Dead Cat Bounce or a Hint of Bull?

The equity markets some times experience good days even in the worst of bear times.  These up days are frequently just the dread dead cat bounce.  This label comes from the saying that even a dead cat bounces if you throw it.  You’re going to hear two things from me today; probably in two different posts.  The first is just a line by line look at the Obama and McCain approaches to the economic panic.  The second is the Paulson announcement to make $250 billion available to banks to help them recapitalize.  I’m watching some of the interbank lending markets unfreeze, so it might be more than a dead cat bounce.  There might be a hint of the bottom which would be something to celebrate.

I was trying to read this last night as well as a some literature on the Bank Capital Channel of Monetary Policy (something only an economist could love but is important in terms of looking at the possible outcomes for this move).  I unfortunately chose to do it at my local bar and became the immediate target of the shriek of the Obamatrons and all the usual stuff:  “racism, Palin is a c*nt, it’s okay for us to call her that because McCain called his wife that, no Obama NEVER said women get third trimester abortions because they’re blue, do you get all your information from fox news? racism, racism, racism.” I’m beginning to wonder if they hand out an instruction card with the koolaid on how to insult the unindoctrinated? 

Sigh, so I’m working on this for your this morning instead.  You’ll have to give me a wide berth as I try to do this in the peace and quiet of my house over coffee instead of red wine.  Oh, also, just so you know I am now Miss Perfect and Miss Know it all.  It felt like high school ALL over again.  I think they were trying to ensure that the other two ex-Hillary supporters who were resigned to voting for the “ONE” would not leave the fold with anything as meaningless as facts and the truth.  There was also a Republican and a Ron Paul supporter in the room to make things nice and interesting.  For some reason, I got the brunt of the abuse. I can’t tell you how many times I was told to just get over Hillary.

So, any way, here goes the girl with the glasses again.  While the market chews on the Paulson plan, I’ll start with my take on the McCain and Obama crisis plans in this post.

Obama’s plan seems centered on unemployment.  This is a bit odd because the problem at the moment is not unemployment for most of the country.  The only thing I can figure is this, combined with his plan to double the government’s loan guarantees for automakers, is a pander for votes in places like Michigan.  Since the rust belt is important to winning the election, and the rust belt is the only place where unemployment is above normal at the moment, I have to cynically say this has nothing to do with financial crisis but everything to do with the electoral college.

I think giving employers a $3,000 tax credit for each new hire to encourage job creation is a good economic policy.  At the moment, however it is not necessary and expensive.  Until it looks like unemployment in the country as a whole is going to be a problem, I’m sticking with my view that this is just a pander to folks in important swing states in a not so subtle disguise.

His second idea is just plain awful and would create incredible long term problems.  This is the idea that you should allow Americans of all ages to borrow/withdraw from retirementsavings without a tax penalty.  One of our biggest problem right now (long and short) is that folks are NOT saving enough for retirement. Pulling anything out right now ensures those folks will be worse off in the future.  Also, withdrawing funds from these accounts at the bottom of the market is like stealing future life style from people.  People that do not need to do this will be encouraged to do so and it will make their lives worse in the long run.  This is a stinker and I hope folks don’t follow through with it.  If you’re thinking about doing this, please, please don’t.

I’m more hopeful about Obama’s suggestion of creating a mechanism to lend monies to cities and states with fiscal problems if this is done in a reasonable, thoughtful way.  We’d need to see that current Treasury work in the markets is helping the municipal bond function and we need to be careful about exactly how the funds will be used.  I’m afraid this could be turned into an expensive giveaway to interests rather than a real problem solver.  For this suggestion, the devil will be in the details.  This is my same take on his proposal to allow struggling small businesses to apply for loans from the SBA’s disaster funds to the tune of $5 billion.  This sounds good on the surface and could help getting much need operating loans to some of the hardest hit players.  I’d like to see the exact nature of the terms, however.  You need to know what the terms of borrowing are and what kind of things the funds can be used for.  Also, is this for existing businesses or new start-ups?  The new-start ups would be highly risky propositions and subject to fraud.

Obama rehashed the Hillary suggestion of a 90-day moratorium on most home foreclosures.  This would be geared to folks that are trying to make payments or partial payments.  This is a good start, but again, it has to be followed by some kind of way to renegotiate the foreclosures or it’s basically just a few months grace.  Some details are needed on what to do with the frozen mortgages.  My hope is those details may be forthcoming, but I’m not holding my breath.

All of the Obama suggestions are very costly and there are no funding suggestions.  At one time he was talking about windfall profits on oil companies but given the state of the economy now, I doubt there’s going to be any windfall profts on which to draw.  The gas around here is running less than $3.00 a gallon.  I can’t help but think the record level profits of the oil companies are not going to be around the next few quarters.  Oil futures are about $80 a barrel right now, so my guess is no windfall profits to tax.  So, another dimension of all Obama’s points is where is he getting the money?  I always liked Hillary’s plans because they came with funding sources so they were grounded in realism and not promises.

The McCain Plan was introduced today with the Hillary suggestion of the Treasury Departmentbuying troubled mortgages at face value and giving qualified homeowners instead government-guaranteed, low interest mortgages.  I’m already on the record supporting this in earlier posts since I firmly believe the short term solution is to bottom house prices.  The mortgages would be based on the residences’ reduced value.  We need to focus here on the details of ‘qualified’ homeowners because it does not need to be done with speculators or vacation properties.  McCain has said there would be two possible funds for the valuation differences so I’m not clear which one he’s going for or if it’s giong to be some combination of both.  Basically, either the taxpayer or the lenders would pay the difference.

Several other of his proposals are pretty typical of Republican approaches which focus on tax reduction.  They are targeted tax reductions which is something I’m particularly big on.  This is different than just throwing money at the entire market and hoping some of it trickles down and sidewise.  McCain’s first proposal focuses on seniors (an important voting group) and allows them to withdraw from the IRAs or 401k’s in 2009 and 2010 while reducing their taxes to a flat 10 percent.  Since this only applies to those over 59, there are no penalties so it’s different than the Obama plan.  This is okay, since these folks ARE retired and a worktime of compounding is not something they will need in the future.  This plan would cost about $36 billion and I’m assuming it will be financed with deficit spending because there are no specified funding sources.  This would giving a few years of buying power which would be stimulatory to the economy.  It also protects seniors from any unknown problems.  It’s probably partially motivated to get seniors into the McCain camp but it would impact the country as a whole.

There are three other tax measures put forth by McCain.  The first is a 50 % reduction in the capital gains tax on stock profits.  It is currently 15% to 7.5% for a period of two years.  This plan has a price tag of about $10 billion.  If any one is getting many capital gains right now, I’d sure like to meet them.  This probably only benefits the Warren Buffet type and is a nod to Republican business interests.  The more interesting plan is the accelerated tax write off for stock losses.  Americans will be able to deduct $15,000 in losses for the tax years 2008 and 2009.  This is a change from the current $3,000 losses.  He would also suspend taxes on unemployment insurance benefits for both 2008 and 2009.  These targeted proposals may actually help the little guy who is panicking right now and pulling whatever money he has out of stocks.  It would definitely help any one that does become unemployed also.  I’m not sure how big the effect of these would be, but they are not bad ideas.

So, you can chomp on this while I go work out on the details of the Paulson announcement and watch what appears to be a stablizing stock market.  I’ll also go check for bulls, bears, and any bouncing dead cats.  Also, some earnings reports are coming out today, so that should provide some good information to the market.


None of the Above …

As this depressingly stupid but important presidential election drones on, I have to say I’m more inclined to opt out by the day.  There are simple truths that both campaigns are avoiding.  Perhaps it is true that common sense is a most uncommon trait.  Let’s look at just a few things my mother taught me that I thought was pretty much common sense.  I wasn’t sure if she got them all from Dear Abby or if they were under the collection of  old wives’ tales, but damned some body in these campaigns needs their mom to tape some old copies of Dear Abby to their bedroom mirrors.  Just like my mom did for me so that I would develop some common sense. 

First, I was taught that People in Glass Houses shouldn’t thrown stones.  That means if every one supporting Senator Barack Obama is going to criticize Sarah Palin for lack of experience, they better take a good long, hard look at the top of the ticket.  Which is worse?  An inexperienced Presidential candidate with a Washington Hack at the second position or an inexperienced Vice Presidential candidate with a Washington Hack at the top of the ticket?  You decide. 

Second, I was taught to not open my mouth when I don’t have a clue what I’m talking about.  Neither McCain or Obama seem to know enough about the economy that either of them can answer questions without sounding clueless.  Maybe I’m being hypercritical here since I am a financial economist, and what’s going on is right up my area of expertise, but PulEEZE tell me that one of these candidates had your basic macroeconomics and microeconomics courses somewhere on their college transcripts?  Oh, right, we have NO idea about that because Obama won’t release his … and McCain was busy crashing planes and trying not to be absolutely dead last in his class.  I’m not expecting a Rhodes Scholar for President, but … wait, we did have a Rhodes Scholar, as I recall, and things went pretty well then … maybe we SHOULD start asking for candidates that did their homework for a change.

Third, I was taught not to talk out both sides of my mouth.   McCain has evolved into a Teddy Roosevelt Republican who likes government oversight seemingly overnight.  None of his primary stump speeches would’ve lead any one to that conclusion.  Obama has taken so many sides on one position, I feel like that little green possessed girl in The Exorcist every time I hear another speech.  I mean, really, how many sides to a single issue can there possibly be?  Obama seems to find a new one with every new audience.

Fourth, i was taught if you keep on lying it increases your chances of being caught and that people really NEVER trust anything a liar says.  I don’t even know where to begin here.  The first thing thing that comes to mind though is the Obama interview with O’Reilly.  He just keeps brushing off those specious friends of his. They just folks he knows in his neighborhood.  That was it, these are the people in his neighborhood, in his nieghborhood, in his neighborhood … yes these are the people in his neighborhood, they’re the people that you meet each day.  I mean, right, we all have thousands of folks we know, and each of know at least one person who tried to blow up the pentagon and was sorry they didn’t blow up more buildings, another person who is in jail for corruption and fraud, yet another person who says Goddamn America and blames the country for 9-11 … sheesh, I know I’m highly odd, that I don’t have any friends like this?  and I mean… you do, don’t you?  Then there’s this week’s McCain thing: the fundamentals of the American Economy are strong and what I meant was the American workers are the most productive in the world.  Yeah, right, that’s not a non sequitur there.

Fifth, I was taught Birds of a Feather flock together.  Neither of these candidates can say they are outsiders looking in on the current financial crisis.  Senator Obama with his limited amount of time in Washington is the number two Senator to get funds from both Fannie and Freddie.  Penny Priztker is the mother of the subprime mortgage meltdown as well as his finance chair.  Half of his finance committee has major connections to most of the big players in the current housing bubble and investment banking blow up.  John McCain relies on Phil Gramm for advice.  Puhleeze!  You think we don’t know if you weren’t part of the problem you at least turned a blind eye to it?  Or were so busy on the campaign trail you wouldn’t even have known what was going on even if you read the news?

This has to be the worst set of candidates I have ever seen or heard of in U.S. History. Why can’t we just have some folks that show a little decency, wisdom, and common sense?  If we don’t get some primary election reform soon, I’m going to expatriate to some place that appreciates democracy pretty soon.  It’s a lost art form here. 


Hurricane Sarah hits the lower 50! MSM rushes to LOW GROUND!

I just spent a good week with nothing but a radio.   It was also broadcasting nothing but Gustav news 24-7.  So, i’m back reading the MSM and trying to catch up with the blogosphere. I feel like I’ve emerged from a cacoon to find the oxygen sucked out of the presidential campaign by Alaskan Governor Sarah Palin. While I was concerned with Hurricane Gustav, Hurricane Sarah was the story every where else.

It appears the press has spent the majority of that week vetting Palin.  I wonder where all that hyper-vetting was when we needed that done with Senator Barrack Obama.  Will they ever get around to checking out his relationship with all those Chicago thugs?  How about figuring out if he still holds citizenship in Indonesia?

Yesterday was a treat for those of us starved for some one who really did look presidential.  Hillary gave a great speech in Florida.  Too bad she was having to ride to the rescue of the hapless DNC candidate. The Obama campaign is now begging her to offset the huge momentum coming from the McCain campaign after the suprise vp pick.  Hillary has even taken on the white knite mantle in such low low places as Daily Kampf and Huffington Poop.  Ah, what could have been …

Obama looked positively starved for oxygen and tired on George’s ABC morning talk show to the point he said he was having to take hits for his “muslim faith”.  He was so completely unaware of his gaffe, George had to remind him he was a christian.  Meanwhile, Biden showed he may be part of the Washington problem, but at least he understands the issues by discussing the current bail out plans of Freddie Mac and Fannie Mae.  Biden is the ultimate Washington insider and there is absolutely no way the Obama campaign is going to successful repackage this canned ham.

McCain is just smiling and basking in the Palin glow as he enjoys a much bigger post-convention bounce than Obama.  He’s decided team campaigning sells well, and the power duo have been going from city to city while attracting crowds evoking the rock star label again.  It also looks like McCain has pre-empted the change mantra and is successfully riding the maverick pony with his new wild west sidekick.  Ah, the American Western, what a completely wild, wild image.Meanwhile, the NY Times says Obama’s fundraising is suffering from the same anemia shown by the candidate.  It appears there’s a max to Obamamania and it was reached a long time ago. 

Even Pumas have changed the conversation.  Overexposure abounds!Obama is so yesterday!  The focus in the PUMA movement has gone three ways now.  First, there are those intent on reforming the current democratic party and the process that keeps giving us losers.  The Denver Group has gone that direction.  I’m not sure if an outsider movement can overcome the most insider of problems, but more power to them.  We need to get rid of caucuses and reform the primary system for both parties.  This is an ambitious, long term goal. A second group is focused on Hillary and pressuring the senate to recognize her as senate majority leader.  This is again an outsider movement focused on an insider problem. I think we can all say that the democratic congressional leadership is a big disappointment.  It’s only real accomplishment has been earning congress a lower approval rating than President Bush.  What exactly does it say when you’re more unpopular than the worst president in history?  The third group has jumped on the McCain wagon train and will ride it until Hillary comes back into play again in 2012.  I’m not there with McCain and his dependence on fundie fanatics.  I think he can handle the presidency but I just can’t support irresponsible tax cuts and anyone who hangs with folks that take the bible literally.  I didn’t spend so much of my life sitting in university classrooms and studying science to turn my brain off in the voting booth. I just can’t hold my nose and vote for someone beholden to the religious right.

Personally, I think it’s important we start to focus downticket and ensure a reasonable group of senators and representatives will hit Washington to ensure that McCain’s Maverick side will be rewarded while his pandering to the social right side goes completely punished.  Meanwhile, as Hurricane Ike becomes less relevant to Louisiana and I return my focus to research and the blood sport of politics, I’m taking bets on how long the Palin momentum will continue and if the Obama campaign can get a jumpstart again.

One thing that hasn’t changed is the misogyny that is deeply embedded in US culture.  We’ve seen the re-ignition of the mommy wars which is unwinnable as was the cold war.  I’ve also seen perfectly good progressives tell jokes like ‘well, at least she has TWO things going for her’.  I may just return to my old feminist roots and burn a few bras.  One thing hasn’t changed for me though,  I’m not voting for Obama.


Pandering to the original Kool Aid Drinkers: a Prime Time Exercise in Iron Age Mythology

I didn’t watch the values forum last night despite all the hype.  I had a lot of reasons for this.  One, I really get tired of watching Obama continually invent himself and his life story. Two, I really didn’t want to watch McCain in high pander mode speaking to the craziest part of the Republican base.   Three,  I have to say that I avoid this country’s original koolaid drinker’s–the hyper religious–because I have a low threshold for ignorance and intolerance.  If you have issues with atheists, you better stop reading now, because I’m going into full attack mode on what continues to be used by the powerful to control the weak:  religion.

Why don’t we have big media events surrounding the candidates discussing their commitment to science and reasoned thought?  We could have conversations on constitutional issues or approaches to foreign relations and trade.  Instead, we get conversations on personal screw ups and what role ignorance plays in your life.  Since Sunday morning new shows are part of weekly ritual, I’m currently enduring clips and analysis about Obama’s high school drug use (yawn) and McCain’s first marriage (bigger yawn). Obama was once again his light weight best. (This seemed to me a repeat of an Oprah interview).  McCain just pulled the list of cliches every Republican uses when dealing with the likes of Dr. Dobson and Pat Robertson.  Yes, a fertilized egg = a walking, talking breathing, thinking human being. Yes,  marriage = some sort’ve club that somebody’s imaginary friend only lets one woman and one man into.  Yes, I have an imaginary friend that I speak to even though that kind of behavior is usually associated with mental illness but is considered mandatory when you call the imaginary friend “god”.  They both had to cite their carefully worded confirmation lessons for the benefit of the Pharisees.

I can’t imagine Thomas Jefferson, John Adams, Benjamin Franklin, Thomas Paine, or James Madison doing this sort of thing or going any where near the likes of Warren and his sheeple.  Warren and his ability to make a group of people pay him tons of money so they can feel better about themselves is only equal these days to Obama’s ability to do the same.  These guys are snake oil salesmen, pure and simple.

If you read the letters between Adams and Jefferson, they actually spend a huge amount of ink making fun of the hyperreligious and trying to figure out ways to stop them from ruining the USA.  Thomas Paine was an ardent atheist.  The major framers of the Declaration were deists at best and were probably just quiet atheists.  Jefferson actually rewrote a bible for the Unitarian Universalist church taking out everything he considered to be based on fantasy.   This means his version is a very small pamphlet.  He considered Jesus a fictional character– along the lines of King Arthur–possibly a real person but so steeped in stories by now, the real person has been long lost. Most of the founding fathers found religion to be a base on which to build moral frameworks and something not to be taken literally.   Can you imagine what last night’s group of kool aid drinkers would’ve have done to these three or four men and first presidents that many consider most responsible for the founding of this country?

None of the major founders of the country considered themselves Christian at all because they were all learned men  who were born during the Age of Reason.  They had read exactly what and how the religion was invented in the 3rd century.  The Nicean Council was charged with setting up some thing that would be a tool to manage slaves, children and women, and spread Romanism throughout the conquered lands.  Most Christians aren’t even aware they celebrate their ‘sabbath’ on Sunday because Constantine, the Roman Emperor responsible for inventing Christianity as we know it, was a committed high priest of the Sun God for his entire life.  Each Sunday, Christians gather to celebrate Constantine’s snark.

We’re now in the 21st century, it’s time we stop badgering candidates to adopt Iron Age superstitions to be considered acceptable presidents.  Let’s ask them to be reasoned, intellectually honest, and true to the spirit of this country’s commitment to freedoms instead.  Pastor Rick Warren and his ilk should be left to the realm of the National Enquirer and not the nation’s business.  This is especially true in a country where the fastest growing belief systems are Buddhism and Islam.  Every day, we become more religiously diverse.  There are also a huge number of atheists out there –besides Buddhist who are atheistic by doctrine. The Presidency should be an office for the intellectually gifted, not the reason-impaired.  Religion needs to be kept out of politics as was the original intent of the founders of the nation.

Some examples on the Founding Father’s Belief System

Thomas Jefferson:

Believing with you that religion is a matter which lies solely between man and his God, that he owes account to none other for his faith or his worship, that the legislative powers of government reach actions only, and not opinions, I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should ‘make no law respecting an establishment of religion, or prohibiting the free exercise thereof,’ thus building a wall of separation between church and State.

-Thomas Jefferson, letter to Danbury Baptist Association, CT., Jan. 1, 1802

http://www.nobeliefs.com/jefferson.htm

John Adams:

Indeed, Mr. Jefferson, what could be invented to debase the ancient Christianism which Greeks, Romans, Hebrews and Christian factions, above all the Catholics, have not fraudulently imposed upon the public? Miracles after miracles have rolled down in torrents.


John Adams, letter to Thomas Jefferson, December 3, 1813, quoted from James A Haught, ed, 2000 Years of Disbelief

http://www.positiveatheism.org/hist/quotes/adams.htm


Who Really Supports the Bush-Cheney Energy Plan?

John McCain seems to be gaining traction on Barack Obama in a large part due to the energy crisis.  Senator Obama stumbled by suggesting that we could save the amount of fuel generated by new off-cost drilling simply by maintaining the correct tire pressure for our cars. I remember this energy saving tip was provided as a public service announcement by Mario Andretti back in the day.    For some one who is running to solve some of our country’s biggest problems, it simply didn’t seem too, well presidential. It seems more like a topic for Hints from Heloise.

The Obama campaign must have gotten the message that these household hints during speeches aren’t a substitute for specifics on national energy policy when the McCamp camp started handing out tire gauges with ‘Obama’s energy plan’ emblazoned on the sides.  Obama immediately responded with both an ad and a very long speech.  The few specifics layed out by the plan aren’t very earthshattering. I already attacked one of his suggestions as simply bad economics in my blog yesterday.  Any tax placed on the sellers of a price-sensitive product will be passed on immediately to the buyers.  So, the suggestion of a $1000 tax rebate to the taxpayers based on windfall profits will just eventually come from higher prices at the pump.  So, you get a rebate with one hand and you get higher gas prices with the other hand.  Since we’ve never seen an Obama transcript, I’ll just have to speculate that he never took Economics 101 or 102.  I should know because I’m a professor of economics and I teach those classes.

I reviewed Obama’s ad yesterday and found one attack on McCain.  This was the charge that McCain is simply supporting the Bush-Cheney Energy plan.  I checked into the voting records for the 2005 Bush Cheney Energy plan and found something astounding.  McCain voted against it.  Obama voted for it.  It didn’t take long for McCain to pick up on this.  i heard a McCain speach today in Lima, Ohio pointing out that Obama voted FOR the Bush-Cheney Energy plan while he voted against it.  The Bush-Cheney Energy plan was generally seen at the time as a series of huge handouts to petroleum interests.   So, how is it that Obama voted for it and McCain voted against it?

McCain policy advisor Dough Holtz-Eaken had this to say in a press release reprinted by the Chicago Sun-Times.

While distorting John McCain’s vision for energy independence, Barack Obama is also misleading the American people when he says John McCain supported the Bush-Cheney energy policy. Let there be no mistake: the only candidate who voted to give tax breaks to Big Oil is Barack Obama when he supported the 2005 Bush-Cheney energy bill that gave $2.8 billion in subsidies to the oil companies. John McCain voted against this bill for the very reason that he opposed these tax breaks to oil companies and as president he will ensure their repeal. While he may decry them on the campaign trail, Barack Obama had no problem standing side-by-side with the oil companies while in the United States Senate.

http://blogs.suntimes.com/sweet/2008/08/mccain_policy_advisor_doug_hol.html

I’ve seen the ad playing on CNN.  This has to be a misstep by the Obama campaign.  Why would you actually bring attention to such an obviously questionable charge?  A quick check of campaign contributors also shows that Obama has also taken a lot of money from Big Oil as has the McCain campaign.  Why would you charge your opponent with being in the pocket of big oil with such an obvious elephant in your own room?  (And this could be that Obama, at the time, voted more Republican than McCain) Senator Obama must think the press will cover for him by not pointing out the obvious about the contradictions in his behavior and campaign rhetoric.

Taking on high oil prices is going to play much better in Peoria and Omaha than giving speeches in front of German Victory monuments shouting out with “I am a citizen of the world”.  I can really see a McCain ad coming with this contrast set out for those of us living in the big fly over.

Once again, we see the Audacity of Hype.

The McCain Ad:

and the Obama response:

Again, linking McCain to the Bush-Cheney Energy plan when McCain voted against it and Obama voted for it, seems an odd tactic.  I think this will back fire big time if there’s actually some discussion of the facts-on-the ground.  I’m sure the RNC is just waiting for the DNC convention to nominate this clearly in-over-his head candidate before the attack ads start in full.

Please, delegates, run away from an Obama nomination as quickly as possible.