Well for 1 the expensive homes arent selling at any "real" pace. The builders that ARE building 'expensive' homes are building far fewer than the 'value' providers out there BUT theyre making a killing on their profit margin so if 3 guys and a truck sell 10 homes in a year at 60-70K each in profit, whose to complain.

2 Im not sure that the consumer psyche is going to come back from this in regards to the strength of their money for quite some time.

3 I saw a report that said that future college grads (future being next 4 years) will have a very difficult time finding a job whose salary falls within 15% of their expectations.

What I mean is again, I do not see inflation on the horizon outside of the inflation we would welcome as being a sign of some growth. The opponents of this thought see inflation that would be substantial (I want to say hyper so we can claim winners and losers to this game) enough to cause problems.

In the end we'll all be able to say we were right.

DOLA

Market fell today below a significant support line for me so I'll look to slowly peel off my short position that I got hurt on the way up but I protected some of my small gains now on the way down I'll try to peel it off and then buy in on another tranche for my longs $/cost

That's an easy enough insight that I believe I've known for 15 years. But then what? Are we're going to A) drastically reduce the number of Americans who engage in unhealthy behavior or B) have the government question, test and weigh everybody each year (like Japan does) then C) kick the less healthy people off the rolls and not actually have national healthcare or D) charge these people more based of B?

I just can't imagine any system like this being enacted with teeth and winning the inevitable court battles. Especially once you consider that behaviors like obesity and smoking are correlated with lower incomes and thus the people who ostensibly need government healthcare.

Well, according to the guvmint inflation is and always has been under control.

Never mind that they changed the measurement countless times over the past three decades or so. Including dramatically changing how housing prices are reflected, constantly reconfiguring the 'basket of goods' and weighting, and excluding food and energy costs for 'volatility reasons' (I need to teach them a better definition of volatility apparently, sustained direction is called a trend!).

Anyway, to make a long story short, I've been observing much of what you describe SI over quite a period.

Any system that is based on "encouraging" healthy lifestyles has several problems. First, you are basically telling the insurance companies that their profits will come from keeping unhealthy people off the rolls. It will be too easy, at that point, for them to keep people off who have kids with cancer, etc. I know that it won't be done above board, but it will be done.

Second, it is so arrogant to assume that we now know what is healthy behavior and what is not. Eating steak and drinking whole milk 3 times a day used to help us "build strong bones and muscle." Now it apparently gives us all heart attacks. Fat used to be the enemy. Until carbs became the enemy. Oh, and you should cut down on cholesterol, but not the good cholesterol.

Basically, we are still learning about what is and is not healthy. I don't want my take home pay based on what "researchers" happen to mostly agree on at the time my policy is written.*

Basically, a good idea on paper, but a horrible one in practice.

*Assuming, of course, that we believe that health research can remain anything like objective when we decide to make it the lynchpin of the entire American health care complex. When billions and billions are at stake based on what is and is not "healthy," you are not doing science anymore.

Those of us that are dairy farmers continue to take an absolute bloodbath. We've been running about $4.00/cwt (100 lbs.) below the cost of production for the whole year. Futures don't look bright for the rest of the year. I've eliminated cows to the tune of about 50 below my capacity and amazingly am producing more milk than I was. Some processors are instructing farmers to dump their milk because they can't take it. But the processor we work with called on Saturday wondering where their milk is from us as they can't keep up with their demand and are making cheese 24/7.

We think we've hit the bottom, but it's not going to come back until next year at the earliest. Our banker is standing behind us, as he's said if we go under, the whole industry will have likely gone under with us. Others will not be so fortunate, but it's something that needs to be done.

Then you have these farmers from California milking 20,000 cows coming to Wisconsin telling those of us that milk 50-1000 cows that we need to reduce our numbers. Look in the damn mirror, moron.

Very much agree with this. Does anyone remember when eggs were bad for us? I sure as hell do. I remember being told that I can't have eggs because the cholesterol will make me sick. I was only about 10 when that panic was going on. While I agree that we need to be healthier as a nation, mandating any such type of behavior is not realistic, and borders on socialism in my opinion.

I understand and accept the argument that the science is inconclusive often. But you still have to go with the best information that you have. You can't just throw your arms up and say "it's not 100% conclusive so let's not even try". So, I disagree with the middle premise.

However, I really am discouraged by your first and last points, tho. I think you're absolutely right about people getting removed from the books. That's not much different than now, unfortunately. Any excuse to charge higher premiums or kick higher risks off of the rolls and modern insurance companies do it. So I'm not sure how much would change.

Then you have the issue of research funded by all sides muddling things. I don't know the answer to that, but, again, you can't just say "don't try"- it's too big of a problem and it's not as if the status quo is a good situation. We're trying to make the best of bad choices and just sticking with one because "it's how we've always done things" is not a good reason at all.

SI

Taking into account all of what I said in the previous post, how the hell is this socialism? It sounds like 1) you're just trying to use that as a 4-letter word and 2) trying to use it where it doesn't fit.

People want to take more risks, they should have to pay more to take those risks. No one is forcing you into the government health system and you'd still have other choices. Not only that but you're now expecting the government to do something inefficient so that they would be worse than a private system and probably would then come back and talk about how inefficient it was when your argument created the problem in the first place.

Insurance companies do all sorts of risk assessments before deciding on rates for people so how is the government doing it socialism? You have the freedom, the right to choose your behaviors. You also have the rights to pay the consequences for said behaviors.

You want to smoke? Fine- no one's saying you can't, so long as you're not encroaching on other people's rights to be smoke free (i.e. at a residence, in a smoking area, etc). But you also get to pay extra per month for that luxury because we know that down the road you're going to cost more.

SI

Countries do this all the time throughout the world - its not 'socialism' its comon sense imho.

A society exists to ensure that its members prosper, pure and simple.

Its part of making people think about their choices and part in compensating society for others actions.

You doubt this - look at taxes on cigarettes and alcohol in most countries they're taxed higher than other products because they have known possible negative side-effects*.

A lot of European countries use this sort of thing as a carrot as well as a stick - for instance some items in England are sold 'tax free' because they're viewed as 'essentials' rather than luxury items (for instance its deemed unfair to tax Tampons for women or vital medicines).

Incidentally can anyone decrying 'socialism' please explain to me the pure capitalist utopian vision they have - I presume the poor starve to death because in a capitalist society there are no tax breaks on charity because there are no taxes, I also presume that the suppliers of vital components to peoples lives (water/electricity etc.) will obviously be the 'new rulers' of that society because there are no restrictions on their prces or any determination of how they decide to supply areas of society ...

All countries are a hybrid of socialism and capitalism because neither in their pure form would work, some countries are more pro-socialism and some more pro-capitalism but none is near either extreme. I personally would love a socialist society (ala Star Trek) but mankind simply is far too selfish (myself included) to have such a thing at present - even when crisis's like the present ecomonic one show a huge glare on the inadequacies of chasing the almighty dollar rather than looking to use the worlds resources to help everyone.

*It can also be argued that this is also because they're addictive and the goverments know how to milk a cash cow.

As a resident of Massachusetts, I am forced to either have one of their approved insurance plans or pay extra on my taxes.So you assume the only reason people donate to charity is for the tax breaks? Interesting.

I can't speak for Marc, but I personally assume an overwhelming majority of companies do it for this reason.

SI

That would be a money-losing strategy.

If we want to assume that companies and the people that run them are 100% immoral, then it makes far more sense to assume that it's done as a form of cheap advertising.

When I go to the Idaho Shakespeare festival, we have to sit through five minutes of thanks to the sponsors (followed by applause for each comapny). Micron puts a ton of money into almost every non-profit here - it's how I hear that brand name the most (and it's done in a way that in theory, doesn't turn us off to that brand, like a bad commercial might).

This is assuming there ARE other choices. With no choice but government health care, is that not a variation of socialism? Everyone has the same health care regardless of what their condition (or lack of) is? Everyone pays the same premium and has the same deductable? Sounds like socialism to me.


I agree with you guys on most of these issues. I do not believe in a pure capitalist concept, it is far-fetched and unrealistic. What I don't believe in is somebody mandating to me what I have to do in regards to my personal choices, such as health care and what/how I should eat. People who smoke SHOULD pay higher rates for life/health insurance than those whom do not. The day that we all pay the same rates and receive the same care regardless of our life choices will be a bad day for this country.

My company just announced they are shutting down our plant in Ohio and things don't look very good for the 3rd/4th quarter in 09. Our hope is that mid 2010 will be better, but it looks like this economy could stay in a tailspin for a while:

SUMCO Phoenix to close Maineville plant - Business Courier of Cincinnati:

Not really, as we hardly ever hear about most corporate giving.

I'd say tax implication are the #1 motivation for most corporate donations, followed by personal interests of decision makers, with the advertising aspect being a distant third motivator.

In cases like you mention it's definitely a consideration but that's not been the core of most corporate giving I'm familiar with.

edit to add: By #1 motivation, I guess I'm really talking about "would the donation still happen if not for the tax break". In my experience the answer to that is most often going to be no. It's nearly always a factor, with the other factors playing a role in steering where those donations end up.

I agree with your edit, but it still doesn't make sense to me from a financial perspective - it's not like you're getting more in tax breaks than money you spent on the charity. It's a financial loss. Without some other signficant benefit, there would be no reason to do it.

Who said there is going to be no other choice? I know there are a bunch of fake doomsday scenarios out there but they just aren't realistic.

Is UnitedHealth walking away from $82.89B in revenue last year? Wellpoint's (BCBS) $61B? How about Aetna's $27B? Cigna and their $17B? Those first couple came in at 21 and 32 on last year's Fortune 1000, and one of those are going to suddenly fold up shop? No, it just means they have to be more competitive pricewise rather than the horrible gouging they do now.

SI

Do you think the companies exist to be a moral force? As I understand it (as someone with only a very basic understanding of finance), their goal is to maximize their wealth. Giving money away in exchange for nothing would not contribute to that goal, therefore they must perceive the money spent to be an investment with a positive return greater than the money spent (good PR + tax breaks = x dollars).

That's why I made that assumption.

I was talking about the good PR/cheap advertising aspect of this - because I fail to understand how giving to charity creates a net gain for a company without that.

Agree with all of these points. My only argument is in regards to other health care choices. Do we really believe that a government sponsored healthcare system is going to endorse more than one company? While it is possible, I am not sure if I see it happening. Too much lobbying going on for this to make sense. This is one of the reasons I do not see this type of system coming into place in the U.S. Too much capitalist B.S. going on for these companies and the government to see what might be best for the people. While I think the care we receive is top-notch, I believe the expense factor for the blue-collar worker is pretty high, especially if he/she has a family.

Pretty much agree with you on all accounts here

SI

But thats one of the (many) misunderstanding people in America seem to have about the European healthcare system.

For instance in England everyone pays a pittance (comparative to what you pay in America for coverage) and recieves sensible coverage - ie. prescriptions are free if you're poor or a nominal cost if you're not.

You can have anything important done on the NHS fairly quickly and its covered by the contributions of yourself and others - HOWEVER certain things will take longer to get on the NHS than if you went private (which is still possible), for instance want cosmetic surgery (outside of say burn scars etc.) - its possible on the NHS but good luck convincing your doctor its required for you to have a fulfilled life ....

The other thing which differs somewhat in the UK to America is the approach taken to dentistry etc. - over here everything is about them 'looking good' as far as I can tell, whereas in the UK its about the teeth being healthy not about filmstar smiles ... you can get filmstar smiles in the UK, if again you pay privately for them ...

So to summarise to me it isn't about taking away your options they're still there - its about providing a humane level off care to everyone without a society regardless of income or stature.

He's a witc-- err Communist! Burn him! :D

SI

The opening passage from his Theory on Moral Sentiments, the companion book to Wealth of Nations. Companies are still run by people.

And yet the United States spends about 4 times as much per person on health care than the UK does. There's something missing in the "let's just switch to the European model" analysis.

One could argue that with our mega-corporations, it takes a certain set of characteristics to reach the top of said businesses and charity and compassion usually aren't in that skill set and, in fact, run counter to many of the skills required.

SI

Charity and compassion are actually called greed and ruthlessness in the U.S. One could argue that while these are inherently poor qualities, they do provide for some success in the business world (except for Enron) and most definitely a compelling discussion on FOFC. :)

I'd argue that greed and ruthlessness are not good for success in business, see the absolute failures that are the banking, auto, and housing industry.

Greed can be good, it can also be very destructive... often the latter more than the former, which is why it is probably labeled as a vice rather than a virtue.

In terms of health care, the reason we pay 4 times more per person that in Europe probably has to do with a large chunk of that being taken for making some shareholders rich, and paying for lobbyists to control the government from doing anything about it. I don't think we even need to go to a total socialist system for health, we need to just get things back to common sense... each dollar going towards making people better, and a reasonable return for those providing the service. Instead we have vast sums of money going into a bureaucracy (the health companies, not the government) and only a portion of it actually goes toward the intended purpose (make people better) and the reward is often distributed much farther away from those that provide the service.

Insurance seems like its one of those things we should encourage competition to bring down prices and increase quality. I think right now anyone can point at it as a mess, if not borderline evil. Private business is not a license to print money and be an asshole, its supposed to be a system whereby customers choose the best option for themselves, they chose companies providing the best efficiency, lowest cost, and best service... and that cycle gives a positive feedback loop that improves overall quality and price combinations, while also generating profit.

Health care system is broken, it is not operating as a real economy, so we are not seeing any benefits. In fact, we are seeing massive costs. In reality, our system is as much a command economy as any in Europe, its incentive mechanisms are working in the same way (bloat-ocracy), but denying it with our 'capitalism is always better' koolaid means we are paying much for it, and accepting the massive costs to give an illusion of better service, but in reality it still only exists for those who can pay. We are obfuscating what England has made public for the opportunity to pay some insurance CEO millions of dollars for doing nothing at a desk all day.

I'm sure he plays a mean game of golf

SI

I believe you are confusing greed and ruthlessness with greed and stupidity. While I do not believe that greed and ruthlessness are necessarily good for business, there can be no argument that they are both traits that are entrenched in the business model from hundreds of years ago, and I do not personally see that changing in the near future.

What we need is a more proactive public, one that demands our tax dollars and health premiums be utilized in a responsible manner. I know this has been said numerous times in other threads, postings, water cooler seminars, web chats, and telephone conversations, but if we, as a nation of free thinkers, ever want our finances to get under control in this country, and for the pork barrel spending to stop, and numerous other things, we need to step forward and speak up. What would happen if everyone stopped buying gasoline? Who would suffer the most in that situation? Better yet, what would happen if we all stopped paying health care premiums?

Just as in professional sports, the little guy (a.k.a: the blue collar worker in this case) has not only been forgotten about, he has been ignored and stepped upon. As long as we allow it, nothing will ever change.

Insane prophetic post of the week (maybe year?)...

The issues of volatile world economies, corrupt governments, and greedy businesses will never be properly handled by humans. This is why we need to build bigger & better computers and computer software to evaluate, analyze, and judge compliance of our issues objectively and before they become "too big to fail" or "too late to fix". After all...it is our only hope to maintain our "lifestyle"...right?

Heh, this sounds much better:

IMDb Video: Terminator 3: Rise of the Machines

I do not doubt that greed and ruthlessness are entrenched in the system. I just think people think of the 'capitalism as competition' mantra way too much... competition is but one force within what is ultimately a system of efficient cooperation between actors.

I personally think the mentality I described a long time back as 'board room feudalism', greed and ruthlessness to the point where individuals spend more resources on maintaining position than on growth, will cause very sub-optimal economic trends. I even think organizations that break out of that cycle first have a chance to be the dominant players in a few decades.

As you say, I think the 'little guy' needs to step up his game and stop being a doormat... my bent perspective on it though is that those at the top will actually end up RICHER in the process. There will be more wealth in the pile, and in all likelihood they'll still have their entrenched positions at the top, so the personal pile that they claim on their own will be much larger.

That said, greedy and ruthless traits can help that process... as long as the individuals still have their sights on the long term end game (i.e. the biggest pile of wealth) and not on short term sub-optimal strategies (how can I keep my share price high enough to get my next bonus). Idolizing those traits in and of themselves is why I think we have a generation of the most incompetent scum leading our industry. I've never been so embarrassed as when I saw millionaires putting on their best beggar act in front of Congress asking for multi-billion dollar welfare.

Psst... dominant not dominate. It's a completely different part of speech ;)

SI

Madoff got 150 years in jail. NICE!

hxxp://news.yahoo.com/s/ap/20090629/ap_on_bi_ge/us_madoff_scandal

Bernard Madoff gets maximum 150 years in prison

AP – In this courtroom sketch, Bernard Madoff, center, is seated in front of some of his victims that spoke
By TOM HAYS and LARRY NEUMEISTER, Associated Press Writers Tom Hays And Larry Neumeister, Associated Press Writers – 9 mins ago

NEW YORK – Convicted Wall Street swindler Bernard Madoff was sentenced to 150 years in prison Monday for a fraud so extensive that the judge said he needed to send a message to potential imitators and to victims who demanded harsh punishment.

Scattered applause and whoops broke out in the crowded Manhattan courtroom after U.S. District Judge Denny Chin issued the maximum sentence to the 71-year-old defendant, who said he lives "in a tormented state now, knowing all the pain and suffering I've created."

Chin rejected a request by Madoff's lawyer for leniency and said he disagreed that victims of the Ponzi scheme were seeking mob vengeance.

"Here the message must be sent that Mr. Madoff's crimes were extraordinarily evil and that this kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll," Chin said.

The judge said the estimate that Madoff has cost his victims more than $13 billion was conservative because it did not include money from feeder funds.

"Objectively speaking, the fraud here was staggering," he said.

Chin announced the sentence with Madoff standing at the defense table, wearing a dark suit, white shirt and a tie, and looking thinner than his last court appearance in March. He gave no noticeable reaction when the sentence was announced.

He also showed no emotion earlier in the hearing as he listened to nine victims spend nearly an hour describing their despair. Some openly wept. Others raised their voices in anger.

"Life has been a living hell. It feels like the nightmare we can't wake from," said Carla Hirshhorn.

"He stole from the rich. He stole from the poor. He stole from the in between. He had no values," said Tom Fitzmaurice. "He cheated his victims out of their money so he and his wife Ruth could live a life of luxury beyond belief."

Dominic Ambrosino called it an "indescribably heinous crime" and urged a long prison sentence so "will know he is imprisoned in much the same way he imprisoned us and others."

He added: "In a sense, I would like somebody in the court today to tell me, how long is my sentence?"

When asked by the judge whether he had anything to say, Madoff slowly stood, leaned forward on the defense table and spoke in a monotone for about 10 minutes. At various times, he referred to his historic fraud as a "problem," "an error of judgment" and "a tragic mistake."

He claimed he and his wife were tormented, saying she "cries herself to sleep every night, knowing all the pain and suffering I have caused," he said. "That's something I live with, as well."

He then finally looked at the victims lining the first row of the gallery.

"I will turn and face you," he said. "I'm sorry. I know that doesn't help you."

Afterward, Ruth Madoff — often a target of victims' scorn since her husband's arrest — broke her silence by issuing a statement through her lawyer. She said she, too, had been misled.

"I am embarrassed and ashamed," she said. "Like everyone else, I feel betrayed and confused. The man who committed this horrible fraud is not the man whom I have known for all these years."

Prosecutor Lisa Baroni said Madoff deserved a life sentence because he "stole ruthlessly and without remorse."

The jailed Madoff already has taken a severe financial hit: Last week, a judge issued a preliminary $171 billion forfeiture order stripping Madoff of all his personal property, including real estate, investments and $80 million in assets Ruth Madoff had claimed were hers. The order left her with $2.5 million.

The terms require the Madoffs to sell a $7 million Manhattan apartment where Ruth Madoff still lives. An $11 million estate in Palm Beach, Fla., a $4 million home on Long Island and a $2.2 million boat will be put on the market, as well.

Before Madoff became a symbol of Wall Street greed, he earned a reputation as a trusted money manager with a Midas touch. Even as the market fluctuated, clients of his secretive investment advisory business — from Florida retirees to celebrities such as Steven Spielberg, actor Kevin Bacon and Hall of Fame pitcher Sandy Koufax — for decades enjoyed steady double-digit returns.

But late last year, Madoff made a dramatic confession: Authorities say he pulled his sons aside and told them it was "all just one big lie."

Madoff pleaded guilty in March to securities fraud and other charges, saying he was "deeply sorry and ashamed." He insisted that he acted alone, describing a separate wholesale stock-trading firm run by his sons and brother as honest and legitimate.

Aside from an accountant accused of cooking Madoff's books, no one else has been criminally charged. But the family, including his wife, and brokerage firms that recruited investors have come under intense scrutiny by the FBI, regulators and a court-appointed trustee overseeing the liquidation of Madoff's assets.

The trustee and prosecutors have sought to go after assets to compensate thousands of burned victims who have filed claims against Madoff. How much is available to pay them remains unknown, though it's expected to be only a fraction of the astronomical losses associated with the fraud.

The $171 billion forfeiture figure used by prosecutors merely mirrors the amount they estimate that, over decades, "flowed into the principal account to perpetrate the Ponzi scheme." The statements sent to investors showing their accounts were worth as much as $65 billion were fiction.

The investigation has found that in reality, Madoff never made any investments, instead using the money from new investors to pay returns to existing clients — and to finance a lavish lifestyle for his family.

In bankruptcy filings, Trustee Irving Picard say family members "used customers accounts as though they were their own," putting Madoff's maid, boat captain and house-sitter in Florida on the company payroll and paying nearly $1 million in fees at high-end golf clubs on Long Island and in Florida.

Picard has sought to reclaim ill-gotten gains by freezing Madoff's business bank accounts and selling legitimate portions of his firm. (Its season tickets for the Mets went for $38,100.) He's also sued big money managers and investors for billions of dollars, claiming they were Madoff cronies who also cashed in on the fraud.

The defendants include leading philanthropists Stanley Chais and Jeffry Picower — from whom Picard is seeking at least $5.1 billion alleged to have come out of victims' pockets — and hedge fund manager J. Ezra Merkin. All have denied any wrongdoing.

It's too bad nobody assassinated him.

Thought this was interesting. Macro view, easy enough for me to understand. Unfortunately only 1 of 6 is positive right now, but 5 of 6 are showing of getting better.

Kiplinger Economic recovery index
http://www.kiplinger.com/businessresource/recovery/

I do think there should be a death penalty for white collar crime. Yes, I do think white collar criminals would be deterred by it.

Obama gets the support of both Walmart and a key union for his health care proposal.

Obama gets ally for health care plan: Wal-Mart - Consumer news- msnbc.com

A friend of mine told me that yesterday and we were trying to figure out the angle. They certainly aren't doing this out of the kindness of their heart and I don't think they'd do it just for a seat at the negotiating table. So, what's the story behind the story?

SI

If they see reform as inevitable with the current political balance in Washington, then it makes sense for htem to make an early claim at the negotiating table to somehow influence the bill, while also getting some good PR.

I don't believe in the death penalty, thus I was hoping somebody would assassinate him. Kind of fucked up logic but I'll stand by it.

I've read somewhere that Wal-Mart is really good about educating their employees on what government programs are available to them, and makes sure they take advantage of them, so I could see them wanting this.

heh, I think that if they see the government option as better for employees they'll be able to 'encourage' a great majority of employees off of their books onto the governments perhaps even with a less attractive sumplemental program that saves them money while making it look better for the employee. {shrug}

So, yeah, up until today, I hadn't heard the term "jobless recovery" but this really explains what I've always said about the 2001 recession (I was too young to pay attention to the economy in the early 90s). It didn't seem like there was ever really any recovery- jobs kept getting shipped overseas and apparently we built our "recovery" on piles of debt.

SI

I'm very nervous about there being no jobs, unfortunately throwing around piles of money with little control is as likely to create a negative feedback loop as stimulate growth. If you can make all your incentives go green without having to hire people, you generally won't. That is what corporate welfare can do, but unfortunately it shocks the economy further into depression turning a decision to cut or grow based on profits, into a situation where you need to cut because of impossible costs.

Eventually it'll bounce out of the cycle, its hard to convince an economy there is zero growth opportunity when there is no production at all (because in the world of zero production the first one to make something wins by default)... similar to recovery from 'boredom', but a lot more pain comes from letting things fall to crap before turning around versus making the change while you still have strength.

We need jobs more than we need COMPANIES, the goons haven't figured that out yet. 5 inefficient (in terms of economy of scale) but active companies beats one dying hulk in terms of economic stabilization effect. It creates jobs even though their is less of the pie to split among the 'overhead' of stakeholders. As it is this GM experiment is some of the sickest garbage devised yet (sell out all the assets to some company theoretically owned by the government just sounds like a new version of the Nigerian email bank scam). Quit pretending its a capitalist system or its helping the people to prop these companies up the way we are doing, the method and motivation is not saving the economy but rather the deep pockets trying to grab an even bigger pie now that they've been scared a little.

I don't like the graph. The biggest leading indicator in my opinion is jobs, and they have continued to be rotten. When you have a massive infusion of capital from the government combined with a sustained super cutback period, of course some of the other leading indicators are going to point rosy. It only matters though if companies are encouraged to expand hiring and production, otherwise we are so soft that the smallest little thing can set off another drop.

Regardless of the merits of the data, that chart is a thing of beauty. NYT consistently has the coolest data presentations out there.

I'm a fan of a good visualization, but given the lack of data points on the axes, you have to go by their generic 'regions' (which I disagree with in general). What we are visualizing has been so abstracted out that even a 'happy swirl' may not mean what you think if it goes through the 'craptastic' region and turns south before it ever exits it.

Some visualizations are just paint by numbers formulae... a great visualization makes something beautiful out of data to make something apparent that may be hard to see from staring at a stack of numbers. I could make their visualization just by setting up a spirograph toy with a little variance, and it would be about as statistically significant as well.

Sorry, my inner stat brat is raging, I should shut up before I further embarrass meself!

Jobs always lag somewhat behind other indicators in terms of predicting a recovery in a recession though; until companies see an improving situation they tend to sit in 'safety mode' - its always a 'chicken and egg' scenario .... until companies see improvement they're reluctant to hire, until they hire people don't have the money to spend which means a recession is more likely etc.

As such while from a 'personal' perspective jobs are what matter - its GOOD that there are positive signs elsewhere as its these which will encourage companies to take risks, create jobs and hire people.

If enough large companies in each field start moving then their competition is compelled to act or look like they're being left behind - its the inverse of what we've seen in the last couple of years where every company has chased cost-cutting because others have.

I'm really worried about the jobs data. It was worse than expected last week and from my understanding, the stress tests only accounted for 11% unemployment. If we get to 10.5% or something, don't we start cutting eerily close to the margin of error on those? Do we see another bank or two become insolvent again? I know there are a lot of people pointing to signs of recovery but as long as people keep getting fired from their jobs, I just don't see it happening.

I guess the only good news about the high unemployment is that it'll keep the inflation hawks quiet for awhile.

My concern is that we are past the point where those other leading indicators occur that we start getting the jobs indicators coming in. As i mentioned back in January, I forecasted the upcoming bounce while all the financial gurus were in their depression streak (don't trust the media, they are so short term focused they are blind and no more intelligent than a loquacious parrot).

That bounce happened about where expected, and I've been waiting for the jobs to turn the corner... they are missing. Its understandable if they are a bit late, but I'm looking at a few looming problems and if they hit hard before businesses get their minds out of the gutter we could be looking at a real rough time before they naturally recover. With the level of government meddling, I'm afraid the natural mechanisms are being thrown off too much by the corruption possibilities.

People hire because its the best way to make a lot of money. If handout-o-nomics dominates though... without that incentive they might not do that first hiring round when they should, meanwhile the economy continues to decline, so the government greases the wheels even further... it continues until someone realizes it is absurd, but a lot of wasted time and money has passed in the interim.

Hmm ... should that be "People hire when it's the bet way ... ?

I mean, isn't there a distinction that we have to make there? And isn't it one that seems to be pretty relevant to our current situation?

Right now, seems to me that anyone holding excess inventory (and in some cases an inventory of anything more than 1 unit might be excess), the best way to make at least a little money is to hire no one & dispose of that existing inventory with as little cost of sales as possible. While making a little isn't as good as making a lot, it beats the hell out of losing any (or any more).

I guess what I'm getting at is that I don't see a surge in hiring being a smart play for any significant number of industries right now and I'm not really sure where making bad business decisions (which certainly played a role in getting us into this mess) is something that ought to be expected or even encouraged.

Yes, 'when' is the appropriate statement. It does not always make sense to hire people, and over expansion when it does not make sense can kill a company.

It also is a bad decision to continue to cut your company to the point where it cannot function. Yes, a lot of companies have crushing debt or other factors against them, unfortunately you cannot cut your way to a functional state in all cases. There is a level where it really is just a long lasting liquidation of the company on its way to bankruptcy. Sometimes expansion is the only way to escape a situation in the long term (particularly if you factor in debt, which is financed irregardless of how much resource and revenue chopping you go through, only a debt-free company can guarantee profitability by reduction down to zero).

I agree bad decisions have been the killer, but most of those decisions have been to focus extremely short term and obsessively follow trends over analyzing and controlling the situation. The bad decision is to follow a downward spiraling trend for too long, you might look like an idiot if you jump too soon, but you will be a certain idiot if you never jump at all (waiting until the recovery in a true capitalist economy means you are playing catchup against better positioned rivals that jumped).

Each firm has its own situation of course, my belief though is the pessimistic trend is non-optimal strategy at this point. If it goes on too long because the actors are ignorant it is guaranteed to be sub-optimal, it will eventually crash the economy.

For some companies right now is the time to expand in order to make it rich during the recovery. I can guarantee you the banks have that philosophy, even though they are using our money to do it.

Pretty good sentence there. Does a decent job of summing up the status of a lot of companies IMO.

dola, my original point was also that the incentives to hire are being eroded by the massive bailouts. So companies are further deferring the 'when' to hire because they have an alternative method for keeping their company afloat. All well and good unless the demand for their company existing at all drops to nothing because massive unemployment takes its toll on interest for those stocks of inventory.

Here's a pretty interesting read on the behind the scenes action at AIG FP, widely regarded as the trigger for the subprime meltdown.

Michael Lewis on A.I.G. | vanityfair.com

Even more doom and gloom

http://econlog.econlib.org/archives/...s_recover.html

dola:

FWIW, I might be silly, but I have faith that we will recover. I just thought that I would pass that along since I have been posting pretty much nothing but links heralding the impending descent of the heavens.

For a good decade+, our economy was based on us buying and selling houses to each other using money that we borrowed from China. Turns out that was not sustainable. It also turns out that it kept us from investing in actual sustainable economic activity. Why would we, when the easy money was in housing and the financial products related to it?

Now that, much like Richard Gere, we have no place else to go, I imagine that we will start to do what America and Americans have done for the last 200 years--innovate and expand and create.

Here's hoping that someone does not bump this in 20 years to make fun of me.

Innovators will be held back by everyone stuffing their money into the established and government porked up losers. Got a new car company to revolutionize transportation? Sorry, you are bought out or bargain basement competetion from the new debt-free, full-asset, GM with government invested interest. Sure you built a car at a lower price and higher quality, but GM can sell its shit-mobile at half your price because they have inventory and no need for true profits.

Got a new idea that requires taking out a loan? Enjoy our beautiful new high interest rate loans from banks told to 'avoid risky behavior', so they jump the rates that startups pay, while making the same exotic garbage deals they have been all along for billions with 'safe partners' (like AIG). Just get stock funding? Wait until the well-established power-broker wants to short your stock after you have been open two years and are finally making money. Nothing says free money like a high stock price that can be cut in half the moment you spread even the slightest fear that a company could go under (which most speculative new companies are always in fear of going under, that is how new investments are).

I think the biggest thing standing in America's way is that we are sitting by watching as the big players are pounding capitalism into the ground.

I read that too. Lewis is really one of the best writers on society today. He has a unique ability to tell a complex situation as an easy-to-read story.

I think one of the interesting aspects that this article as well as Matt Taibbi have brought up lately is how tied in Goldman Sachs was. That there was a huge conflict of interest and that GS hedged their bets that the government would bailout AIG. When you figure who was head of Treasury (as well as other major financial positions), it seems like a massive conflict of interest.

Well, the grand experiment is about to begin for GM. Alot of us was saying that the automobile companies should go into bankruptcy reorg. Ford stayed solvent, Chrysler was sold to Fiat, but GM went. Some parts suppliers went bust also.

GM is expected out of bankruptcy on Friday. Their shareprice right now is less than $1. Not sure what it will be on Friday. They had their chance to get it right and wipe the slate clean. I'm rooting for them.

GM’s path to leave bankruptcy cleared - Autos- msnbc.com

Wow less than a dollar? That makes me want to buy a thousand shares and just see what happens. I figure they've got to eff up pretty bad to not succeed, at least in the short term, given the sweetheart restructuring.

The shares quoted are for the old GM, not the new company which will emerge from bankruptcy. The old GM will likely still trade on the pink sheets while they continue to liquidate it.

After reading the first part of that story, I have to think there's a good chance that he was the author of another piece on the same subject I read, I dunno, quite a few weeks ago. It was much shorter but gave some insight into the work being done by the folks who were around for the dismantling. Either it was his also or else the style is strikingly similar, but it had the same unraveling the strings method & ability.

Hmm, how many people are going to walk blindly into that mistake?

Enough to keep it above zero apparently. :)

So GM emerges from bankruptcy and the lead of the wire service story catches my eye

... with ambitions of making money and building cars people are eager to buy.

I'm just having a tough time figuring out how they're going to make money selling cars at a price of $0 and that have no cost to run, apparently fueled only by happy thoughts.

Or is there some other type of car that people are "eager to buy" that I haven't heard about yet?

I'm not so much knocking GM here as I am the bad writing I guess, I just honestly don't know of anything that anyone is "eager to buy" at this point.

Here you go: Consumers' Favorites Vehicle Survey

Having favorites is different from "eager to buy".

I've got lots of favorites -- from music to movies to houses to cars to steaks -- but I'm not "eager to buy" any of them.

edit to add: I'm certainly eager to be able to afford them again, just not eager to buy them when there's more pressing needs competing for the same dollar.

I'm a little dissapointed that GM didn't go bankrupt and new and better options (rather than "New GM") didn't come to light. Where the fuck is Tucker, a man and his dream???

I know, I was deliberately trying to annoy you. :D

Anyway, I see that Dutch is reading the thread, so he can probably concur with you on the semantics.

Edit: this reply directed at JiMGA, not Dutch.

Whew, missed a close one thanks to you guys.

Beware GM Equity - The Faber Report - CNBC.com

Can we please get to work on financial regulations? These mothfuckers can't learn.

Dude if the stock market wouldnt have had it's rally (bear market or otherwise) they would be soooo fucked right now. (along with many others)

Ah, but they have learned...how to get rich taking unecessary risk and getting taxpayer money if it fails.

Doesnt matter when you're gambling with somebody else's money.

Actually, want to see the scarier one:

Terms of Service

The story just broke last week that Morgan Stanley is going to try and take some junk CDOs and turn them back into AAA rated bonds. It's the same #$^@ that got us here!

SI

Gotta have AAA rated junk, how else do you think you can swindle pension funds, 401k, and massive pools of 'safe money'?

The abuse is atrocious, and abuse is the name of the game, that is why I think discussion of a recovery is highly likely to end up as nonsense. Why play the difficult game of capitalism when outright theft is so damn easy?

We do not need mish-mashed 'securities' of any sort. You want to load up a system with an odd risk profile, make a damn portfolio with similar loads of AAA and junk. The only reason to securitize shit is so you can SELL it with false advertising to dead money, i.e. anyone who buys a fund. We don't need shit factories, honestly, just invest in some fucking real stuff for once. Idiots thriving off the 'there is always another sucker' concept, encouraged by an inept government and apathetic populace of sheep.

Hell, maybe we should just gut most of the financial industry, its sickening.

They are going to screw up the country so bad that I'll finally get super rich and won't be able to enjoy it because the next day the country will probably collapse.

Sounds like a damn good idea right about now. It's pretty clear this week between this story and Goldman Sachs that no one has learned a fucking thing from this whole mess except that theft is good and easy. I've been for all sorts of new "draconian" legislation since this whole mess started and I haven't seen word one. But, maybe it's just time to burn the whole damn house down and start over.

SI

This is my concern with the finance sector...and the elected legislators. I really think that all of these people are seriously out of touch with the general populace, as well as the seriousness of our financial issues.

Which is why the failure to even read the "stimulus" package just galled me more than the inevitable lack of "stimulus" it's provided. I'm not going to debate whether any of it was good policy (naturally some likely is, some likely isn't...most is likely unecessary IMO). But I would take issue with the deceptive nature of it being passed through as dire and could not wait 1 week to review.

This may belong in the Obama thread...but I have to say that while I was not for Obama in the last election based on perceived policy direction...I have been thoroughly disappointed in the way he has conducted governance more similar to the exact counterpoints he railed against. I doubt it was his idea to load up the "stimulus" bill with "non-stimulative" policy and then have everybody vote on a 1000 page plus document the same day it gets finished...but similar to Bush...he allowed his cronies in the senate to do it.

That's a new one. :D

We've talked a little about executive pay and this graph helps show how salaries rise regardless of profits.



This is from the WSJ story:

Good news. I can tell the grandkids that I survived the Great Recession.

Recession eased in second quarter, data show - Stocks & economy- msnbc.com

I don't know, I find that article more depressing than anything.

A made up statistic that is losing touch with reality (the GDP) shrank, but yay it shrank less than estimated (well what they estimated, lets not get into my estimate).

Later on they go on to say how it may take five to six years for a recovery in the labor market, because of it being a financial crisis and all... which to me screams stagflation. That is, the cost of everything is going up, but wages are screwed because companies can hold the threat of 'the economy' over everything.

Obama-style economic turnaround, bitches!

247,000 Jobs Lost in July; Rate Falls Slightly to 9.4% - NYTimes.com

:p

Nope. I'm not impressed with unemployment as a statistic anymore at this point in the economic cycle (and really in general for the most part). At this point it's likely just dropping because more and more people are dropping off the roles at the "still unemployed" end rather than in the "found jobs" end. I want to see a list of new hires, or jobs created, or whatever you want to call it, rather than an unemployment list where you stop being counted as unemployed after however-many months on the list and all.

Only when we start creating jobs and filling positions and putting people back to work will I start to think that maybe things are easing a little.

More stat-magic, ignore it.

Think of the economy as a giant machine. It has millions of parts.

You start wanting to cut costs on the machine, so you start taking away parts. However, there is a minimal number of parts required to keep the machine functioning at all.

What we are seeing is that, indeed, as you cut the hell out of that machine that eventually you run out of shit to cut. Eventually if there is anyone with half a brain in the economy, they realize that there is a void out there of lost productivity, and if they build up their personal machine they can grab up more market than expenses. Leading to my belief of 'eventually people get tired of sucking and they start hiring again'.

The problem is there is no guarantee that someone, or enough someones, have brains enough to realize it is possible to make money and start a net employment rebound. The capacity for stupidity, especially in leadership positions, is astounding.

As unemployment keeps growing the void becomes more obvious, so it is more likely for someone to try and fill it.... but I'd rather we not wait until the machine chokes up before rebuilding it.

Ha! Not a chance!

The political game machine lives and breathes on the angled stats culled from the mountains of data collected from the eggheads (sorry QS).

If the other side wants to say "OMG, unemployment over 9%! Armageddon!!!" then I'm sure as hell going to say "OMG, unemployment down 0.1%! Ponies and Unicorns!!!"

Seriously, take all of your reasoned approach and conclusions to economic data back to the economics thread where everyone can... wait... this isn't the "Obama" political thread?

Shit, my bad. As you were. :D :p :popcorn:

Or in other words, "Mission Accomplished!"

Boo-Yah!

Or we could listen to Nate Silver: FiveThirtyEight: Politics Done Right: Economic Headlines You Won't See on The Drudge Report

All right, let me try to make the point even more annoying.

The limit of jobs you can cut converges to zero as the number of total jobs approaches zero, if there are no jobs leftover, your rate of decline is zero, yippee, but... you are still FUCKED because you have no jobs!

So an increase of unemployment by 1%, say 200,000 jobs, after we already have LOST millions of jobs, does not impress me one fucking bit. We increase employment by 1%, say gain 200,000 jobs, then you can take credit for having done something. Right now Obama = fail, sorry if it offends your politics (I voted for him and hope he succeeds btw).

OK, I feel I need to apologize, SportsDino. I might not have been clear enough in that three of my last four posts (all besides the Nate Silver one) were me being silly.

Because it's Friday. And I've consumed an enormous amount of caffeine.

I promise to treat your good posts with the proper amount of respect again on Monday. :D

Get ready for another round of foreclosures! From the San Francison Chronicle(through CalculatedRisk)

Oh, I think next year will be the other V in the W, but Ive been wrong about this rally thus far in everything from Home sales to car sales, so WTF do I know.

No reason to make wild guesses about what the market will do. Being long with your eyes open is about the safest state to be in right now, it has been since March. Since early-March if you did nothing more clever than say the DOW is going to go up, you would have made 40% since then. If you sell on spikes and reload like I do, and have lucky timing you can make more (or make less), but its rough to constantly try and buck the trend.

Unfortunately, we are in a spot where stocks can do okay while the overall economy still stagnates. They are more an indicator of what can happen rather than a sign of what will happen.

I was wondering when you would pop up again. Don't see posts that often now that the economy has slowed into a state of "blah"

SI