurance. I think it's important to expand on what exactly is so corrosive with having a system in which employers provide health insurance for their employees.

First, we've all likely heard politicians bemoan the fact that someone can't "take their health insurance with them" when they leave their job. Of course when someone bemoans this problem, they are bemoaning the wrong problem. After all, the reason that employees can't "take their health insurance with them" when they leave their job is because their employer is the one that negotiated the insurance deal. The insurance plan is the property of the company not the employee. Of course, the employee can't take their plans with them since the plan isn't their property. So, the problem isn't that employees can't take their insurance with them, but that we have employers provide insurance for their employees. The second reality causes the first problem.

Then, we've all heard of the so called gold plated insurance plans. These add hundreds of billions in medical costs yearly because they cover just about any medical procedure including regular check ups. Imagine how large automotive costs would be if everyone had car insurance that included oil changes, tire reallignments, and new windshield wipers. One of the reasons that health care costs are so expensive is that the patient is rarely a consumer. That's because most patients have nearly all hospital visits covered entirely by someone else. Patients never question the costs of tests, procedures, and everything else related to their visit. That's because they don't pay for it anyway. If car insurance covered oil changes, oil changes would become exponentially more expensive. That's because no one would ever question the cost of the oil change.

So, why are so called gold plated insurance plans so prevalent? They are provided by employers. In fact, they are often used as part of the selling point to recruit potential employees. Since health insurance isn't taxed, the employee has absolutely no motivation to get anything but a gold plated health insurance plan. Since employers provide most health insurance plans, gold plated plans become the standard. By doing so though, we also create a system in which costs are simply unsustainable.

Finally, employer funded health insurance also contributes to the enormous power of the insurance companies. That's because the patients become by standards in the health process. The insurance is provided by someone else. As such, the one in a position to control the insurance companies, the patient, has little power to control them. The patient can't leave the insurance company if they are unhappy. It wasn't their choice to use the company in the first place. It was the choice of their employer. I have documented several cases of corruption by the insurance companies against doctors. In fact, an insurance company insider once admitted that it's standard practice to shred doctor's bills. That's because they've found that only 80% of doctors notice that they haven't been paid. (likely because doctors are so busy that they don't always keep good track of their bills) The check against waste and corruption is the patient. If an insurance company mistreats your doctor, the patient leaves and finds another insurance company. Of course, if the insurance company is chosen for you, then you can't leave. The system of employer funded health insurance encourages more power in the hands of the insurance companies and less power in the hands of the doctors, and that's what leads to this waste and corruption.

So, it is for these reasons that I believe that our health care system won't be fixed until we find a way to lessen the influence of employer funded health insurance. Once again, here are my recommendations.

Meet the New Executive Human Resources Director: Barney Frank

The House passed the most sweeping regulatory bill on limitations of executive pay today.

The House approved a measure Friday that would put new constraints on executive
, capitalizing on outrage over multimillion-dollar bonuses to Wall Street executives whose firms were bailed out by taxpayers.

The measure, which applies to any firm with more than $1 billion in assets, passed 237 to 185, with most lawmakers voting along party lines. The Senate will not take up a similar measure until after it returns from its August recess in September.

The bill, introduced by Representative Barney Frank, Democrat of Massachusetts, would let regulators ban risky incentive-based pay that could have an adverse effect on the financial system.

This bill would give the Congress all sorts of new power to regulate salaries, bonuses, and other benefits packages (like the hated golden parachutes) of any individual deemed an "executive". The good news is that this bill has a slim to no chance of becoming law. The bad news is that our legislators are so drunk on power that they think that this is part of their job description.

It's important to note that Frank's bill wouldn't merely regulate the executive pay of those companies that have $1 billion and more in assets. There is so much troubling in this bill. First, Frank is trying to use class warfare by attacking a class of people that have little sympathy anywhere, executives. By attacking executives, a class no one likes, the Congress can do something that is entirely not their business.

There is absolutely nothing in the Constitution that could reasonably give Congress the power to tell a private company how much to pay any of their employees, executives included. Yet, that's what Congressman Frank has purported to do and he found 236 other lawmakers that agree with him. There's no doubt that many executives are over paid and often paid handsomely for incompetence. There's also no doubt that fixing this is entirely up to the private market and not the federal government.

The negative unintended consequences are numerous. This will no doubt drive executive talent to foreign firms not under this regulation. American companies will simply not be able to compete in the word market place for executive talent. If you were an executive would you work at a firm in which Barney Frank could dictate how much money you can make, when another firm of equivalent credentials doesn't have the same restrictions?

Of course, once the Congress gets its meathooks into executives that definition will continue to expand. If Congress is given any power to regulate executive pay it's not long before executive are defined to include more and more private employees. Of course, power is like a drug. Give Congress this power and it only feeds their monster and their thirst for more.

This is yet another example of why I see class warfare as such a corrosive tactic. Frank capitalizes on the natural disgust and envy for executives and he uses that to give him and his colleagues power none of the founding fathers intended. He uses this envy to craft legislation that will make firms less competitive, give government even more power, and opens the door to give it even more power. We can all only hope that this dies a fast death in the Senate

Council Winners

The Council has spoken again. This week, I'm an also ran but it's an honor just being nominated, even if I nominate myself.

Winning Council Submissions
First place with 2 points! – The Razor - Waging Lawfare: A Call To Arms
Second place with 1 2/3 points – Joshuapundit - Bigotry In Basic Black
Third place with 1 points – (T*) – Right Truth - Advice to Sergeant Jim Crowley
Third place with 1 points – (T*) – Bookworm Room - Make me Well
Fourth place with 2/3 points – Soccer Dad - It’s the speeches stupid
Fifth place with1/3 points – (T*) – The Provocateur – The Definitive Dossier on the House Health Care Bill (Pages 1-500) Part
Fifth place with 1/3 points – (T*) – The Colossus of Rhodey - Common sense on the Gates arrest
Winning Non-Council Submissions
First place with 2 points! – Michael Yon - An Artery Of Opium, A Vein Of Taliban
Second place with 1 2/3 points – (T*) – Heretical Ideas - Is Barack Obama An American Citizen?
Second place with 1 2/3 points – (T*) – American Thinker - Hoven’s Index : The First Six Months
Third place with 1 points – (T*) – The Daily Beast - The Man Who Let Mengele Get Away
Third place with 1 points – (T*) – - Obama insults the entire medical profession
Fourth place with 1/3 points – (T*) – Dick Morris - Socialism Doesn’t Work-Even in China
Fourth place with 1/3 points – (T*) – Wendy Kaminer @ The Atlantic - Law Students Flunk Academic Freedom 101
Fourth place with 1/3 points – (T*) – Ludwig von Mises Institute - The Second Coming of Keynes

Video, Quote, and Word of the Day


promoting peace

The vision that you glorify in your mind, the ideal that you enthrone in your heart - this you will build your life by, and this you will become.
James Allen

Energy Committee Secures Health Care Deal

Henry Waxman was able to pull Blue Dogs and liberals together to cut a deal to secure passage of the health care bill out of his Energy Committee just a couple hours ago.

Liberals and a small core of conservative Democrats set aside long-standing ideological differences early Friday to cut a deal that should allow the House Energy and Commerce Committee to approve a sweeping health care bill, breaking a two-week deadlock that threatened President Barack Obama’s top domestic priority.

Blue Dog Democrats on the committee, who are the linchpin in the House health care debate, agreed to allow their liberal colleagues to cut billions from existing government-funded health care programs in order to restore some $50 billion to $65 billion in subsidies set aside in the bill to help middle-income families purchase coverage.

This final agreement should clear the way for committee passage later today. Energy and Commerce is the last of the three House committees to consider the bill, so passage will put the package in the hands of party leaders for a titanic fight when Congress returns in the fall over the government's role in health care.

In the meantime, Waxman also lost one moderate Blue Dog out of his coalition, Rep. Zach Space. That means only three of the seven Blue Dogs on the committee have signed on. Despite this agreement, I am still of the opinion that the bill, in its current form, has little to no chance of becoming law.

The bill will have now passed out of three House committees. The Blue Dogs are still not all on board. If the Energy Committee is an indication, slightly more than half are still voting against the bill. The liberal wing is also not that happy with the new bill. It's unclear how many of the full chamber will be lost when it comes to a full vote. You're probably looking at between 25-30 Blue Dogs that will vote against this bill. Only 39 Democrats can vote against the bill and still have it pass. (if the Republicans vote in unison against it) So, passage out of the House is by no means a certainty.

Things are even more murky in the Senate. There, there isn't even a bill yet. Right now the bill has to walk a very tight rope between the liberal and moderate wing of the party. It has barely enough support to pass out of the House. Democrats can only hope for that kind of "success" in the Senate. Then, it still has to be reconciled and maintain that support.

I haven't even started talking about the month break yet. Now, lawmakers will go back to their districts and hear from their constituents. The bill is a lot less popular in the country than it is in the Democratic caucus. Furthermore, we'll have two more jobs numbers before there is a vote. If we're still losing 400,000 or more for the month of August (numbers that would come out the first Friday of September), then, in my opinion, all hope for passage of health care reform this year would be lost. The economy would be judged to still be in free fall and there'd be no confidence in any of the president's agenda at that point.

Support for both the president and this bill is falling and the momentum is against it. It's months before it winds up being law at best. So, between now and then, something must change to turn around the momentum. So, the message will need to be recalibrated, if you will, or the economy will have to show a remarkable turnaround. If not, the bill, as it stands now, will still not pass.

Nancy Armstrong RIP

I received very sad and tragic news yesterday. On Wednesday, Nancy Armstrong, who blogged at Ms Placed Democrat, was found dead at her home in Wichita, Kansas. Nancy and I allied on some stories about ACORN. I got to know her in the last month or so. She broke several important stories on the subject including the corruption in St. Louis I referenced on occasion. She broke several other stories including connections between ACORN and the Obama administration and was never credit for it. She told me that such recognition wasn't as important as the truth coming out.

Both Nancy and her husband were veterans of the military. She is survived by her husband and two children. Nancy was full of life with many fascinating plans, including a potential run for Congress, and so her death is a total shock to everyone that knew her.

I only got to know her in the last month or so and so I might not be the best person to write a eulogy. I can say that everyone that I've spoken with that knew her well is totally devastated. I enjoyed every conversation I had with her and I know that I will miss her. To her family and friend, she will be in my thoughts and prayers. May you rest in peace Nancy.

The Cash For Clunker Debacle

With the loan modification program the problem so far is that the program is so complicated, confusing and convoluted that it's hard to get any loans approved under the program. As such, a program that was supposed to save millions of homeowners from has saved a fraction of that. The cash for clunkers program has a totally different problem. It's so lucrative and straight forward that it's exceeded demand and is now out of money. This was supposed to be a $1 billion program in which car buyers traded in their older cars for new fuel efficient vehicles and received a $4500 credit from the dealership that would be applied to the new purchase. The program was supposed to last until the fall. It appears to have run out of money in four days.

Now, dealers are scrambling to get their money. Dealers would give a credit to the buyer and then go to the government to get that same $4500 back. If the $1 billion has run out and a dealer still hasn't received their money from the government, they're stuck. Furthermore, all the major car companies have taken out significant ad time for this program. Now, all of that is on hold.

Meanwhile, dealers are scrambling to make sure that they receive their money from the government. After all, the so called "clunkers" aren't worth anywhere near $4500 and if they don't get their money from the government, most of the cars they sold under the program would have been sold at a loss. Now, the program has been official suspended, indefinitely, as of midnight.

So, now a program that dealers and car makers thought they would be using for months is cut off in a matter of days. There are already law makers that are calling this a shining success. If you give anyone a good enough deal, they will take it. In this case, the government was literally giving a billion dollars to anyone who wanted to buy a car.

Of course, this was a success. People were getting a $4500 subsidy from the government to buy a car. That doesn't mean it will stimulate the economy. If you want to put money into people's pockets, just cut their taxes. Instead, the government came up with a scheme that would do something similar only in a much more confused way. Now, after overwhelming sales for five days, the whole program is confused and in chaos. A lot of car dealers will be left holding the bag on worthless cars they gave a $4500 credit for. That's not necessarily stimulative. A lot of car makers will have spent money on ad buys that are no longer valid. That's not necessarily stimulative.

Morning Market Report

There's breaking news. The Gross Domestic Product number came out and the economy contracted by one percent over the second quarter. (April through June) The consensus number was that the economy would contract by 1.5%. This is the most promising economic news in months. This is the fourth straight quarter of contraction which used to be a technical definition of a depression. (though most people don't consider that the definition anymore) Also, with a h/t to a reader, the first quarter GDP was revised to a drop of 6.4% from 5.5% originally. Of course, expect this number to be adjusted as well.

So, it's perplexing that the major indices have lost value since the announcement an the Treasury bonds have gotten better. The Dow, S&P, and NASDAQ were all up about a half a percent and now they are down slightly. Meanwhile, the Ten year Treasury Bond is now at 3.58% whereas it was trading at 3.64% before the announcement.

According to CNBC, this may be a clear case of buy on rumor and sell on news. While the numbers were better than expected, it appears that traders were already expecting them. The market has gained more than ten percent in about two weeks, and so it's possible that a better number was necessary to keep the momentum going. Either way, expect some volatility today.

Meanwhile, oil is trading down at $66.25 after testing $67 per barrel before the number came out. The Dollar is down against most other currencies though somewhat marginally. Against the Euro, the Dollar is down .31%, it's down .01% against the British Pound, down .17% against the Japanese Yen, and it's down .04% against the Canadian Dollar.

Stock indices were up across the board in the Far East and the exact opposite in Europe. The Hang Seng in China was up 1.68%, the Japanese NIKKEI was up 1.89%, and the Straits Time Index in Singapore was up .89%. In Europe, the British FTSE was down .27%, the DAX in German was down .64%, and the Spanish index was down .41%.

In individual stock news, Chevron is the biggest story. Its earnings fell 71% and they were weaker than estimates. Estimates had their earnings at 91 cents a share and they came in at 86 cents per share. Earnings were "only" 1.75 billion Dollars in the quarter. General Electric is also up after a Goldman Sachs upgrade.


All information here is meant for informational purposes and not meant as an endorsement of an investment and shouldn't be taken as such. I am NOT a licensed investment professional and all investment strategies should be made on a personal level.

Thursday, July 30, 2009

Video, Quote, and Word of the Day


to assert as true

I write down everything I want to remember. That way, instead of spending a lot of time trying to remember what it is I wrote down, I spend the time looking for the paper I wrote it down on.
Beryl Pfizer

The Drip, Drip Toward Infamy

Today, the New York Times provided a report that confirms what a lot of people have suspected.

Manny Ramirez and David Ortiz were among the 104 major league players listed as having tested positive for performance-enhancing substances in 2003, lawyers with knowledge of the results told The New York Times.

The two were key members of the
Boston Red Sox World Series championship teams in 2004 and 2007.

The lawyers did not name the substances Ramirez and Ortiz tested positive for, The Times reported.

On Thursday, before the Red Sox-Athletics game at Fenway Park, when Ortiz was asked about the 2003 drug test, he told The Times: "I'm not talking about that anymore," he said. "I have no comment."

This latest revelation should put to rest any belief that Ramirez' recent positive test was an anomaly. As for Ortiz, if this report is accurate that means that his entire career has been manufactured. Ortiz was a marginal player until he arrived in Boston in 2003 and his stats exploded. To put it into perspective, in all his time in Minnesota, seven years, he only had 57 home runs total. He had 31 homers in 2003 and 30 or more for five straight years in Boston. Yet, his time in Boston coincides with this positive drug tests.

This indicates that Ortiz was a marginal player that struggled to make a major league roster. Then he began cheating and he wound up being a perennial All Star. Much like Eric Gagne, there is now strong evidence that Ortiz manufactured a career and a life by cheating. If the timeline is accurate in both the Mitchell report and in this latest revelation, then both were marginal players, began cheating, and turned into perennial all stars. Both wound up in the record books, made tens of millions, and Ortiz even won two World Series titles during periods when they cheated. (again assuming everything is accurate)

To put this into perspective, this latest revelation should makes both World Series titles by the Red Sox totally corrupted and thus ought to be voided. Both Ramirez and Ortiz were the two heavy hitters in the middle of that line up for both titles. If they cheated to produce their numbers, then how else should we treat those titles.

The problem with all of these after the fact revelations is that in reality almost everything that happened in the fifteen years or so that steroids were prevalent renders almost all results worthless. If we knew the full truth, then we'd likely find out that major stars on almost all World Series winners were cheating. If cheaters were major contributors to a World Series title, how can it be judged as anything but tainted?

For baseball, this all couldn't be happening in a worse way. The sport would like nothing more than to move forward. Instead, we are treated to random revelations that remind everyone just how corrupt it all was for years. Unfortunately, the whole thing is much deserved. The sport pretended that none of this was happening when systemic steroid use lead directly to more homers and that lead directly to more fans. Now, some would like to move on and forget that anything happened. Of course, that's impossible. Baseball reaped the financial rewards of mass cheating in the form of more fans. The powers that be took on a see no evil hear no evil approach. The sport is now in an untennable position. Fifteen years produced so much cheating that everything that happened at the time is ultimately rendered worthless. All records and championships are rendered meaningless. How does the sport move on from there? The sport would like to put that inconvient fact behind it quickly but instead we have a drip, drip of bad news that comes out and it reminds us all just how bad it was.

Blogging as Propaganda

Today on the conservative blog, Hot Air, had this story about initial weekly jobless claims. The story's thesis: this new report is further evidence that Obama's employment strategy is failing. The story points out that jobs report was up 25 thousand jobs from the previous week. The story does mention that jobless claims are down but dismisses that as inconsequential.

Put away the streamers and stop the chorus from singing “Happy Days Are Here Again,” at least for a while. Bloomberg reports that initial jobless claims rose again last week by 25,000 as more that 584,000 Americans applied for unemployment benefits for the first time. While the four-week average of initial jobless claims dropped, this increase hints at continued escalation of the national unemployment rate:


We may be seeing less firing, but we’re still seeing plenty of it. More than a half-million people had to apply for unemployment last week, which means that we’re not seeing new jobs created.In fact, I’d challenge the notion that we’re seeing less firing. The four-week average hit 559,000, and last week’s number was 554,000. The latest figure will push the average higher in the next couple of weeks, which is what happens when the rate of claims increases.

Now, this story is peculiar on many levels. First, jobless claims is a very technical economic statistic. Unless you cover it regularly, you shouldn't draw any conclusion from it. After all, it comes out every week. How much could something that only measures a week's worth of activity tell us? If you are going to make analysis about jobless claims, you should be reporting on them regularly. That's not what Hot Air does, they only report on jobless claims in random times. No doubt those times match up with bad news for President Obama. Here's what the piece at Hot Air didn't mention. This is the fourth week in a row that jobless claims are under 600,000. It is, however, the second straight week they have increased. So what does that mean? Your guess is as good as mine which is why I wouldn't draw a conclusion from this week's numbers one way or another. So, why would Hot Air draw a definitive conclusion on a random weekly number? It's because the conclusion is much more propaganda than opinion based on fact.

Conservative blogs were doing something similar with the monthly jobs numbers for a while as well. Here were the job losses from February to May of 2009, 710,000, 663,000, 539,000, and 345,000. Now, there's a pattern there and that pattern was that things were improving. (that pattern was of course broken in June when numbers when the Bureau of Labor and Statistics reported a loss of 477,000) If you were to report the jobs numbers honestly, you would have to acknowledge that things were getting better. That's especially true following the May numbers. That's because not only did they show a marked improvement from April, but they beat estimates by over one hundred thousand jobs. How did the same Hot Air cover those numbers? They selectively isolated the unemployment rate, which was higher than expected, and focused on that.

The unemployment numbers for May hit earlier this morning, and it looks like Barack Obama didn’t save many jobs at all. Despite claims from both Obama and VP Joe Biden that the Porkulus package had saved 150,000 jobs, unemployment went up another half-percent to 9.4%, setting a new record for the past quarter century. Unemployment rose across a broad spectrum of demographics, too:

Of course, no one could honestly analyze the May jobs numbers and conclude they were bad or bad for the president. They improved by about two hundred thousand from the previous month and they beat estimates by more than a hundred thousand. Anyone who at the time was pushing a narrative that these numbers were evidence of Obama's failing economic policies was engaging in pure rank propaganda.

Liberal blogs are of course notorious for engaging in rank propaganda. Daily Kos once touted that Olbermann had beaten O'Reilly in the ratings. They never mentioned that on that particular day Olbermann appeared on the flagship NBC station while O'Reilly was on cable. For years, liberal blogs would cite any source, no matter how obscure, that claimed that Bush lied about anything: Iraq, the economy, the GWOT. It was the liberal bloggers that couldn't get enough of the so called "Downing Street Memo" which purported to prove that Bush lied. Of course, this memo was actually the opinion of a single official in the British Intelligence service and not a fact as the bloggers claimed.

The issue of polling is another way in which both sides of the blogosphere engage in propaganda. It's usually done when polls are isolated that show a particular side more favorably. For instance, Republicans have come to treat Rasmussen's polls as the gold standard. That's because Rasmussen's polls have always found Obama's support to lack that of most other polling. Now, that doesn't mean that Rasmussen is wrong, and I've referenced Rasmussen's polls before as well, but isolating a Rasmussen poll and using it as the thesis of a story is totally misleading. So, of course, liberal blogs have taken to attacking Rasmussen.

Some commentators on the right have been pointing to an interesting number that
has been coming from the Rasmussen daily tracking poll, which Rasmussen bills as the "Presidential Approval Index," which Scott Rasmussen only began bringing out
in late 2008. The key questions then are: What is this number, and is it a valid measurement of real popularity? In an interview today with TPM, Rasmussen defended the index's validity against some harsh criticism, saying that intensity of opinion -- the true figure measured by his index -- does indeed matter.

The thing to remember is that this is not simply subtracting all the respondents who disapprove of President Obama from the people who approve. Instead, Rasmussen takes the numbers who strongly approve or disapprove, and then performs this math. As of today, that index number is -10, compared to an overall rating of +1 in Rasmussen's daily tracker.

It would seem at first glance that this number can skew negative -- that is, the people who disapprove of a president are inherently more likely to feel strongly about it, compared to a certain level of lukewarm support for a president. For example, the
2004 exit poll put George W. Bush's strong approval at 33%, to strong disapproval of 34%. But his overall approval was 53% to disapproval at 46%, and he was re-elected 51%-48%.

It's very dubious to have a blogger question the professional judgment of a pollster. Josh Marshall of Talking Points Memo blogs professionally. Meanwhile, Scott Rasmussen polls professionally. I would trust Rasmussen's judgment over Marshall's for the validity of the poll.

To me it's dubious to create a narrative based on polling to begin with. It's even more dubious to focus on one poll, whichever side you are on. Real Clear Politics has a collection of polls that continues to show solid support for the president however it also shows that support has significantly eroded over the last few months. Focusing on polls appears to be beside the point. If health care doesn't pass, the president's poll numbers will fall precipitously. It won't merely be Rasmussen that shows bad poll numbers but everyone. If, on the other hand, the economy turns around, and especially if health care passes, even Rasmussen will show positive numbers. So, why the fixation on polls? It's because there are so many out there that a propagandist can always find a poll that will affirm their pre determined opinion.

Unfortunately in two plus years of blogging I have come to the conclusion that for the most part most bloggers are much more propagandists than they are journalists. Many more bloggers use their blogs to push an agenda rather than to report. They mask opinion that are dressed up to appear as facts. Ironically enough, blogs sprouted in large part because citizens believed that the MSM was engaging in this very behavior. As it turns out, most bloggers are no better than the media they despise only they don't write nearly as well.

Hubris and Naivete Are Bring the President Down

I don't know the president and so I want to be careful in making character observations. That usually requires reading some one's mind. Instead, I want to analyze his actions which I believe speak for themselves. Right now, health care reform is on life support. If that doesn't pass, it will also spell doom for cap and trade. Without either initiative passing, the president will face mid term elections in which we'll have near double digit unemployment, near two trillion dollars in deficits, and no major legislative accomplishments. That will create a bloodbath for any Democrat running in November of 2010.

It's nothing short of remarkable that only six months ago President Obama had near 80% approval ratings. Now, he is about to be so politically damaged that he may never recover. How did this happen? In my opinion, it's a combination of hubris and naivete. The president exhibited his first fatal sign of hubris in only his second day in office. That's when he signed an executive order to close GITMO a year from that day. It's now clear that he had no plan to close it and the plans he had for it's closure were terribly naive. It's ironic and scary that GITMO hasn't yet affected him politically. That won't happen until early next year. That's when he will either force terrorists on towns and cities that don't want them or he will go back on his publicized promise.

Either way, proclaiming that he would close GITMO in a year with no plan to close it showed not merely arrogance but fatal hubris. It's exactly that sort of a public promise that comes back to haunt presidents. Yet, the president made it confidently in only his second day on the job.

When the stimulus was being debated, President Obama famously, in an exchange with Eric Cantor, proclaimed "I won so I trump you on that". The stimulus passed with only three Republicans voting for it in either chamber. By doing so, he took total ownership of all its effects. Had President Obama tried to incorporate some Republican ideas he would have split the Republicans. He would have gotten about half the Republican chamber to sign on. By doing so, they would have shared in its effects. Now, he owns its effects. As such between the ballooning deficit, the growing unemployment, and the stagnating economy, the President alone is being held responsible. Had he tried to include Republicans their ideas would have been included and they would have shared responsibility for its effects. That he didn't is another sign of both political hubris and naivete.

The president also totally misread the political landscape. The president was elected on a moderated message. His most famous line was "I do what works". He was supposed to be post partisan, post racial, and pragmatic. Yet, he's governed as a liberal if not far left. Did he really think his mandate was to move the country this far left? Did he not understand the theme of his message? The president furiously denied the National Journal's poll that rated him the most liberal Senator in 2007. He fought hard to present an image of moderation. Yet, his entire agenda has been liberal to far left. How did he think this was going to work? That's both full of hubris and naivete.

Then, there's the price tag on all of this. Brit Hume made an excellent point about this. By passing the massive stimulus, he made it harder to pass any other big spending item. He moved forward with a $787 billion stimulus even though he had a trillion dollar health care bill and a three and a half trillion dollar budget he still wanted to pass. Did he really think that he could pass all this spending all at once?

Because the stimulus was so expensive, the president made a promise not to allow health care reform to add to the deficit. As such, in order to sell health care reform he must raise taxes on someone. A marginal tax increase on soda, cigarettes, or beer won't be enough. He'll have to raise some one's margins on their tax rate. That's rarely popular and just as rarely that becomes law. Walter Mondale ran on a platform of raising taxes. He lost 49 of 50 states. Did President Obama really think he'd be different? Such an assertion is both full of hubris and naivete.

Then, he let the Congress write the details of the bill. He merely set out broad parameters. Congressional leaders are entirely made up of far left liberals. So, what kind of a bill did he think would come out? Did he really think the public at large would like a bill framed by the likes of Henry Waxman, Nancy Pelosi, and Ed Markey? Does the president really not realize that despite his election the country is still center right not far left? So, when far left folks are the major players in crafting legislation is he really surprised the country is rejecting the legislation?

Did he really not understand the make up of the legislature? Between the Congressional Black Caucus, the Congressional Hispanic Caucus, the liberals, and the Blue Dogs, the Democrats are a very loose combination of parts. Trying to craft legislation that will appease enough of them to get a majority. Yet, despite this fact, the president not only made health care reform, the most complicated piece of legislation in decades, his first major priority, but he had the liberal wing write it. Did he really think that the moderate Blue Dogs would just roll over when presented with a big government takeover of the health care system? The legislative mess we are seeing now is entirely due to the complete lack of planning done in March, April and May. Where were the Blue Dogs in negotiations when this bill was just being crafted? Because they weren't included in that, they public opposed it when it was released. Was the president really surprised by how this played? If he was, it's another sign of both fatal hubris and naivete.

Going forward, the president will either learn his lesson or continue to exhibit both hubris and naivete. It's very simple. His liberal agenda is done, it's over. It has no chance of passing and if it does it will be roundly rejected by the public.

The president has a chance to right the ship. It should be clear to him that his liberal agenda isn't going to work. He can allign himself with the Blue Dogs and the Republicans and pass energy reform, health care reform, and education reform with that alliance. It won't look anything like what he wants currently, but if he's truly for "what works" then he has a path to get things done. If not, he will continue to exhibity fatal hubris and naivete that will ultimately doom his presidency.

Walmart, the Olympics, and the Chicago Way

Two local stories I have recently been covering, the Olympics and Walmart's proposal to put a store in the Chatham neighborhood, have finally crossed over and affected each other. Yesterday, Alderman Richard Mell (the father in law of former Governor Rod Blagojevich) decided to move the decision on Walmart's proposal from his own Rules Committee to the Finance Commitee which is run by Alderman Ed Burke. The City Council is ready to break until September. The Internation Olympic Committee will make its final decision for 2016 on October 2nd. Alderman Burke characterized to the Chicago Sun Times the chances of a vote on this matter prior to October 2nd this way.

I doubt that it will.

Alderman Burke also made it plainly clear what the problem with the proposal is.

Chicago is a strong union town...They can build 14 stores here. All they have to do is make a commitment to the rights of working men and women in Chicago to organize.

Walmart, as I've pointed out, is committed to providing 500 UNION jobs to build the store. Walmart, however, resists unionizing its store employees. Of course, this whole thing has been much more about perception than reality from the beginning. The unions are a critical part of Daley's Olympic coalition and he's been able to keep labor peace in preparation for the bid vote. Wal-Mart's approval would jeopardize all that and create unneeded chaos in anticipation of the vote.

Meanwhile, a poll conducted on July 27th found that not only did nearly 80% of residents favor the Walmart but it was favored handily in each and ever ward, including those run by Mell and Burke. In fact, the worst performing ward was the 37th which had Walmart favored 57-35, and that's the ward where this proposal fared worst. (incidentally Burke's ward favored Walmart 7014 and in Mell's ward Walmart was favored 62-25) That should put some context on Alderman Burke's statement that this is "union" town. The results show that the folks want the jobs, union or not, and they want the cheap groceries, clothes, and other retail items that the Walmart store would sell.

What Alderman Burke is really saying is that this is a union City Council. There's no doubt about that. In other words, what Burke, Mell, and Daley are really saying is that in order to play ball with them you must be ready to unionize. The fact that the building a 150000 square foot superstore on any area that is now dirt is economically stimulative by any measure is beside the point. The politicians of this city have their allies and those allies are against Walmart. That's really all that matters. This isn't about good policy, good economics, or listening to the people. Instead, it's about pleasing a constituency even if that constituency represents a 20% minority of all the citizens of the city.

If you read the tea leaves though, this is also the most cynical of political stunts. Walmart will get its Chatham location later or sooner, mostly later, but they'll get it. There's too much media attention and there's too much public demand for it. The council will just stall and delay long enough to appease their major constituency, the unions. More than that, they'll stall them long enough for the IOC to have its vote. Once Chicago is chosen in 2016 then the unionize can stomp and shout and it won't matter because the city has already been chosen. That's really what this is all about. This Walmart proposal threatens a major player in the Olympic bid and so their proposal must be delayed long enough for the Olympic bid to be decided. After that, the politicians will likely throw the unions under the bus in favor of public opinion. The politicians will eventually do the right thing, but first the IOC must vote on the Olympic bid. Welcome to the Chicago way.

Morning Market Report

Yesterday, the major indices were changed only marginally again for the second day in a row. Today, however, all three look up nearly a full percentage point at the open. The Dow will likely open above 9100 and the NASDAQ might test 2000 before the end of the day. There's going to be a lot of earnings released today. Cigna, Kodak, Walt Disney and Exxon Mobil all report earnings today.

At the same time, Treasury bonds are starting to have their rates inch toward critical levels again. The ten year is pushing 3.7% this morning. The yield spread is 2.52% as the two year has shown much quicker rise in its rate than the ten year over the last week or so. The two year is now trading at 1.17%. That's after a lukewarm auction a couple days back started the weakness.

All major indices in both Europe and the Far East were up. The Hang Seng in China was up .49%, the NIKKEI in Japan was up .51%, while the Straits Time Index in Singapore was up 1.23%. In Europe, the FTSE in London was up 1.53%, the DAX in Germany was up .78% and the Spanish Index was up 1.23%.

After a few days of losses, oil is trading up this morning currently at $64.64. The Dollar looks to be trading down against most major currencies this morning. Against the Euro, the Dollar is down .06%, it's down .65% against the British Pound, and it's down .68% against the Yen.

There's two pieces of breaking news. The weekly jobless claims came out. They rose a bit more than expected however they have stayed below 600,000 people every week of July.

The number of Americans filing claims for jobless benefits last week held below levels seen in late June, before auto-related distortions set in, indicating firings are slowing as the economy stabilizes.

Applications rose by 25,000 to 584,000 in the week ended July 25, higher than forecast, figures from the Labor Department showed today in Washington. More than 600,000 claims were filed every week last month. The number of people collecting unemployment insurance decreased for a third week.

Meanwhile, Exxon Mobil came out with its quarterly earnings and they missed the mark.

Exxon Mobil Corp., the largest U.S. oil company, reported a third straight drop in profit after shrinking demand for diesel, gasoline and natural gas pulled down energy

Second-quarter net income fell 66 percent to $3.95 billion, or 81 cents a share, from $11.7 billion, or $2.22, a year earlier, Irving, Texas-based Exxon Mobil said today in a statement. Per-share profit excluding legal costs related to the 1989 Valdez oil spill was 84 cents, 15 cents below the average of 16 analyst estimates compiled by Bloomberg.

My analysis:

It looks to be another wild day on Wall Street. I believe that the couple days of mild changes are over.

Wednesday, July 29, 2009

Health Care Reform is Still on the Ropes

Just as Henry Waxman seemed to appease the center with a deal with the Blue Dogs, that same deal has a potential of a "rebellion" from the left.

House Speaker Nancy Pelosi spent half of Wednesday finalizing a deal with the Blue Dogs — and the other half quelling a brewing rebellion among progressives who think conservatives have hijacked health care reform.

Liberals, Hispanics and African-American members — Pelosi’s most loyal base of support — are feeling betrayed after House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) reached an agreement with four of seven Blue Dogs on his committee who had been bottling up the bill over concerns
about cost.

The compromise, which still must be reconciled with competing House and Senate versions, would significantly weaken the public option favored by liberals by delinking reimbursement rates to Medicare.

One of the concessions that the Blue Dogs were able to negotiate was a weakening of the "public option". This is a cause celebre among those on the left, and certainly the far left. With it weakened, it's unclear how many of them will vote for the deal, and there's a lot more liberals in the caucus than there are Blue Dogs. So, it appears to coax the middle, Waxman, Pelosi, et al may have lost the left.

Furthermore, the deal in the Energy Committee was cut with only four of the seven Blue Dogs on the committee. That's enough, if Dems hold everyone else, to pass it out of the Energy Committee. It's still unclear how many of the full 52 Blue Dogs are on board with this deal. It's even less clear just how many liberals will be held with this deal.

So, ironically enough, this deal might wind up meaning less votes in the Democratic caucus. It points out two significant problems. The first is structural. This shows again the problem that Dick Morris pointed out first. The Democrats are a collection of factions and it's nearly impossible to craft legislation that will appease them all. (or at least enough of them to get a majority) Between the Congressional Black Caucus, the Congressional Hispanic Caucus, the Blue Dogs, and the liberals that's a lot of people to keep happy. It turns out that it's too many people to keep happy and the Democrats simply can't find a majority on any piece of legislation.

Even more troubling for those in charge, it appears that there is no leadership. How in the world did Waxman secure this deal without making sure the liberal wing would be on board? Furthermore, if the public option is a deal breaker why is Baucus negotiating a coop in the Senate? Even if Baucus figures out how to make a deal with his committee and gets it passed out of his committee, the liberals clearly wouldn't be on board. It looks as though the Democrats aren't talking to each other. People are making deals without knowing the numbers. That's chaos and a total failure of leadership.

Earlier, I said that this deal got them some momentum back. I'm changing my analysis. This deal is symptomatic of the total chaos that the Democrats are governing with.

Video, Quote, and Word of the Day


the highest point

At bottom every man knows well enough that he is a unique being, only once on this earth; and by no extraordinary chance will such a marvelously picturesque piece of diversity in unity as he is, ever be put together a second time.

Friedrich Nietzsche

Council Submissions

Council submissions are up.

Council Submissions
The Provocateur – The Definitive Dossier on the House Health Care Bill (Pages 1-500) Part
Wolf Howling - Gates & The Politics of Race
Joshuapundit - Bigotry In Basic Black
Rhymes With Right - Time To Fix The Texas Social Studies Curriculum
Right Truth - Advice to Sergeant Jim Crowley
The Glittering Eye - Is Technology Responsible for Rising Healthcare Costs?
The Colossus of Rhodey - Common sense on the Gates arrest
Mere Rhetoric - One Jerusalem Conference Call With George Gilder: Israel Is The “Crucial Battlefield For Capitalism In The World”
Soccer Dad - It’s the speeches stupid
Bookworm Room - Make me Well
The Razor - Waging Lawfare: A Call To Arms
Non-Council Submissions
Submitted By: The Provocateur – Dick Morris - Socialism Doesn’t Work-Even in China
Submitted By: Wolf Howling – Wendy Kaminer @ The Atlantic - Law Students Flunk Academic Freedom 101
Submitted By: Joshuapundit – Michael Yon - An Artery Of Opium, A Vein Of Taliban
Submitted By: Rhymes With Right – Rge Free Market Warrior Blog - NOW WE ARE THE STORY
Submitted By: Right Truth – Digger’s Realm - DHS Launches New Website – Top Stories Include Saving Bald Eagles
Submitted By: The Glittering Eye – Heretical Ideas - Is Barack Obama An American Citizen?
Submitted By: The Colossus of Rhodey – The Daily Beast - The Man Who Let Mengele Get Away
Submitted By: Mere Rhetoric – Ludwig von Mises Institute - The Second Coming of Keynes
Submitted By: Soccer Dad – - Obama insults the entire medical profession
Submitted By: Bookworm Room – American Thinker - Hoven’s Index : The First Six Months
Submitted By: The Razor – Dave Price – Dean’s World - Choice and Risk

Deconstructing the Corruption Between Senator Conrad and Countrywide

In mortgages, anything can make a difference. The same person could qualify for a loan if the property is a single family unit and get denied if that becomes a townhome or Planned Unit Development. A loan could hinge on whether or not a condominium has four stories or less or five stories or more. While standards became quite loose over the previous five years, it's important to understand that tens of thousands of rules exist in the mortgage world. Everything I just described concerns rules for RESIDENTIAL properties. Commercial properties are a totally different world.

The two types of properties are explained by their names. Residential properties are done on properties in which people live. Commercial properties are properties are bought and sold mostly for commerce. When it comes to multi units, the break point is clear and it's defined. Four units and less are residential properties. Five units and more are commercial properties.

When it comes to commercial properties, the loan done is a totally different animal from a residential loan. Not only are rates two and three points higher, but the terms are almost always a variable rate, with a pre payment penalty, and often a balloon payment at the end. None of those things are common on a residential loan. Terms are only one difference in the two types of loans. In a commercial loan, a borrower is usually asked for at least three years of their full tax returns. In residential loans, a w2 borrower can usually get away with their last two w2's. Furthermore, a rent roll is required on a commercial property along with leases. A residential loan only requires the leases. Commercial loans also require significantly more detailed appraisals which can start at $1000 (and run to $5000 and even more at times) whereas the residential appraisal will usually cost $300-$400. Finally, commercial loans require much greater down payments and much lower loan to values on refinances than residential properties.

Yesterday, it was reported that both Senator Conrad and Senator Dodd were aware of their sweetheart loans with Countrywide. What was mentioned in passing were the details of one of the transactions by Senator Conrad. On one occasion, Countrywide treated an 8 unit property as a residential loan. Senator Conrad downplayed the favoritism.

Conrad's spokesman, Chris Gaddie, said Monday that the senator "never asked for, expected or was aware of loans on any preferential terms" and has "worked overtime to set the record straight."

"He went with Countrywide simply because they already had his financial information," Gaddie said. He added that a Countrywide official had told Conrad that "it is not unusual for them to make exceptions for good customers if they could sell the loan in the secondary market. We now know that they did sell the apartment building loan in the secondary market."

This statement is not only peculiar but a total falsehood. The only question is whether Conrad is perpetrating a lie on the voters, Countrywide is perpetrating a fraud on another bank, or Countrywide lied to Conrad. First, it's very peculiar to have a borrower speak about the secondary market. I don't know too many borrowers that know their loans are sold in the secondary market. Those that do don't care. So, why did Senator Conrad care enough to have his spokesperson point it out in downplaying the favoritism?

That's not answerable yet because Conrad hasn't elaborated on this and no one has asked him directly. That said, an eight unit property would NEVER be included in a portfolio of residential loans to be sold in the secondary market if everything was done legitimately. I don't believe that this loan was sold, but if it was, then either the buyer of the package that included this loan was incompetent or they were defrauded. In fact, I wrote a piece about just such a fraud involving a package of small business loans. Presumably, Countrywide gave the Senator favoritism because they wanted something. Whoever bought this loan, among a package of loans, wouldn't be expecting the same sort of quid pro quo. If they did, then we're dealing with all sorts of corruption. Either way, if this loan really was sold, as Conrad's spokersperson suggests, then that sale must be investigated by both the SEC and Justice immediately for fraud. That's because a commercial property was done as a residential loan. If a bank did this loan this loan this way, that's their business. If they sold it, they better have disclosed that or it is fraud.

Most media is reporting that it was Countrywide's rules that limited residential loans to four units or less. That's misleading. That's a mortgage rule. As such, this commercial property would be included with residential properties in a package that is only supposed to be residential loans and properties. That would be fraud and it would serious and significant fraud. If Conrad's spokesperson's statement is accurate, they have accidentally informed the public of massive fraud.

Another possibility is that Countrywide lied to Conrad in trying to explain why they were giving him such a bargain. Finally, Conrad may just be lying to the public. Either way, there's no way this loan was sold in the secondary market if that transaction was done legitimately.

The loan was only $96000 and so the monthly savings were likely only $300-$400 per month. The savings are not the issue. This was a refinance and so Conrad was probably familiar with the process of financing a commercial loan. He had already financed this property at least once, and so it's hard to believe that he didn't know just how good a deal he was getting. Doing a commercial property as a residential loan is not some small giveaway. This breaks a clear, straigthforward, and standard rule that all mortgages are supposed to follow. Never, during the most obscene times of the mortgage industry did banks ever allow for eight units to be financed as residential properties. That Conrad's loan was given such special treatment is something that must be investigated fully. A bank doesn't violate such an important rule without expecting something tangible in return. So, the question remains what did they expect and what did Conrad give them.

Some Quick Early Thoughts on the House Health Care Agreement

So far, we know a lot less about the reported compromise between Blue Dogs and the Dem leadership on health care bill in the Energy Committee. We know that the Blue Dogs on this committee have announced that a deal has been cut. We know that under this deal the price tag of the bill will get cut by $100 billion over the next ten years. We know that there will be more emphasis on hospitals in rural areas. We also know that companies with payrolls of $500,000 and less will be exempt from being mandated to provide insurance. There will also be some changes to the public option though those changes aren't clear.

Here's what we still don't know. We don't know when any health care bill will be voted on the full House. The Blue Dogs have gained a commitment not to have a full vote before the break. The current plan is to vote on it in September after the House comes back from break. Of course, in political terms a month and a half is an eternity and anything can happen prior to that. We also don't know the details of the bill that will come out of the Energy committee. Most importantly, we don't know what if anything will come out of the Senate.

The only bill that has been released in detail is this House bill. The only full released bill is nothing short of a monstrosity. It includes at least ten new government regulators. It creates a health care exchange that will be regulated by one of these regulators. All health care providers will be forced to be part of this exchange if they use or provide insurance in their business. As such, almost the entire health care field will now be regulated by a yet created new government regulator. It includes regulation and rationing of cancer care, end of life care, and even electric wheelchairs. It forces audits on any company or individual that self insures. It mandates the government to see patient records, bank statements, and tax records. It even sets salaries for doctors. These are just a few of the "highlights" of this monstrosity of a bill.

So, if what comes out of the Energy Committee is largely a mirror of what is now the only full bill, with the changes mentioned earlier, the Blue Dogs will have betrayed the principles they have professed to believe in. They will have been exposed as much more Democrats than fiscal conservatives. The current bill is not fiscally conservative. The changes made will not make it fiscally conservative. For instance, the Blue Dogs screamed that they wanted to see more in the bill to "control costs". Yet, there's ZERO in the House bill, so far, to deal with tort reform. The hundreds of billion spent in unnecessary tests to protect doctors against potential lawsuits are NOT currently addressed. If the Blue Dogs sign onto a bill without tort reform, they will have betrayed their fiscally conservative principles.

Politically this is a small victory for the President but it is still very small. No bill will be voted on in either chamber before the August break. That means that at least two more sets of jobs numbers will come out before the vote, and the legislators will go home to hear from their constituents before voting on any final bill. If the bill doesn't change markedly from the current version, they will get an earful. The rationing, government control, and ACORN giveaways are only now being analyzed. The changes that the Blue Dogs received will be marginal outliers if the final bill continues to include the basic tenets of the current House bill.

So, the Democrats and the President have extracted a change in momentum but I still believe it is short term and temporary. The trend continues to be against health care reform. It doesn't appear as though the Democrats have any desire to really moderate health care. Until and unless they do, health care reform will not happen. It remains to be seen if what comes out of the Energy Committee will be real moderation or merely window dressing. That will determine just how close we are to passing health care reform.

The Velocity of Money and the Chatham Walmart Proposal

I have spoken on more than one occasion about the velocity of money. The velocity of money is essentially how many times a given dollar is spent during a fixed time period. During periods of economic contraction, like now, velocity of money is low. That's because people are scared and they hoard every dollar they can get their hands on. In my opinion, the key to any stimulation is to increase the velocity of money. Once velocity of money increases the economy will recover.

Right now, Walmart is sitting on tens of millions of dollars that the company has earmarked to build and operate a store in the Chatham neighborhood of Chicago. If that store is given the go ahead to get built, Walmart will immediately sign several project managers. That team will move forward with acquiring all appropriate permits. Once those are secured, Walmart will break ground on a 150,000 square foot superstore. Building this project will require hiring about 500 UNION contractors, construction workers, electricians, plumbers, etc. Those companies will have to buy equipment, parts, and material. The folks hired will have to get to work somehow. They will have to eat lunch in the area.

Then, once the store is built, there will be 400 people hired to operate it. It will sell everything under the sun and will attract thousands of shoppers daily. Now, let's think about this. The current scenario has Walmart's money sitting in a bank account. How quick is the velocity of money in that scenario? The second scenario has that money being spent on labor, parts, equipment, etc. It is a scenario in which those hired will themselves need to buy parts and equipment. It will mean that 400 people currently sitting at home will be going to a job everyday. They will either drive costing gas or take public transportation putting money into the coffers of the city. In either scenario, they will be spending more money than they are now as well as receiving a paycheck.

I haven't even begun to discuss the velocity of money created once the store is built. There will be electricity, gas, and water bills that will all be paid. There will be 500 new paychecks to receive. All those people will need to come to work. So, they will spend money on either gas or public transportation. (unless they walk which some will) With more money in their pockets, these employees will spend more money on things they need and want. I haven't even mentioned the enormous velocity of money created by Walmart increasing their orders of goods to stock the store and then having those goods get bought.

The velocity of money increase in building and operating this Walmart superstore is exponential. Tens of thousands of businesses and individuals will see business transactions in crease as a result of it being built and operated. Instead, right now, only two entities see any transactions, Walmart and the bank their money is at.

It sounds so simple. What the city, and country, need right now is to increase the velocity of money. We need people to spend and invest more. That's what this Walmart proposal would do, and it would do it in an enormous way. Unfortunately, a theoretical increase in the velocity of money does nothing. So, until the politicians in Chicago brush up on their economics, the velocity of money that this Chatham store would provide won't happen.

My One and Only Post on Birthers

I never really worried about the so called controversy of th birth of President Obama because I am no fan of conspiracy theories. In order to believe that President Obama wasn't born in Hawaii, you not only have to believe that a conspiracy is being created involving an entire state's bureaucratic apparatus, but you also have to believe that President Obama has been lying, or lied to, since he was a child. After all, he's maintained he was born in Hawaii since he was a kid. Either he was claiming this lie long before he wanted to be president, or his entire family lied to him about his place of birth.

I haven't followed the dispute closely however there is a birth certificate on file that was released. Birthers claim that the one released isn't the official birth certificate and claim there is a longer form that is supposed to be on file. The state of Hawaii says that the form in question is no longer available because the state went paperless about seven years ago and that form is no longer on file.

The so called controversy is not the issue. If you believe in conspiracy theories, this one is one you will enjoy. The problem is the conspracists are a cancer to anyone around them. If birthers gain any sort of mainstream attention they will decrease the legitimate criticism of President Obama. That's because any criticism will be tied to the conspiracists and dismissed as illegitimate.

The question is why the controversy is gaining attention again. Lou Dobbs started it last week by doing an entire show on the controversy. Of course, Dobbs is watched by about four people so his broadcast on its own didn't cause new media attention. His show lead to Politico doing a series of stories on the issue. Since then, O'Reilly covered it once and plans on covering the issue again. Politico claims that birthers are an issue that Republican law makers have to prepare for. They create a political conundrum for politicians who have to straddle between signing onto a conspiracy theory and alienating part of their base. Politico also claims that a birther leader has stated that Republican leaders are supporting them.

I haven't attended enough Republican townhall meetings to know if birthers are becoming a mainstay. Though, this particular confrontation has become a viral sensation.

It's very possible for a small group of people to look larger by simply being noisy. I doubt that "truthers" account for any more than a handful of the public at large and the Republican party. They can certainly appear more mainstream by showing up at townhall meetings like the video and speaking up.

What is clear is that the whole movement is nothing more than a corrosive cancer to the Republican party and conservatism in general. The more actual power and influence it gains the worse it is for the Republican party. Any mention of this conspiracy theory only goes to the perception that Republicans are unfairly attacking the president. Right now, the president is ready to implode all on his own.

The only thing that will save him is the implosion of his opponents. Being attached to this conspiracy theory is one way for the Republicans to implode. So, while I don't believe the movement is anything as large as the perception being created by Politico, the perception that they are infiltrating the party is something for leaders to be concerned about.

Party leaders are caught in a difficult position if media attention continues. Coming out forcefully against the conspiracy only gives it legitimacy. Saying nothing raises questions that they believe it as well. The best thing is for this movement to back under the same rock it was under until about a week ago. It's unlikely that current media attention will be anymore than a passing fad. So, the best thing to do is for everyone to ignore the current media attention and wait for it to go away. Hopefully, no one encourages these folks as that's the only thing that will keep them active.

Mayor Daley + 2016 Olympics = Gasoline + Fire

If the old adage is true that absolute power corrupts absolutely, then the last thing the all powerful mayor of Chicago needs is the Olympics to preside over. The ability to control every aspect of the Olympics is nothing more than sending a devious kid into a candy store with money for our mayor. The budget for the games, currently, is roughly $4.8 billion. It includes the building of 16 new venues. A new 70,000 person stadium will be built in Washington Park for the opening and closing ceremonies. (and then summarily torn down after the Olympics though not before creating irreversible damage to the park)Michael Reese hospital has already been sold and planned to be torn down to build the Olympic Village. It will consist of redesigning nearly all parts of the city.

The mayor of Chicago, Richard M. Daley, already runs this city much like an electoral monarch. The city council is little more than a rubber stamp on any issue he deems important. Examples of "close" elections have Daley winning 70-30. In the city of Chicago, Daley is a lot less like a mayor and much more like a King. Now, we're going to give him a project, lasting eight years, the size and scope of which we've never seen on this scale in this city since the fire of the late 1800's.

In 1995, the mayor announced plans to build Millenium Park. That project ran four years behind schedule and cost about four times as much as it was originally budgeted for. That project was also about one twenty fifth the budget of the Olympics.

Our mayor is corrupt and runs this city like a political machine. More than that, his corruption and addiction to power has grown more troubling and enormous over the last five years or so. There are those, folks I disagree with, that believe that some corruption is necessary to run a city the size of Chicago. Some point to San Francisco as a city without the sort of corruption of Chicago and point to utter incompetence. Yet, no one doubts that Daley's corruption has now crossed into a counter productive area.

The case of the sale of parking meters is an example of this. Desperate for cash, the mayor agreed to sell the rights to operate the city's parking meters to a private company. Rates for parking have gone up exponentially since then. The city has massive and unsustainable budget shortfalls simply from running the city's normal everyday business. Now, we're going to hand Daley the power of running the Olympics as well. That's simply a disaster in the waiting.

Let's make things clear. Chicago Olympics 2016 is technically a private organization that is supposedly independent of the mayor. Technically, though, the mayor just put his recently former Chief of Staff, Lori Healey, to head the Olympic Committee. So, any supposed separation is nothing more than a farce. Make no mistake, if the Olympics comes to Chicago in 2016, Richard M. Daley will be the CEO, CFO, and COO of its planning and execution.

He will have the full scope and power of the city's government apparatus to implement it all as he sees fit. Between income, property, and sales taxes, Daley will have a nearly unlimited tax base to operate the games. No one will ever have to know just how dirty and corrupt things are getting because tax increases will never have to be specifically earmarked for the Olympics.

The concept of TIF's (Tax Increment Financing) is just one example of a way in which Daley can use the enormous size, scope and complexity of the city's government structure to control the Olympics and hide corruption. TIF's cap the amount of property taxes that go to their intended purpose: schools, trash removal, etc. The rest goes into a slush fund for the mayor to use as he sees fit. So, Daley can raise property taxes in perpetuity and no one will ever know that it will go to feed the corrupt monster of the Chicago Olympics.

The 2016 Olympics will guarantee billions, if not, tens of billions in contracts that the city will have to dole out for construction, security, street cleaning, etc. There is already a standard operating procedure for how these sorts of contracts get doled out now. They go to Daley's friends, admirers, and allies. Only now the budget is infinitesimal compared to what it will be if the Olympics comes here.

Bringing the Olympics to Chicago will allow a corrupt mayor to run the city in the same corrupt manner only with an exponential new sets of resources, responsibilities, and powers. Is that really what the city wants? That seems to me to be pouring gasoline on top of a fire.

Morning Market Report

There's two pieces of breaking news. First, Yahoo and Microsoft have reached a deal for an Internet search partnership.

Microsoft has reached a deal with Yahoo for an Internet search partnership, ending years of back and forth negotiations.

The agreement announced Wednesday gives Microsoft access to the Internet's second-largest search engine audience.

It adds a potentially potent weapon to Microsoft's Internet arsenal as the software maker girds for an online assault against Google.

The partnership was quite as sweeping and expansive as analysts expected, however, an Yahoo's shares are currently trading down about 7% on the news.

Meanwhile, durable good orders were down 2.5%, the most in five months.

New orders for long-lasting U.S. manufactured goods fell more sharply than expected in June, notching their biggest decline in five months as demand for communications and transportation equipment slumped, a government report showed on Wednesday.

The Commerce Department said durable goods orders fell 2.5 percent, the largest drop since

January, after rising by a revised 1.3 percent in May, previously reported as a 1.8 percent surge. This was worse than market expectations for a 0.6 percent decline. Orders had advanced for two straight months.

New orders excluding transportation unexpectedly rose 1.1 percent in June, after climbing by 0.8 percent in May

There was about a $40 billion auction in 2 year Treasury bonds yesterday that was lukewarm. Treasury yields rose to 1.08% before settling at 1.10%. They are trading this morning at 1.10%. The rates on longer term yields are trading better this morning however. The Ten year is at 3.64% and so the yield curve between the two year and ten year is down to 2.54%.

Indices were mixed, marginally, yesterday. The Dow and S&P were down slightly while the NASDAQ was up slightly, .4%. This morning, all three are trading down this morning following the durable goods numbers. All three look like they will start down between a half and a full percentage point.

Meanwhile, in China, investors are worried things are going too well. A very strong Initial Public Offering for China State Construction Engineering Corp sparked worries that the market is headed toward a bubble. The Chinese index, up about 90% year to date, was down about 5% yesterday. The Hang Seng, another Chinese index, was down 2.37%. Not everything was bad yesterday in the Far East. The NIKKEI in Japan was up .26%, however that was the only index that was up. The Straits Time Index in Singapore was down .76%. In Europe, it was the reverse. The Spanish index was down .31% but that was the only index down. The FTSE in London was up .93% and the Dax in Germany was up 1.8%.

Oil is giving a lot back today. It's trading at $65.60 down $1.60 a barrel. The Dollar is mostly better today. It's up .33% against the Euro, .04% against the British Pound, and up .26% against the Japanese Yen.

My Analysis:

There's so much competing data that the market will humble most prognosticators. I still believe that the market will shave 10-15% in the intermediate term, through the end of the Summer, but right now the only thing that appears safe is volatility in the markets.

Tuesday, July 28, 2009

A Few Quick Thoughts over the Bruhaha Over the Bonus of Andrew Hall

There's a business story causing some stirs in certain circles. It involves the oil trader Andrew Hall. Hall works for a subsidiary of Citigroup. He made this subsidiary, and by extension Citigroup itself, about $600 million in 2008. According to his contract, he is thus owed $100 million. Now, he's looking to collect.

And after placing a few multimillion pound bets on behalf of his employer, he is said to enjoy practising calisthenics with a ballet teacher.

But now, British-born oil trader Andrew Hall is at the eye of a deadly serious storm over Barack Obama's attempts to rein in the pay of America's top

Hall, 58, is in line for a $100million bonus from his employer Citigroup.

Normally this wouldn't be a big deal. After all, Hall is only asking for what his contract specifies he should get. Yet, these aren't normal times and Citigroup is no normal company anymore. That's because Citigroup took about $30 billion in bailout funds. As such, before Hall can get his bonus, the pay czar, Ken Feinberg, must approve it.

This is now the world we live in. Hall earned every penny of his bonus. He made his employer, Citigroup, a lot more than the $100 million he asking for. Hall is an oil trader. He bought absolutely no mortgage backed securities. He engaged in absolutely none of the business that got Citigroup into trouble. Hall had nothing to do with any of Citigroup's problems.

In fact, Hall, one could say, was a bright spot in an otherwise cloudy year for Citigroup. Yet, that doesn't mean the bonus he is entitled to will actually be paid. First, the pay czar has to approve it. Never mind that this bonus is written into the contract that Hall signed with Citigroup. Never mind that if Citigroup is unable to pay bonuses, they will cease to function. Before this successful oil trader gets money owed to him, Citigroup must get permission from the government. Does anyone else see this as totally absurd and no environment for growth.

What's worse is that some in the media are trying to demonize Hall for demanding what's his. I saw Stephen Moore of the Wall Street Journal last night suggesting that such a massive bonus shouldn't be requested from a company that requested bailout funds. Of course, the only way to have voided this contract was for Citigroup to file for bankruptcy. That didn't happen. They received a bailout. That means the contract is still valid. Hall deserves what he earned, and he shouldn't be demonized for asking for it even if his employer begged the government for money.

Video, Quote, and Word of the Day


having flavor

Ambition is the path to success. Persistence is the vehicle you arrive in.

Bill Bradley
About: Ambition quotes.