The Thinking Nationalist

Predictions On The Coming GOP Wave: House Yes, Senate No.

2010-10-31T23:47:00.000-07:00

On Tuesday, November 2nd, to the surprise of no one,

the Great GOP Wave will wash over Washington D.C.

Frightened Democrats and liberals are making headlines

with scare stories of a 60 to 70 seat Democratic rout in the

House, and loss of control of the Senate as well.

To the mainstream media , an epic repeat of the

Disaster Of 1994 is in the works, when the

Democrats lost 53 seats in the House

and eleven in the Senate to hand total

control of Congress to an angry and motivated

GOP.

Is this going to happen again? I think not.

I am, however, predicting that the GOP will

take control of the House, picking up a total of

47 seats, with most of the Democratic

losses coming from freshman and sophomore

Representatives in districts that went for McCain

in 2008. A silver lining in all this for the Democrats

is that most of their key leadership is predicted to

return to Congress, which will give them some

necessary "time in opposition" to impose discipline

and develop an ideologically coherent message.

The Senate, however, is a different story. To win the

majority, the GOP would have to add ten seats to the

41 they currently control. This looks to be out of reach now.

As of this writing, the GOP will pick up three contested

seats (Arkansas, Indiana, and North Dakota) and possibly

add another in Wisconsin, where Democratic incumbent

Russ Feingold is running behind newcomer Ron Johnson

(former CEO of S.C. Johnson Co.). That leaves six to go.

And these six states - Pennsylvania, Colorado, Nevada,

Illinois, Delaware, and Washington - have been closely

watched ever since the primaries. My prediction: The

Republicans will pick up three, the Democrats will

retain three. Here's the breakdown:

1) Pennsylvania. Pat Toomey (R) and Joe Sestak (D)

have been battling neck-and-neck all summer for the

seat being vacated by defeated Sen. Arlen Specter (D,

formerly (R) ). It all depends on turnout in heavily

Democratic Philadelphia and Pittsburgh,

as the rest of the State leans heavily Republican.

If Sestak's margin in the Philadelphia area is less

than 400,000, Toomey wins. My prediction: Pat Toomey

will be the new Republican Senator.

2) Colorado. Appointed Senator Michael Bennett (D)

and former Weld County D.A. Ken Buck (R) are battling

for the seat vacated by Interior Secretary Ken Salazar.

This race has attracted perhaps the most out-of-state

and 3rd-party money of any save the race in Nevada.

At this moment, the race is rated a toss-up by the media.

My take: Obama won Colorado narrowly in 2008 on the

strength of Denver and Colorado Springs suburban liberals.

These folks have since been hammered by huge

white-collar layoffs, and Colorado leads the nation

in unemployment among educated, white-collar

professionals. Outside of the Denver and Colorado

Springs areas, the state is Red and getting redder.

Prediction: Ken Buck takes this seat for the GOP.

3) Nevada. Probably the most watched Senate race in the

nation, this one pits Senate Majority Leader Harry Reid

against exciting and outspoken newcomer Sharron Angle.

Early on, Reid was expected to "vaporize" the "extreme"

Ms. Angle and cruise to re-election. It hasn't turned out

that way.

Ms. Angle seized the initiative in their only debate, coming

across as both reasonable and energetic while Reid looked

and sounded every bit the tired, entrenched Washington

insider. When Reid mumbled on and on about "markups"

and "Senate procedure", Ms. Angle told him to "man up"

and "take responsibility" for the disastrous condition

of both the local and national economy.

At that moment, the momentum switched to Ms. Angle.

Unenviably, Nevada leads the nation in unemployment,

foreclosures, and bankruptcies, and Reid and the

Democrats have done precious little to turn things

around.Even the endorsements of the large gaming

and mining interests (which came before Ms. Angle

even won the primary), have probably hurt Sen. Reid

more than they have helped. Ms. Angle has very

effectively painted Harry Reid as the candidate of

big money interests, while she fights for the little guy.

My prediction: Reid fights Angle to a draw in Clark

County (Las Vegas), and loses resoundingly everywhere

else. Sharron Angle goes to Washington, in what the

national media will term a huge upset.

4) Illinois. The race between State Treasurer Alex

Giannoulias (D) and former Rep. Mark Kirk (R) for

President Obama's old seat has been watched for over

a year. And this one is turning out to be a classic, with

The Chicago Democratic Machine pitted against

conservative, downstate Republicans. Early scandals

involving Giannoulias with his family's failed bank

and disgraced ex-Gov. Rod Blagojevich and convicted

"fixer" Tony Rezko haven't been reflected in the polls,

which show the Democrat with a slight lead.

My take: Kirk wins downstate, but the Chicago machine,

now strengthened with the help of former White House

Chief of Staff Rahm Emmanuel, does its usual "fixing".

Alex Giannoulias becomes the new Democratic Senator

from Illinois.

5) Delaware. This is the one state where the Tea Party

over-reached, nominating the unelectable Christine

O'Donnell over the pragmatic GOP moderate Mike

Castle in a very low-turnout primary.

All the national Democrats had to do was replay

endless bits from Bill Maher's Politically Incorrect,

where Ms. O'Donnell was a frequent guest talking

about witchcraft and Satanism. Result? Game Over.

Chris Coons (D), the Yale-educated lawyer and former

New Castle County Executive, goes to the Senate.

6) Washington State. Sen. Patty Murray (D) has been

locked in a tight battle against newcomer Dino Rossi.

While Murray has not been exactly the most effective

of Senators, she has been instrumental in keeping

Boeing (Washington's largest employer) from

outsourcing more jobs either overseas or to lower-cost

Kansas or South Carolina, saving thousands of

high-skill, high-wage jobs.

Add to this the fact that Washington (like

Oregon and California) has a large edge in

Democratic voter registration and this race

will go as predicted, with Murray winning re-election

by a 53% -47% margin.

Bottom Line: The GOP will make significant gains,

but the gains in my opinion could have been

larger had the GOP campaigned more on policy

and less on blanket opposition to all things Obama.

The reason they didn't campaign on policy

is that the mainstream GOP is hugely beholden

to Wall Street and Corporate America, and

mainstream GOP policy calls for more outsourcing,

more job exportation to the Third World, shredding

what remains of the the social safety net, and vast

reductions in the standards of living for everyone

except the very richest 1%.

And the Democrats? Rather than preach Class Warfare

and the interests of ordinary Americans, they became

the Party of Government and Business As Usual,

becoming the party of favor-granting, ear-marking,

bailouts, spending and pork.

With the economy in tatters and poverty and desperation

increasing everywhere, The Tea Party, unruly and

disorganized though it may be, has become the last best

hope for millions of disfranchised Americans abandoned

by both their government and their financial elites.

And this may be the last chance the "system" gets. Two

more years like the last two and there won't be "elections"

in 2012.

There will be a Revolution - led by a Nationalist

Strongman, probably from the military.

Move over, Argentina - here comes the U.S.A. !

Endorsement: Sharron Angle For U.S. Senate

2010-10-10T20:14:00.000-07:00

November 2nd is shaping up to be perhaps the most
crucial Mid -Term election in modern American history.

Facing what is unarguably the darkest economic climate
since the Great Depression, the choices facing Americans
could not be more clear.

Either we continue on the same path we are on now -
more debt, more spending, more government regulation,
or we use this crisis as an opportunity to make a clean
break with the past and begin anew.

And to begin anew, it is going to take more than just
new policies. It is going to take new people in the House
and Senate; new people untainted by the failed policies
and platitudes of BOTH parties which have placed us
in the predicament we are in now.

And, here in Nevada, we have an opportunity to start
the national renewal process that is so badly needed.

We can begin by sending Sharron Angle to represent us
in Washington.

And why are we opposed to Harry Reid? Because
in 24 years in the Senate, good ol' Harry has gone
from representing Nevada in Washington to representing
Washington to Nevada.

We can begin with ObamaCare - the "healthcare reform"
that wasn't. The president had started with a good
premise - that health care in the United States was both
too expensive and inaccessible for the vast majority of
Americans. The Bush years had seen an explosion in
premium costs, vast reductions in coverage, and huge
oligopoly profits for the health insurance industry.
The system was irretrievably broken, and crying out
for drastic reform.

Yet, when the "public option" was on the table,
together with necessary cost controls on pharmaceuticals
and the insurance industry, it was Harry Reid, more
than anyone else, who bluntly told the president that
anything that restricted the profits of the health insurance
industry and Big Pharma was off the table.

Not only would true reform never pass the Senate,
Harry said, but also that he personally could not support
any bill that did not keep control of health care delivery
with the for-profit private sector.

And now we know where that has led us. Health care
premiums are rising at 25-30% rates, millions are facing
the loss of all of their health coverage through employer
plans, and costs are escalating through the roof.

If your employer is dropping your health coverage or
doubling or tripling your premiums or deductibles, you
can thank Harry Reid for that.

And, as the Las Vegas Review-Journal points out, in
its Oct. 3 endorsement of Ms. Angle:

" As he has climbed higher and higher in the Democratic
hierarchy, he has veered further and further to the left,
becoming politically disconnected from Nevada and its
residents "

Truer word was never spoken. And on the other failed
policies of the past two years, on bailouts for Wall Street
and the auto companies, on the pork-laden "stimulus",
on "cap-and-trade" that threatens to sink the nation into
permanent uncompetitiveness, Harry Reid has led the
charge for it all.

Indeed, it can plausibly be argued that rather than"hitching
his wagon" to the Obama agenda, it was Harry Reid who
convinced the President that in order to succeed he needed
to conform his program to the Harry Reid-Nancy Pelosi
agenda of high taxes, intrusive regulation,and crony
capitalism for Wall Street and the Fortune 500.

Finally, there's the issue of who supports who in
this contest. Not only has Harry Reid obtained the
support of the usual Democrat suspects (including
the public employee unions), but he has also obtained
the support of almost every private interest needing a
government-granted "favor" in either
Washington or Carson City.

Both the U.S. and Nevada Chambers of Commerce
are supporting Reid. The gambling and mining
interests have loaded up his campaign coffers
with most of the $25 million Reid is banking for this
election. Even long-time Carson City GOP "fixers"
and "insiders" Sig Rogich and Bill Raggio
have signed on to the Reid bandwagon.

Against all this, Sharron Angle has only the people.
And in this state, the people are, to put it mildly,
fed up. Unenviably, Nevada leads the nation in
foreclosures, bankruptcies, and unemployment rate.

And how has Harry Reid responded? If Harry Reid
were any kind of Democrat Majority Leader, say on
the order of the late Robert C. Byrd of West Virginia,
Nevada should be awash in federal projects, federal
employment, and federal dollars, and riding out the
recession if not comfortably, at least satisfactorily.

Instead, Nevada ranks 49th out of 50 states in overall
federal dollars returned to the state. Fiftieth in federal aid
to highways. A dismal 49th in federal aid to K-12 and higher
education. Indeed, Harry has been so busy handing out
special favors to everyone else he has completely forgotten
the home folks. For a Democrat, that's inexcusable.

Against all this, Sharron Angle represents a
complete break from the failed policies of the past.
A principled and unwavering voice for low taxes,
less regulation, competition and free enterprise,
Sharron Angle will be a key player in making
sure that a more conservative and more Republican
House and Senate stay in line and on message.

And that message is NO to more spending, more
regulation, more debt, and more special favors
and breaks to those corrupt private interests who
have done so much to bring this country to its
knees.

And if that's a message you agree with, then the choice is clear.

Vote for Sharron Angle on November 2nd.

The 9/11 Anniversary - Let's Be Thankful For What Didn't Happen

2010-09-12T16:03:00.000-07:00

The 9/11 Anniversary has come and gone; thankfully,

without any further violence to anyone.

Despite the "threat" of a misguided Florida pastor to

burn copies of the Qu'ran, and the threat of total street

violence from the "Arab Street", the solemn day of

remembrance came and went in what was, for the

most part, a decent respect for the events and casualties of

that day nine tears ago.

It's as if both sides peered over the edge into the abyss

and said, "No Thanks". And that's actually a tribute to

the good sense of people of good will on both sides.

To be sure, there was a well-attended demonstration

at the site of the proposed Muslim "cultural center"

in Lower Manhattan, featuring anti-Islamic activist

Pamela Geller and freedom-fighter and free speech

activist Geert Wilders from the Netherlands. And there was

also a small "counter-demonstration" by the usual coterie of

leftist nuts and peace activists.

But both groups managed to do something right, which

was to keep the Elected Politicians firmly at arm's length -

something which I am convinced helped keep both

demonstrations peaceful.

And the Qu'ran-burning pastor in Florida? He called

off his event after fellow clergy from both Christianity

and Islam gently reminded him that in Islam,

burning of the Bible is haram - forbidden - because

the Old Testament tells the story of the many

prophets as revered in Islam as they are in Christianity.

And what both sides need to do now is to step back

and explore ways in which both communities might

better coexist with one another.

Here in America, that's not yet a large problem.

Muslim immigrants here tend to be either well-educated,

relatively secular professionals or hard-working taxi

drivers, shopkeepers, small business men of all kinds.

On balance, they are a net plus to society, even allowing

for the occasionally deranged lunatic like Ft. Hood's

Maj. Hassan.

The same, however, cannot be said of Europe. There,

unlimited immigration of millions of poor, uneducated,

unassimilable Muslims has led to all sorts of problems -

problems which Europe's cowardly "politically

correct" leaders have been both unable and unwilling

to take seriously. And we have the same problem here,

only worse.

Just substitute "Mexicans" and "America's cowardly

"politically correct" leaders " and you'll know what I'm

talking about.

And if Europe's and America's leaders won't handle

the problem, it will be handled for them - by Nationalistic

peoples pushed beyond both anger and reason.

And trust me, no one is going to like that outcome.

Don't Underestimate the Power of Palin !

2010-08-28T23:49:00.000-07:00

The last round of Republican primaries has established

one thing:

Don't Underestimate the Power of Palin !

Unlike any other Republican figure, Sarah Palin has proven

beyond doubt to have the "endorsement power" that excites

voters and gets them to the polls.

The Great Corporatist Mitt Romney doesn't have this power.

Neither do Mike Huckabee nor Tim Pawlenty.

After this last round, the Palin endorsement scoreboard is 20 Wins,

10 losses - a 67% winning percentage. That's good ball in any game.

But when we go behind the raw figures and dig down

into the details, it gets even more impressive. Most of the

Palin-endorsed primary victories were won by Tea Party

backed candidates; most of the losses were candidates

backed by the Republican "Establishment". And this last fact

is something you will not find in the Mainstream media, with

the possible exception of Fox News.

Which leads one to ask the question: "Why did Sarah Palin

waste her endorsement power on Establishment candidates?"

Answer: Sarah Palin is a serious politician, who will either

win the 2012 GOP Presidential nomination or decide who

does. To get that power, she needs to get political IOU's from

her party's mainstream, not just the "Tea Party".

And, as the GOP's hottest commodity, she can literally

make or break a candidacy with her support.

Think that's a little extreme? Just ask soon-to-be-ousted Senator

Lisa Murtkowski (R-AK), who lost to Palin and Tea Party

endorsed candidate Joe Miller.

Until two months ago, Sen. Murtkowski was the picture of

an untouchable Establishment Republican. The daughter of

former Governor Frank Murtkowski (whom Palin defeated

for Governor in 2006), Sen. Murtkowski had $10 million

in the bank, was 20 points ahead in the polls, and was

cruising toward re-election. Then Palin and the Tea Party

stepped in.

While Palin endorsed candidate Miller and recorded

messages for him, Husband Todd and the Tea Party

sprang into action. Going door-to-door and village-to-

village in Alaska's remoteness, The Tea Party and Todd

Palin won the day for Joe Miller - and the reverberations

were felt all around the country, most especially in Washington

D.C.

Message delivered: If you are an Establishment GOP incumbent,

and Sarah Palin opposes you, you are not safe. And if you are

too closely identified with the GOP "Establishment", a Sarah

Palin endorsement may not save you.

And the details bear this out. Of the fifteen House Candidates

endorsed by Sarah Palin, 9 won and 6 lost. Of the winners,

seven were Tea Party Candidates, and only two were from

the "Establishment". Of the losers, two were Tea Party and

four were "establishment" - including three incumbents.

On the Senate side, the results were a little more evenly

divided. Two "establishment" Palin-endorsed candidates

won (Carly Fiorina in California and John McCain in Arizona),

two Tea Party candidates lost (in Washington and Kansas),

and Tea Party bright lights Sharron Angle(Nevada) and Rand Paul

(Kentucky) won (and are expected to win in the general election),

with the help of Sarah Palin's endorsement.

And with the always important Governor's races, Sarah made the

difference in at least four of the nine contests she endorsed, saving

establishment candidates Susanna Martinez in New Mexico and

Mary Fallin in Oklahoma, as well as engineering the dramatic

come-from-behind win of Nikki Haley in South Carolina.

Yes, that Nikki Haley - the daughter of Indian immigrants whom

a GOP Establishment figure called a "raghead" in public.

Bottom line - when Sarah Palin makes her run for the White House

in 2012, she'll have an awful lot of folks in the GOP, both in the

"establishment" and out, who will owe her big time.

And in getting her "IOU's" in early, on both sides of the GOP,

she's following in the proven footsteps of the Greatest

Conservative of our Age, the 40th President, Ronald Reagan.

And she's looking and sounding more and more like The Gipper

every day.

Obama, Pelosi and Reid: Putting Government First

2010-08-15T22:11:00.000-07:00

By Patrick J. Buchanan (Creators Syndicate) - Las Vegas Review-Journal

Where a man's purse is, there his heart will be also.

If you wish to know where the heart of the Obama party

is today, consider: In the dog says of August, with temperatures

in D.C. rising above 100, Nancy Pelosi called the House back to

Washington to enact legislation that could not wait until September.

Purpose: Vote $ 26 billion to prevent layoffs of state, county

and municipal employees whose own governments had decided

they had to be let go if they were to meet their constitutional duty

to balance their books.

Workers their own governments thought expendable, Congress

decided were so essential it borrowed another 26 thousand

million dollars from China to keep them on state and local

payrolls.

A nation whose national debt is approaching its gross national

product, that goes abroad to borrow to keep non-essential

workers on the government payroll, is a nation on the way

down and out.

And anyone who thinks the party of Obama, Reid and Pelosi

is ever going to cull the armies of tens of millions of government

workers or scores of millions of government beneficiaries to put

America's house in order is deluding himself.

As long as this Congress and White House remain in power, a

U.S. default on its national debt is inevitable. The only question

is when.

Nor is this the first time the Obama Administration has rushed to

save workers whose own state, city and county governments

were prepared to let go. Among the reasons the $800 billion

stimulus failed is that so little of it was directed to firing up

the locomotive of the economy, the private sector, and so much

of it was spent to ensure that government workers did not have to

share in the national sacrifice.

Why Pelosi and Co. felt compelled to return to D.C., to ensure

that state and local government payrolls were not pared, is

not hard to understand.

Which party does the American Federation of Teachers,

The National Education Association, and the American

Federation of State, County and Municipal Employees

usually contribute to, work for, vote for?

At which of the two party conventions are teachers

and government employees hugely over-represented?

Consider too, the states deepest in debt and facing

the largest cuts in employee ranks, pay and benefits:

California, Illinois, New York.

In these states, public employees earn an average of

$10,000 more a year in pay and benefits than the

average American worker who is bailing them out.

Hence, we have a situation where private-sector workers

in Middle America are being taxed, their children driven

deeper into debt so government employees who have

greater job security than they do, and earn more in pay

and benefits than they will ever earn, can stay in Fat City.

And folks wonder why so many Americans detest

government.

In the same week that Congress came back to

prevent AFSCME from taking a haircut, the

Wall Street Journal reported that in 2009,

only three of 52 metro areas with populations

over 1 million saw "net earnings and the broader

measure of personal income both rise".

Are you surprised to learn that Washington D.C.

is #1 among the three?

That same day, USA Today had a startling report

on how, during the last decade, U.S. Government

workers, like Wall Street bankers, left their fellow
Americans in the dust.

"Federal workers have been awarded bigger average

pay and benefit increases than private employees

for nine years in a row, The compensation gap

between federal and private workers has doubled

in the past decade.

"Federal civil servants earned average pay and

benefits of $123,049 in 2009 while private

workers earned $61,051 in total compensation.

The federal compensation advantage has grown

from $30,415 in 2000 to $ 61,998 last year. "

Remarkable. U.S. government workers, who

enjoy the greatest job security of any Americans,

now earn twice as much in pay and benefits as the

average American. This is not the D.C. some of

us grew up in.

Nor is all of this Obama's doing. For most of the

fat years of the federal work force came while

Washington was being run by Big Government

Conservatives and a White House of Bush-Cheney

Republicans.

No wonder the Tea party is targeting both parties.

Nevertheless, it is impossible to believe that the

Obamaites, who intervened twice and massively

with bailouts to prevent minor layoffs of local

and state government employees, have the stomach

to do the major surgery needed to cut the federal

monolith down to size.

For the vast majority of government employees

vote Democratic, as do the vast majority of the

scores of millions of beneficiaries of federal, state,

and local programs.

What Pelosi and Co. were saying with the $26

billion bailout was "We are going to protect

our own".

Which is why either Obama, Reid, Pelosi and

Co. go, or we are Gone.

Islam Dominant: The Ground Zero Mosque

2010-08-14T18:59:00.000-07:00

The "Ground Zero Mosque" controversy isn't going away
anytime soon, no matter what our social and political
"leaders" say.

But as is usually the case where there's a more heat
than light on a subject, the issues are not always
completely clear cut. To begin with, we should try to

understand a few things.

First of all, religious freedom and tolerance are
uniquely part of the American experience - in contrast
to both Europe and the Muslim World.

Had there not been brave people with the courage

to flee religious persecution and discrimination,
there probably wouldn't be a United States of America.

And, unfortunately, the Muslims are only the latest
"other" religious group to face religious persecution
and discrimination here in the United States.

A quick history lesson. One hundred and fifty years ago,
waves of economic-based immigration brought tens
of millions of Roman Catholic Irish, Italians, and Poles
to our shores, to face immediate discrimination and
prejudice at the hands of the American Protestant
majority.

An entire political movement - The "Know-Nothing"

party - was built around anti-Catholic sentiment.

And like today's Muslims, the Catholics were

suspected of being a "fifth column" - part of a global

"Papist Plot", to bring the United States - and all of

Western Civilization - under the domination of the

Pope in Rome.

Sounds familiar, doesn't it? And the language used
by the press of that time in describing the "Catholic
Threat" would never be allowed today, even in the
most fever-swamped screeds of the fringes.

In this light, it should come as no surprise that President
Obama took the time to remind the nation of its too-often
forgotten commitment to religious freedom and toleration.
And to a point, the President is right - Imam Feisal Abdul
Rauf and his followers do have a legal right to erect a mosque
in a location of their choosing, subject to local ordinances
and the like.

But all legal platitudes aside, the decision to build a
Mosque at this particular location is hugely unwise.

To begin with, it's a direct insult to the thousands
of New Yorkers whose memories of the events of 9/11
are indelible scars.

Second, it sends exactly the wrong message of Islam
Dominant and Triumphant - when the building is
complete, it will directly overlook two holes in the
ground where the World Trade Center used to be.
That's not too terribly helpful for the "War On Terror" -
in fact, it makes "terror" look like the winning side.
Look for Al-Jazeera and the rest of "violent Islam" -
(and there's really no other kind) to treat this as
a deservedly huge propaganda victory.

So, what would be the right decision? Go ahead
and build a Mosque - but anywhere else, just not
at this particular spot.

To his credit, New York Governor David Paterson
in suggesting this got it exactly right. To his
everlasting shame, New York Mayor and Mosque
supporter Michael Bloomberg got it exactly wrong.

It would be as if the Church of the White Aryan
Resistance decided to build a church next door
to the Mt. Zion AME Church in Harlem - and then
deck the place out in Confederate Flags and play
"Dixie" on Martin Luther King Day.

Or better yet, build it next to Temple Beth Israel
and fly the swastika and play "The Horst Wessel Lied"
every Friday at sundown.

Nobody in their right mind, of course, would allow
either such thing - but that's exactly what the mosque
supporters among our elites are doing.

And this whole affair just reeks of the contempt
of the Secular Liberal Ruling Elites for any opinions
but their own. Steeped in moral relativism, bound
by situational ethics, and hopelessly debilitated
by "political correctness" , the decision to permit
this ill-advised project is just one more blot on
a sorry and sordid record.

Whether the issue is Immigration, Islam, endless
war, trade, financial reform, or corporate greed,
our "Ruling Elites" have managed to be consistently
wrong every time, on every issue.

Always ready to excuse and forgive every crime,
every transgression, every bit of wrongdoing, our
"Elites" are like the Bourbon kings of France -
they learned nothing, and remembered nothing.

And we the people, in no mood to either forgive
or forget, may well decide to give them the same
treatment the Bourbons got in 1789.

Bell, California: Followup.

2010-08-01T22:06:00.000-07:00

The story on the public corruption in the impoverished
city of Bell, California just won't go away.

Thanks to the angry outcry of the citizens, City Manager
Robert "Ratso" Rizzo, Assistant City Manager Angela Spaccia,
and Police Chief Randy Adams have all resigned. Mayor
Oscar Hernandez, Vice Mayor Teresa Jacobo, and councilmen
Luis Artiga and Jorge Mirabal have followed suit by agreeing
to forgo their salaries for the rest of their terms.

Only honest councilman Lorenzo Velez will remain on the
payroll.

At this point, I also want to point out something that initially,
both the L.A. Times and I got wrong . Both the Times and I said
that there were seven councilmen, including the Mayor and Vice
Mayor (who are also voting members of the City Council).

In reality, there are only five all told - it is Maywood, which
outsourced everything to save money, that has a head count
of seven.

Be that as it may, the other facts speak for themselves. These
miscreants loaded themselves up with salaries and perks that
made them some of the highest paid public "servants" anywhere
in the United States, let alone California.

But the big question everyone is asking is " How did they do it?"

Here's How:

Back in 1999, then-Gov. Gray Davis and the Democrat-dominated
legislature changed two things. First, the pension-calculating
formula for all State and general-law municipality employees
with pensions administered by CalPERS, (the state public
employee retirement system)m was made more generous.
Second, the guidelines for general-law municipality employee
compensation (as Bell was at that time), were changed to
bring managerial and exempt employee compensation in
line with that of employees covered by a collective bargaining
agreement.

For the Bell boodlers, this meant substantial raises in
wages and retirement benefits. But the looting didn't stop
there.

In 2005, following the examples of the neighboring cities
of Commerce and Vernon, Bell held a special election to
become a Charter or "Home Rule" city - meaning that
thereafter they could write their own rules with respect
to wages, benefits, and collective bargaining. It also meant
that they were exempt from state guidelines on property tax
assessments, subject only to those restrictions imposed by
Proposition 13.

At the special election, only 336 of 14,000 registered
voters showed up at the polls - and as it was a special,
not a general election, notice only had to be posted in a
"newspaper of general circulation" - meaning, the Legal
Notices section of the Times. Thus for all practical
purposes, only those with a direct financial
interest in the outcome voted.

And once the Charter was granted, the pay feast
was on. The sixteen "one minute a month" city
commissions were set up, with pay scales
to match.

And that's how "Ratso" Rizzo, the City manager,
managed to get most of his pay - taking his compensation
from a base of $186,000 to his final total wages of $601,000.
And the other $187,000? That's the cash value of unpaid
vacation and sick leave, housing allowance (Rizzo owns a
$2 million dollar home in Huntington Beach),
car allowance (he drives a Mercedes-Benz, as well as a
city-provided Cadillac Escalade), and a special bonus which
enables him to retire immediately at age 55 with 31 years of
credited service - which translates to a pension
of $600,000 a year for the rest of his life.

And the most depressing news? Despite the ongoing
investigations, and the special audit of city finances
ordered by Gov. Arnold Schwartzenegger, all of this
Wall-Street type looting is probably all legal.

The only hope for Bell at this point is that either Attorney
General Jerry Brown (yes, the former Governor running
again for his old job), the L. A. County District Attorney,
or The Public Integrity Division of the U.S. Attorney's
office can find some irregularity somewhere along the line.

Otherwise, they will all ride off into the sunset with the
loot, leaving the Bell citizenry holding the bag.

We're going to stay on top of this story, and we eagerly
await the outcomes of all three investigations.

Adult Education: Passing The Seven

2010-08-01T16:11:00.000-07:00

The "new economy" has everyone looking to re-invent
themselves - and your correspondent is no exception.

The predicament has always been - re-invent yourself
to do what?

And it's not as if opportunity is around every corner.

"Retraining" the jobless for new careers is touted
everywhere as a cure for what has become endemic
and chronic unemployment. The only problem is
is that for the most part neither the old jobs the
unemployed left nor the "new" jobs they were
trained for exist any longer in this economy.

And I found myself in a similar predicament, in that
the field in which I worked independently was about
to go the way of the dodo. After all, what I did was
predicated on the existence of a REAL economy,
where people made, sold and transported real goods
the real people had a demand for.

Well, that's all so '80s and '90s. Has nothing to do
with today's "real economy" , which is trading contracts
and pieces of paper back and forth in the best bankster
fashion.

So, I decided about a year ago, since I was reading and writing
so much about "traders" and "banksters", I decided to
become one.

First thing to do was to teach myself How To Trade. That's
relatively easy. There are all kinds of courses, either online or
on DVD, that can teach you how to trade stocks, options, even
commodities and currencies. There are other courses that teach
you how to use the major trading platforms provided by the
"trading" brokers, such as Scotttrade, E-Trade, TD Ameritrade,
and the like. Courses that teach you both fundamental analysis
and Technical Analysis (reading charts).

Being neither hugely rich nor loaded with plentiful free
time, I opted for the trading courses taught by College of
Southern Nevada and UNLV. I then bought some inexpensive
but thorough trading books and took up the least expensive
but most comprehensive stock charting program I could find.

So far, so good. Next step was to find someplace where I could put
all this knowledge to use. And I found that if you can pass Federal
and State licensing, plus fund a large enough account to put you
out of the "retail day trader" category, you can actually find
employment as a trader.

No Harvard MBA required. No elite old-school ties. And also
no magnificent salary. But licensing, some formal education,
and the ability to fund a trading account of $25,000 or larger
will get you in the door.

So, before I go forth to get "backers" the first thing to
do is to Get Licensed. And the process is very much like getting
a Real Estate license - study for several months, take a formal
class or classes, and then sit for the tests. In the case of Trading
in Nevada, there are two tests you must pass - the FINRA Series 7,
on the working and regulations of the financial markets, and
the Series 63, which covers the "Blue Sky" laws that exist in
every state. And you must first pass the 7 before you take the
63.

Well, I got Step 1 out of the way. Earlier this week, I Passed
The Seven. Not with the greatest scores, mind you, but a
Pass nonetheless. Now, having sent in the results, I am awaiting
my permission to take the 63 - and I have 60 days from
Passing The 7 to do so. So it's back to the books.

The 63 is a much shorter test - two hours rather than all day -
but I am advised that what it lacks in length it makes up for in
difficulty - so no break there.

But still and all, it's worthwhile. Even if I ultimately decide
not to trade for a living, just passing the tests gives me some
credibility when talking about banksters, traders and the
like. In the eyes of the law, I am knowledgeable in things
like equities, fixed-income, options, even "derivatives".

With enough money, I could be a one-man Goldman Sachs.
Another Vampire Squid. Just what the economy needs.
How nice.

But in reality, the goal is to make enough to pay the bills
and support the other activities (such as this blog) that
make life meaningful and worthwhile.

And finally, I suppose that if you can't beat 'em, better find
a way to join 'em....

A Tale of Two Cities: Maywood CA and Bell CA

2010-07-17T18:36:00.001-07:00

Here's a story I've held off on posting until I had all the facts.

To my readers, I apologize for not posting sooner but I
wanted to be accurate above all else before I went to press.

What you are about to read should shock the daylights
out of you. It puts the tales of New York's Tammany Hall
to shame and makes Chicago's Democratic machine
look like the rankest amateurs.

And if that upsets you, it should - because this is a tale of
EPIC Public Corruption unlike any I am aware of in recent
history - a sad tale for the local residents involved, but a
cautionary one for the rest of us.

It is a salient example of what happens when a community
ceases to be vigilant about its governance. And just because
this story involves local government, it makes no difference.
The same thing can happen at the state or national level, far
more easily than we might imagine.

Here's the story:

It begins in the city of Maywood, California last May, when,
in the preparation of its annual budget for the 2011 fiscal
year, the city received a notice from its liability insurers
that its premium for liability coverage of its employees
(including the Police Dept.) would triple, to approximately
$1.5 million per year.

Now Maywood is a close-in suburb of Los Angeles, but let
me assure you, Beverly Hills it is not. It is a city of about
40,000 people, 90% Hispanic, 60% foreign born, with
a per capita income of about $36,000 per year - about
half that of Los Angeles County in general. Which means
that they're not exactly flush with cash.

So after first considering merely doing away with their
police department, which was facing several lawsuits
over "police abuse", they came up with an even better idea -
to do away with the notion of city employees entirely -
and outsource everything.

First, they outsourced law enforcement to the L.A. County
Sheriff's Department, saving approximately $ 4 million a
year in the process. Next came Public Works, Parks and
Recreation, even parking enforcement - all services for
which they found eager private sector bidders, saving
even more money.

The last thing the Maywood City Council did was to
contract out the administration of the city itself to
the neighboring city of Bell, at a monthly payment
of $50,000 - about two-thirds of the previous expense.

So far, so good - Happy citizens and taxpayers in Maywood.

But here's where it gets interesting. The Los Angeles Times,
no friend of outsourcing or the Private Sector in general,
decided to investigate and compare Bell and Maywood - two
adjoining cities with similar demographics, to see what
lessons could be learned.

And what they found blew the roof off.

The City Manager of Bell, one Robert Rizzo, was
being paid $ 787,000 annually - almost twice as much
as President Obama and three times the salary of
Los Angeles Mayor Antonio Villaraigosa. Police Chief
Randy Adams was paid $ $457,000 per year - or twice
the salary of L.A. Police Chief Charlie Beck. And
assistant City Manager Angela Spaccia was paid
$ 376,000 per year - more than any other municipal
executive (except for Rizzo) in the State of California.
And it goes on from there.

The seven Bell City council members, who are part time
and paid $700 per month, also are eligible to sit on up to
sixteen different city Boards and Commissions - the City
Recycling Authority, the City Planning Commission, and
so forth. In return, they can earn up to $1,000 per month
additional for each different board they sit on.

But most of these boards are "ghost" authorities - in fact,
last year most of them met for only One Minute Per Month -
this according to California Public Records Act disclosures
which the Times uncovered. And six of the seven councilmen
occupied all these positions, making their total compensation
over $100,000 annually for part-time work.

Even so, the Times managed to uncover one honest man -
newly appointed Councilman Lorenzo Velez, who earned
only his $700 monthly for attending City Council meetings.

The reason he wasn't also on the gravy train? He replaced a
councilman who resigned after unspecified accusations of
wrongdoing, but who after resigning was given a full-time
city job at Bell's food bank and kept his membership on
six of the "ghost" commissions - this despite an ordinance
that specifies only sitting council members can be on these
entities.

The upshot? The Bell City Council meeting yesterday was
jammed with irate voters demanding the resignation of Mayor
Oscar Hernandez ( a part-timer making $150,000 per year), Rizzo,
Adams, Spaccia, and the entire council except for Velez. A group
has formed to circulate petitions for a recall election. Others
are preparing to file suit demanding an audit of city finances,
which hasn't been done for the last two years despite California
law to the contrary. And there's still more. It appears that three
of the part-time council members own businesses whose principal
function is contracting with the City for "unspecified services".

Both the Los Angeles County Attorney and the State
Attorney General's office are investigating, and late yesterday
came word that the U.S. Attorney for the Southern District of
California will open an investigation for violations of the
Federal Public Corruption Act.

For the unfortunate residents of Bell, help can't come
soon enough. And it's even more galling that the
corrupt council members and city executives appeared
to be taking advantage of the "Patron" culture which
the mostly Hispanic and foreign-born residents grew up in.

In the Hispanic culture, the "Patron" or political leader, is
expected to be corrupt, and to lavishly line his pockets in
return for shouldering the great responsibilities of governance.
In return, he is also expected to disburse cash, favors, and
considerations ("Las Mordidas") to deserving members of the
community.

But there wasn't very much flowing downward to the ordinary
people, it seems - just to the regular employees and their
unions, who regularly turned out at election time to keep
the incumbents in office.

Regardless of what ultimately happens, (and I expect that
some Bell city councilmen and managers will ultimately be
guests at the Crossbar Hotel or Club Fed), this should be a
warning. Where Government and Tax Dollars are concerned,
voters won't get what they expect - only what they inspect.

And the solution to problems like this? Not recall elections
and criminal investigations, but pitchforks and torches,
tar and feathers, and trees and boiled rope.

Tax Cuts for the Wealthy vs. Unemployment - No Change We Can Believe In

2010-07-12T18:45:00.000-07:00

Well, it's finally out in the open now.

Sen Jon Kyl (R-AZ) finally detailed the reasons for his
(and the rest of his party's) unrelenting opposition
to the extension of emergency unemployment benefits.

To him, they are a "necessary evil", and thus they need
to be fully offset by "spending reductions" elsewhere.

Here's the story on The Huffington Post

At the same time, Sen. Kyl also went on to explain that
"tax cuts", unlike unemployment benefits, don't need to
be "offset" by spending cuts elsewhere, because
"they pay for themselves".

And the economist he cites as proof? That eminent
economist and Senator from Kentucky,
Mitch McConnell.

Now I don't blame Sen. Kyl. As a loyal, obedient member
of the Senate Republican caucus, he has to speak the lines
he's told to, even if they don't square with the facts.

And the fact is, that of $787 Billion in stimulus spending,
$450 Billion was tax cuts skewed toward corporations
and the wealthy. This was supposed to "stimulate" new
investment and hiring. And we can all see how that turned out.

And to The Thinking Nationalist, it's a very, very tired and
overplayed theme.

It's nothing more than "trickle down" economics,
dressed up in fancy rhetoric to stimulate class envy
and resentment. And I can understand this.

If you're a small businessman, or self-employed, and
You aren't seeing any benefit from all of the "stimulating"
activity going on, and you aren't benefiting from this
miraculous economic recovery, why shouldn't you
have a tax cut?

After all, the unemployed are (or were) getting Theirs,
the Too-Big-To-Fail banks got Theirs, and as long as they
agreed to keep outsourcing and offshoring jobs, the Big
Corporations got Theirs....

Where's Yours?

I feel your pain.

But, to the GOP and their fellow travelers among the
"Blue Dog" Democrats, you don't matter.

You aren't lining up to stuff dollars in lobbyists' pockets
to hand to the GOP and the entrenched politicos of the
Democrat Party . You aren't working the corridors of
Capitol Hill, with lobbyists in tow, with pre-written bills
or amendments to bills, pressing your case directly, where
it matters.

And if you're going to do that, don't forget the manila
envelopes stuffed with large amounts in small
denominations for your favorite Congresscritters.

After all, in the Halls of Power, money talks and
you-know-what walks.

And don't even think about mainstream Democrats.

If you aren't an Ivy-educated, certified Intellectual,
you just don't count. But don't blame yourself if you're
not at that exalted level.

After all, mainstream "liberal" Democrats, including
the president, care more about winning the "intellectual"
battle more than anything else.

Their idea of a "win" is a critically acclaimed Op-Ed in
the Times or the Washington Post. Or a blog post
on Huffington. Or a guest appearance on the PBS
News Hour.

After all, those audiences understand all the "nuances"
and the "irony" involved in trying to represent the
"progressive" agenda. And they also understand that
this has absolutely nothing to do with representing
the voters back home.

After all, Everyone who is Anyone knows that they
(meaning you) just don't get it. That means you don't
count. And don't be thinking "Tea Party".
The "Tea Party" doesn't shock anyone anymore.
There's no scare there.

Just a bunch of mindless rural rubes ready to vote
Republican, to their own detriment.

So if you think your voice isn't being heard in
Washington (and you can be assured it isn't),
Mr. or Ms. Independent Voter, you need to do something
different. You need to think outside the box.

And that means voting Third Party.

Now, don't get me wrong. If you're dissatisfied with the
way things are going, and your incumbent isn't getting
the job done for you, go ahead and Vote For The Other
Guy, no matter what, as long as there's a credible difference
between the two.

But in some places that may not be enough. Some states
are so Blue or Red that winning the Primary means a
ceremonial walk-over in the General Election.

Or, there's so little difference between the two candidates
that either could just as well be a member of the others'
party.

And that's just not good enough.

So if that applies to your state, vote Third Party.

If you're Conservative, vote Libertarian instead of
Republican. If you are liberal or "progressive", vote
Green, Socialist or even Communist.

And if enough of us do this, we're going to have a
great mixture in Congress and in the state legislatures
as well.

I'd love to see some Republican leader bust his gut
trying to get a "compromise vote" out of some
died-in-the-wool Libertarian. And I think the
Democrats would go nuts if they had to "coalesce"
with Green, Socialist, or Communist legislators.

Who knows - out of all that, you might get Change
that some of us might believe in ... for a change.

Guest Post: The 24 Types of Libertarian

2010-07-11T12:23:00.000-07:00

(h/t Barry Deutsch)

The current economic malaise has brought all kinds of folks
out of the woodwork.

From out-and-out Marxists ( a la David Harvey) to the Tea Party
types, the extremes on both sides seem to be dominating the
debate these days. What they have in common, I'm afraid,
is being long on volume and short on solutions.

But nothing has been quite as remarkable as the steady march
of the GOP towards its "libertarian" roots.

In this vein, then, here is a "graphic" description of the "24 Types"
of "GOP supporters and libertarians" - the better so that we
can identify them should they try to convert us to their
way of thinking.

Here they are (follow the link):

Happy Fourth of July - A Salute To Bloggers And a Year Completed.

2010-07-04T21:43:00.000-07:00

It was almost a year ago that I set out to create
The Thinking Nationalist - a small web journal of
political and economic opinion that focused on current
events from a "centrist" American perspective.

Unlike many other "bloggers", I did not look in
the first year to go all-out with a firmly biased
outlook, either left or right, on every issue that
crossed my writing desk. Rather, I decided that
this first year would be given over to honing my
blogging craft, and that my original pieces would
try to be more explanatory than exhortatory,
preferring wherever possible to shed light on an issue
rather than unwarranted heat.

Further, when the occasion required, I decided to also
include several pieces cross-posted (with attribution)
from other blogs or sources. And in return, I have had
the distinct pleasure of being quoted by name in a few
other blogs, many of which are older than this one and
more widely read.

I would also at this point like to take the time to thank
the other authors whose blogs are listed on the left-hand side of
the page, many of whom took the time to offer advice,
suggestions, topic ideas, or links to additional information.
And in the same spirit, I would also like to thank the readers who
circulated my posts like Samizdat to others.

To all of you, both readers and fellow bloggers. I thank you.

In these trying times, I believe that bloggers are
providing necessary, important and free public services
of both information and persuasion - far more so than the
paid mainstream media, who are more comfortable
sucking up to the powerful and influential than standing
up to them in the name of the public.

Time was when the intrepid journalist was focused on
getting "the story" - having checked the facts and
corroborated the evidence, he published - and let the
chips fall where they may. Naturally, such an approach
never sits well with "Powers That Be" wherever they are,
as these worthies have often more to lose from
embarrassment or ridicule than the actual discovery of
malfeasance.

Thus journalists, under the pressure of a constant
news cycle to generate air time or column inches, often
morph into the lap dogs of their favorite sources.
Nothing so warms a mainstream media person's heart
but that to know that for him or her, the velvet rope
will always be lifted and access will always be granted
when deadlines or air time loom near.

With rare exception, the blogger faces little such pressure.
Permanently on the outside, occasionally granted access
as part of the "Alternative Media" pool, he is free to write
and opinionate to his heart's content.

And in so doing, he not only sheds light on important issues
but brings some necessary heat as well.

It is fitting, therefore, that on the 234th Anniversary of
the Nation's founding, a Nation founded in no small part
by the exertions of free men armed with free speech and a
free press, that we take time to honor those who dare
call the powerful to account and the influential to
explanation. Let us always remember that our liberties
are more secure in the hands of the man with a
pen and a voice than in the hands of the man with a gun.

If Thomas Paine, the author of "Common Sense" were alive
today. he would be a blogger - and his columns would still be
passed hand to hand and read as eagerly as in the days of old.

And given the mess that is today "our body politic", he
would have plenty to write about and a lot to say - and
almost none of it would be complimentary to those
who style themselves "Our Leaders".

In that vein, then, we are going to alter the approach of
The Thinking Nationalist over the coming year to take
a harder, more partisan stance on the issues than before -
and the principle that will under line our approach is
Nationalism.

"Nationalism" in the current sense, has gotten an undeservedly
bad rap from authors of both the left and the right. "Liberals"
view "Nationalism" as a code word for racial and ethnic
prejudice, while "Conservatives" view "Nationalism" as a quaint
and backward obstacle in their abstract pursuit of "Free Markets".

Both are wrong. "Liberals", while pretending solicitude
for the common man, fail completely to understand the
anger and distress felt by citizens about the unlawful
invasion of millions upon millions of alien foreigners into
our midst, who share not our language, culture, history or
traditions but, with the support of "liberals" demand not only
legal status but unquestioned acceptance. The "conservative"
on the other hand, would announce "open borders" the better
that wages and working conditions might fall to some abysmal
3rd world level, the better to profit the "Ownership Class".

And "Immigration" is only one area where both mainstream
liberals and conservatives are just plain wrong. "Nationalism"
gives us the reasons why.

The same is true on any number of issues - economics,
trade, jobs, industrial policy, education, social welfare,
foreign policy and national defense. In their single-minded
pursuit of abstract "truth" as they see it, both left and right
have failed a nation desperately seeking answers and a way
forward in a pitiless and hostile world.

"Nationalism" provides that way forward.

Over the coming weeks, I will detail "A Modern Nationalist
Manifesto" that, hopefully, will provoke discussion and
debate. And, we will keep up our perspective on current
events and people as always.

These are interesting, indeed historic times we are
living in. But whether they are tragedy or blessing is
now, more than ever, up to us.

- The Thinking Nationalist

Andy Grove: How to Make an American Job Before It's Too Late

2010-07-04T15:12:00.000-07:00

(H/T: Naked Capitalism and Bloomberg News)

When Yves Smith of Naked Capitalism suggests we read
something, I usually take notice.

Yesterday, she directed her readers to an article by Andy Grove
(one of the founders of Intel), calling for drastic changes in
American industrial policy, specifically toward startups,
innovation, scaling, and manufacturing job creation.

The piece is long, detailed, and worth reading in full, but
the central point is this: An economy that innovates
prolifically but consistently exports its jobs to lower
cost overseas locations will over time not only lose its
capacity for mass production but also its very ability
to innovate.

So compelling and important is this piece that I am
going to present it here substantially in its entirety:

Dr. Grove:

" Recently, an acquaintance at the next table at a
Palo Alto , California restaurant introduced me to
his companions: three young venture capitalists
from China. They explained, with visible excitement,
that they were touring promising companies in
Silicon Valley. I've lived in the Valley a long time,
and usually when I see that the region has become
such a draw for global investment, I feel a little proud.

" Not this time. I left the restaurant unsettled. Something
didn't add up. Bay Area unemployment is even higher
than the 9.7 per cent national average. Clearly, the great
Silicon Valley innovation machine hasn't been creating
many jobs of late - unless you count Asia, where
American technology companies have been
creating jobs like mad for years.

" The underlying problem isn't simply lower Asian costs.
It's our own misplaced faith in the power of American
startups to create U.S. jobs. Americans love the idea of
the guys in the garage inventing something that changes
the world. New York Times columnist Thomas L. Friedman
recently encapsulated this view in a piece entitled
"Startups, Not Bailouts" . His argument: Let tired old
companies that do commodity manufacturing die if
they have to. If Washington really wants to create jobs,
he wrote, it should back startups.

Mythical Moment

" Friedman is wrong. Startups are a wonderful thing, but
they cannot by themselves increase tech employment.
Equally important is what comes after that mythical
moment of creation in the garage, as technology goes
from prototype to mass production. This is the phase
where companies scale up. They work out design details,
figure out how to make things affordably, and hire
people by the thousands. Scaling is hard work but
necessary to make innovation matter.

" The scaling process is no longer happening in the U.S.
And as long as that's the case, plowing capital into young
companies that build their factories elsewhere will
continue to yield a bad return in terms of American jobs.

" Scaling used to work well in Silicon Valley. Entrepreneurs
came up with an invention. Investors gave them money to
build their business. If the founders and their investors were
lucky, the company grew and had an initial public offering,
which brought in money that financed further growth.

Intel Startup

" I am fortunate to have lived through one such example.
In 1968 two well-known inventors and their investor
friends anted up $ 3 million to start Intel Corp., making
memory chips for the computer industry. From the
beginning, we had to figure out how to make our chips
in volume. We had to build factories, hire, train, and
retain employees; establish relationships with suppliers;
and sort out a million other things before Intel could
become a billion-dollar company. Three years later it went
public and grew to become one of the biggest technology
companies in the world. By 1980, which was about ten
years after our IPO, about 13,000 people worked for
Intel in the U.S.

"Not far from Intel's headquarters in Santa Clara,
California, other companies developed. Tandem
Computers went through a similar process, then
Sun Microsystems, Inc., then Cisco Systems Inc.,
Netscape Communications Corp., and on and on.
Some companies died along the way or were absorbed
by others, but each survivor added to the complex
technological ecosystem that came to be
called Silicon Valley.

" As time passed, wages and health care costs rose in the
U.S., and China opened up. American companies
discovered that they could have their manufacturing
and even their engineering done cheaper overseas.
When they did so, margins improved. Management
was happy, and so were stockholders. Growth
continued, even more profitably. But the job machine
sputtered.

U.S. Versus China

" Today, manufacturing employment in the U.S. computer
industry is about 166,000 - lower than it was before the first
personal computer, the MITS Altair 2800, was assembled in
1975. Meanwhile, a very effective computer manufacturing
industry has emerged in Asia, employing about 1.5 million
workers - factory workers, engineers, and managers.

" The largest of these companies is Hon Hai Precision Industry
Co., also known as Foxconn. The company has grown at an
astounding rate, first in Taiwan and then in China. Its revenue
last year was $ 62 billion, larger than Apple Inc., Microsoft Corp.,
Dell Inc. or Intel. Foxconn employs more than 800,000 people,
more than the combined worldwide head count of Apple,
Dell, Microsoft, Hewlett-Packard, Intel and Sony Corp.

10 -to- 1 Ratio

" Until a recent spate of suicides at Foxconn's complex
in Shenzhen, China, few people had ever heard of the
company. But most know the products it makes -
computers for Dell and H-P, Nokia cellphones,
Microsoft XBox 360 consoles, Intel motherboards,
and countless other familiar gadgets. Some 250,000
Foxconn employees in Southern China produce all
of Apple's products. Apple, meanwhile, has about 25,000
employees in the U.S. - that means for every Apple worker
in the U.S. there are 10 people in China working on iPods,
iMacs, and iPhones. The same roughly 10-to-1 relationship
holds for Dell, disk-drive maker Seagate Technology,
and other U.S. tech companies.

" You could say, as many do, that shipping jobs overseas
is no big deal because the high-value work - and much
of the profits - remain in the U.S. That may well be so.
But what kind of a society are we going to have if it consists
of a few highly paid people doing high-value-added work -
and masses of unemployed?

" Since the early days of Silicon Valley, the money invested
in companies has increased dramatically, only to produce
fewer jobs. Simply put, the U.S. has become wildly inefficient
at creating American tech jobs. We may be less aware of this
growing inefficiency, however, because our history of creating
jobs over the long term - the last fifty years - has been
spectacular, masking our greater and greater spending
to create each position.

Tragic Mistake

" Should we wait and not act on the basis of early indicators?
I think that would be a tragic mistake because the only
chance we have to reverse this deterioration is if we
act early and decisively.

"Already the decline has been marked. It may be
measured by way of a simple calculation ; the employment
cost-effectiveness of a company. First, take the initial
investment plus the investment during a company's IPO.
Then, divide that by the number of employees working in
that company ten years later. For Intel, this worked out to
be about $650 per job - $3,600 adjusted for inflation.
National Semiconductor Corp., another chip company,
was even more efficient at about $2,000 per job.

" Making the same calculations for a number of
Silicon Valley companies shows that the cost creating
U.S. jobs grew from a few thousand dollars per position in
the early years to $100,000 today. The obvious reason:
companies simply hire fewer people as more and more
work is done by outside companies, usually in Asia.

Alternative Energy

" The job-machine breakdown isn't just in computers.
Consider alternative energy, an industry where there
is plenty of innovation. Photovoltaics, for example, are a
U.S. invention. Their use in home-energy applications
was also pioneered by the U.S.

" Last year, I decided to do my bit for energy conservation
and decided to equip my house with solar power. My wife
and I talked to four local solar firms. As part of our due
diligence, I checked where they get their photovoltaic panels
- the key part of the system. All of the panels they use come
from China. A Silicon Valley company sells equipment used
to make photo-active films - and they ship close to ten times
more machines to China than the U.S. - and the gap is growing.
Not surprisingly, estimated U.S. employment in the making
of photovoltaic films, panels, and the equipment to produce
them is about 10,000 - a few per cent of total worldwide
employment.

Advanced Batteries.

" There's more at stake than just exported jobs. With
some technologies, both scaling and innovation take
place overseas. Such is the case with advanced batteries.
It has taken years and many false starts, but finally we
are about to witness mass-produced electric cars and trucks.
They all rely on lithium-ion batteries. What microprocessors
are to computing, batteries are to electric vehicles.
Unlike microprocessors, the U.S. share of lithium-ion
battery production is tiny.

" That's a problem. A new industry needs an effective
ecosystem in which technology knowhow accumulates,
experience builds upon experience, and close relationships
develop between supplier, manufacturer, and customer.
The U.S. lost its lead in batteries 30 years ago when it
stopped making consumer electronic devices.
Whoever made batteries then gained the exposure and
relationships needed to learn to supply batteries for the
more demanding Laptop PC market, and after that for the
more demanding automotive market.

"U.S. companies didn't participate in the first phase and
consequently weren't in the running for all that followed.
I doubt that they will ever catch up.

Job Creation

" Scaling isn't easy. The investments required are
much higher than in the invention phase. And funds
need to be committed early, when not much is known
about the potential market. Another example from Intel:
The investment to build a silicon plant in the 1970's was a
few million dollars. By the early 1990's, the costs of the
factories that would be able to produce the new Pentium
chips in volume rose to several billion dollars. The decision
to build these plants needed to be made years before we
knew whether the Pentium chip would work or whether
the market would be interested in it.

"Lessons we learned from previous missteps helped us.
Years earlier, when Intel's business consisted of making
memory chips, we hesitated to add manufacturing capacity,
not sure of the market demand in years to come.
Our Japanese competitors didn't hesitate: they built the
plants. When the demand for memory chips exploded,
the Japanese roared into the U.S. market and Intel
began its decline as a memory-chip supplier.

Intel Experience.

" Though steeled by that experience, I remember how
afraid I was as I asked the Intel directors for authorization
to spend billions of dollars for factories to make a product
that didn't exist for a market we couldn't size.
Fortunately,they gave their OK even as they gulped.
The bet paid off.

" My point isn't that Intel was brilliant. The company
was founded at a time when it was easier to scale domestically.
For one thing, China wasn't yet open for business. More
importantly, the U.S. hadn't yet forgotten that scaling
was crucial to its economic future.

" How could the U.S. have forgotten? I believe that the
answer has to do with a general undervaluing of
manufacturing --- the idea that as long as "Knowledge Work"
stays in the U.S., it doesn't matter what happens to factory
jobs. It's not just newspaper columnists who spread this idea -
but politicians and academics as well.

Off shore Production.

" Consider this passage by Princeton economist Alan S. Blinder:

"The TV manufacturing industry really started here,
and at one point employed many workers. But as TV
sets became 'just a commodity' the production moved
offshore to locations with much lower wages. And
nowadays the number of TV sets manufactured in
the United States is zero. A Failure? No --- a success! "

" I disagree. Not only did we lose an untold number of jobs,
we broke the chain of experience that is so important in
technological evolution. As happened with batteries,
abandoning today's "commodity" manufacturing
can lock you out of tomorrow's emerging industry.

" Our fundamental economic beliefs, which we have
elevated from an observation to an unquestioned truism,
is that the free market is the best economic system - the
freer, the better. Our generation has seen the decisive
victory of free-market principles over planned economies.
So we stick with this belief, largely oblivious to emerging
evidence that while free markets beat planned economies,
there may be room for a modification that is even better.

No. 1 Objective.

" Such evidence stares at us from the performance of
several Asian economies in the past decades. These
countries seem to understand that Job Creation
(italics mine - TTN) must be the number one objective
of state economic policy. The government plays a
strategic role in setting the priorities and arraying
the forces necessary to achieve that goal.

" The rapid development of the Asian economies
provides numerous illustrations. In a thorough study
of the development of East Asia, Robert Wade of the
London School of Economics found that these
economies turned in precedent-shattering performances
in the 1970's and 1980's because of government involvement
in the targeting the growth of manufacturing industries.

"Consider the "Golden Projects" - a series of digital
initiatives in the late 1980's and 1990's. Beijing was
convinced of the importance of electronic networks - used
for transactions, communications, and co-ordination - in
enabling job creation, especially in the less developed parts
of the country. Consequently, the Golden Projects
enjoyed priority funding. In time, they contributed to
the country's rapid development of China's information
infrastructure and the country's economic growth.

Job-Centric Economy

" How do we turn such Asian experience into intelligent
action here and now? Long-term, we need a job-centric
economic theory - and job-centric political leadership -
to guide our plans and actions. In the meantime,
consider some basic thoughts from a onetime factory guy.

" Silicon Valley is a community with a strong tradition of
engineering, and engineers are a peculiar breed. They are
eager to solve whatever problems they encounter. If
profit margins are the problem, we go to work on margins,
with exquisite focus. Each company, ruggedly individualistic,
does its best to expand efficiently and improve its own
profitability. However, our pursuit of our individual
businesses, which often involves transferring a great
deal of manufacturing and engineering out of the country,
has hindered our ability bring innovations to scale here at home.

" Without scaling, we don't just lose jobs - we lose our
hold on new technologies. Losing our ability to scale
means losing our ability to innovate.

" A story goes around that an engineer was to be executed
by guillotine. The guillotine was stuck, and tradition
demanded that if the blade didn't drop, the condemned
man was set free. Before this could happen, the engineer
pointed with excitement to a rusty pulley, and told the
executioner to apply some oil there. Off went his head.

"An example: Five years ago a friend of mine joined
a large VC firm as a partner. His responsibility was to
ensure that every startup they funded had a
"China Strategy" - meaning , a plan to ship as many jobs as
they possibly could to China. He was going around with
an oil can, applying drops to the guillotine in case it
was stuck. We should put away our oil cans. Every
VC firm should have a partner in charge of every startup's
"U.S. Strategy".

Financial Incentives

" The first task is to rebuild our industrial commons.
We should develop a system of financial incentives.
Levy an extra tax on the product of offshored labor.
If the result is a trade war, treat it like any other war -
fight to win. Keep that money separate. Deposit it in
the coffers of what we might call the Scaling Bank
of the U.S. and make these sums available to companies
that will scale their American operations. Such a system
would be a daily reminder that while pursuing our company
goals, all of us in business have a responsibility to maintain
the industrial base on which we depend and the society
whose adaptability - and stability - we may have taken
for granted.

" I fled Hungary as a young man to come to the U.S. in
1956. Growing up in the Soviet bloc, I witnessed firsthand
the perils of both government overreach and a stratified
population. Most Americans aren't aware that there was a
time when tanks and cavalry were massed on Pennsylvania
Avenue to chase away the unemployed. It was 1932; thousands
of jobless veterans were demonstrating outside the White House.
Soldiers with live ammunition and fixed bayonets moved in,
herding them away from the White House. In America!

" Unemployment is corrosive. If what I'm suggesting is
protectionist, so be it. Yet the imperative for change is
real, and the choice is simple.

"If we wish to remain a leading economy, we change on
our own, or change will continue to be forced upon us. "

(Andy Grove is a senior adviser to Intel Corp. and was Intel
Chairman and CEO from 1987 to 2005)

David Harvey and The Crisis of Capitalism

2010-07-04T14:05:00.000-07:00

(H/T Brad Delong's blog)

Every so often, something comes along in the blogosphere
that reaches out and grabs you to such an extent that
you just can't put it down.

And the short video lecture below by anthropologist and
"socioeconomist" David Harvey is one of those.

For those of you who haven't heard of Professor Harvey before,
he is Distinguished Professor of Social Anthropology at the
Graduate College of the City University of New York.
He has further made news as a leading theorist in the
emerging discipline of "Socioeconomics" - that is, that
economic events can be explained as much as a consequence
of social and anthropological norms as by mathematical
descriptions of "rational" behavior.

But, what makes his lecture fun to listen to is the unique
animation provided by the British Royal Society for
Animation that accompanies it.

Oh, and by the way, I need to warn you - Dr. Harvey is
a committed Marxist.

But if that doesn't bother you, I think you'll find that
his brief, 11- minute explanation of "The Crisis of Capitalism"
to be both cogent and comprehensive. And even though
The Thinking Nationalist is a firm believer in Capitalism
and Free Markets, I have yet to hear a better short explanation
of "What Happened To Us And Why" than this short piece.

Therefore, Dr. Harvey, the floor is yours:

The Gen. Stanley McChrystal Affair: A Civilian-Military Disconnect?

2010-06-27T19:19:00.000-07:00

The recent cashiering of General Stanley McChrystal,
Allied Forces commander in Afghanistan, was neither
unprecedented nor uncalled for.

After a devastating cover piece in Rolling Stone detailing
the deeply-felt contempt felt by Gen. McChrystal and his
staff for the civilian leadership of the Allied military and
diplomatic effort in Afghanistan, President Obama had
no choice but to fire him.

You can read the original article here.

If I were President, and one of my military leaders was as
openly contemptuous of the civilian leadership as
McChrystal, that man would be immediately gone - and
immediately replaced. And I wouldn't have been as
considerate as Obama. Rather, Obama should have
ordered Secretary of Defense Robert Gates to replace him
with his second-in-command immediately, pending a
thorough housecleaning and further strategy review.

This would have accomplished several things - first of all,
it would have reinforced the notion of Chain of Command -
from general in the field, through the Secretary of Defense,
to the President. Second, it would have taken a lot of the
heat off the White House and placed it on the Pentagon,
where it belonged. Third, it would have bought time for
a necessary review, the end result of which should be a
recognition that Afghanistan is a failed venture,
to be terminated as soon as practicable.

But, as the Rolling Stone story makes clear, the Afghan
venture is rapidly becoming a Vietnam-style quagmire.
Incredibly, Stanley McChrystal appears to understand this,
but the civilians don't, including U.S. Ambassador Karl
Eichenberry, a retired three-star who at one time was
McChrystal's immediate superior. And according to
Michael Hastings, the author of the piece, the one
thing there's no shortage of in McChrystal's war is
bureaucratic infighting and one-upmanship.

Not that there aren't always powerful rivalries when
leaders with large egos are given charge of a war effort.
Even in World War II, leaders like FDR, Churchill,
Marshall and Eisenhower were often having to
intervene in squabbles between different generals,
admirals, and field marshals on matters of strategy,
tactics, and logistic support.

But the blame can't solely be placed on the generals
themselves. Anyone with "flag" or "star" rank knows
only too well that in wartime, he faces two enemies;
the enemy he's fighting, and the other generals or
commanders with whom he must compete for the
always-too-scarce resources provided to the forces
afield. It is sad but true that the most successful
commanders are almost always those who can
most successfully persuade their superiors that their
theater deserves the lion's share of the men and
materials available.

An astute general knows that failure to win the
bureaucratic war now often means defeat in the
field later. And when one's bureaucratic rivals are
civilians or politicians with little or no military,
diplomatic, or national security experience, a general
must press his case very carefully - and that includes
keeping very tight control of the "message" one brings
to one's superiors.

Which is why, for the life of me, I can't understand how
a leader as obviously intelligent and dedicated as McChrystal
could wind up as the object of a hatchet job, as the song
goes, " On the Cover of A-Rolling Stone".

Just who did he think he was talking to? Army Times?
Stars and Stripes? As almost anyone under the age of
50 knows, Rolling Stone is well- known for covering
the ins and outs of the music business, including irreverent
exposes of artists such as Jay-Z, Miley Cyrus and Lady GaGa.

But lately, Rolling Stone has taken a serious tone in reporting
matters that serious folks at the top would have preferred
be left uncovered. Rolling Stone's Matt Taibbi blew the
whistle on the machinations of Goldman Sachs and the
government in his piece "The Great American Bubble
Machine" , which gave Goldman its everlasting moniker
of "The Great Vampire Squid". Rolling Stone was among the
first to report the rampant prescription drug abuse behind
the untimely death of King of Pop Michael Jackson last year.

And when handed the opportunity to affect the course of
an unpopular, poorly-justified foreign war by a journalist
reporting on events and conversations that were clearly
"off-the record", the elite, Ivy-educated 20-and 30-something
brass at Rolling Stone said "F@#k It. Publish and
let the chips fall where they may."

In such journalistic company, both McChrystal and his
staff should have kept their mouths shut, and strictly
controlled reporter Hasting's access to sensitive information.

That they apparently did neither, I feel, speaks less to their
judgment and more to their "apartness" from civilian society
than anything else. For if today's military is anything, it is
truly A Society Apart - one far less representative of America
than almost any other public institution.

Drawing its recruits principally from the working and
middle classes, its commissioned and non-commissioned
career leadership is now almost exclusively 2nd, 3rd and 4th
generation military. While it is rare for the sons or daughters
of the "elite" to serve, it is not at all unusual to see a career
military man, enlisted or officer, with one or more children
serving. And this is especially reflected in the Service
Academies, where 80% of the class of 2012 (the last year
for which statistics are available), at Annapolis and West
Point comes from career military families.

Given this self-selected isolation, and subject to a civilian
leadership to whom concepts such as Duty, Honor, and Country
seem both quaint and naive, it's not hard to understand some
friction and resentment on the part of those who serve. And
for the most part, the vast majority of serving men and women
honorably keep their resentments, if any, to themselves.

But sooner or later, the "Civilian-Military Disconnect" is going
to blow up in the faces of a dissipated and self-absorbed civilian
leadership more interested in personal financial advancement
than the welfare of the country they serve.

And if and when that should happen, the results will
not be pretty. We will have more to say on this issue in a
future piece.

The GOP: The Triumph of "Just Saying No"

2010-06-27T15:54:00.000-07:00

The Grand Old Party may have finally hit on a winning
strategy.

By playing to growing concerns among voters of debt and
deficits, as well as Tea-Party-fueled resentment of expensive
and ineffective Government, the Republicans at one stroke
have managed to turn the tables on an embattled Obama
Administration and Democratic Congress.

By "Just Saying No" to extensions of unemployment insurance,
aid to the states, a Medicare "Doc Fix", and a variety of tax cuts
for small business, the GOP may finally have found its partisan
voice - a voice it was in danger of losing to the decentralized and
un-coordinated Tea Party movement.

And this was a very large win. For eight weeks, the Senate
Republicans forced the Democrats to negotiate with themselves
on the "price" of this aid package.

First, it started at $ 80 Billion - all funded by additional debt.
Then, it was $50 Billion - funded partly by new debt and partly
by unspent "stimulus" funds. Finally, it was $33 Billion - mostly
unemployment insurance, funded by a grab bag of tax increases,
spending cuts, stimulus money, and additional borrowing.

And very shrewdly, each time the Democrats made a concession,
the stronger the Republican opposition became. For, with this
"win" , the Republicans can sail into November pointing to two
signal accomplishments - they have drawn a line on additional
deficit spending, and they have highlighted the inability of
the Obama Administration and its Democratic majority in
Congress to deliver on relieving the genuine economic distress
of much of America.

And this message is going mostly unchallenged by the think
tanks, the "Liberal Media", and left-of-center thinkers generally.

Twenty or thirty years ago, this would have been unheard of.
Cut off the benefits of the unemployed? The "media" would have
been calling for demonstrations in the streets and widespread
civil disobedience. No aid to the states? The New York Times
and the Washington Post would have been up in arms about the
Nation's "Unmet Social Needs". And the "Doc Fix" and the other
programs? The beneficiaries of those programs are mostly in
Middle America - that great expanse between the coasts whose
inhabitants are viewed by both liberals and conservatives
with disdain and contempt.

What happened in the intervening time period? Three things.

First of all, the success of Bill Clinton and his embrace of
"Free Markets", "Trickle-Down Economics" and "Free Trade".
Compared with the utter failure of the last Democratic President
Jimmy Carter, the "New Realities" to Democrats became clear.
Market Economics had won the day. Deregulation of competition
and financial markets was the new watchword. A rising tide
would lift all boats - even the boats of the chronically
disadvantaged. Even the despised George Bush continued
in this same vein. While the Democrats rightly excoriated
him about plunging the nation into two unwinnable wars,
on economics the Democrats gave Bush a free pass;
the no-questions-asked bailouts of Wall Street, GM and
Chrysler passed with substantial Democratic support.

Second , there was the unusual ascent of Barack Obama to the
Presidency. He successfully defeated the all-but -crowned
Democratic nominee Hilary Clinton by casting himself as a
center-right, non-ideological alternative,thus winning
both the nomination and the Presidency not so much by the
overwhelming support of Blacks and Hispanics but by
convincing the non-ideological "center" that he was a
pragmatic, practical choice for difficult times.

Third, there was the increasing personal wealth of many
so-called liberals. Rising economic tides had brought many
obscure academics and writers to new levels of personal wealth.
Tenured left-of-center Economics professors began to earn
unheard-of sums for speaking engagements and consultancies
to Wall Street banks and hedge funds - in some cases, earning
more in one speech than their salaries from Academia. And then
there was the phenomenon of "liberal" lawmakers retiring from
politics to new careers as lobbyists for well-funded special interests.

Combine the new wealth with the well-documented cultural
contempt of many liberals for "the ordinary people" of "flyover
America", and the new paradigm of "socially liberal but fiscally
conservative" becomes completely understandable.

Put more bluntly, the sellout of liberalism by liberals for
personal gain was now complete.

And the Republicans changed also. Ditching the social and
religious conservatives as both ignorant and unreliable,
the GOP became unapologetically the party of Big Capital:
The Party of Wall Street and the hedge funds, The Party of
Big Pharma and Big Oil, The Party of Transnational
Corporations busy outsourcing and offshoring American
jobs, all in the name of "Free Markets" and "Capitalism".
And to their utter delight, they found that they had more
in common with their liberal colleagues than with other
Americans; how to get their kids into the "right" elite
schools, how to get in on the right hedge fund deal, how
to extract this private benefit or that from a compliant
government, how to make sure that their kids got a
scarce career-launching job or internship.

Bottom line: Their are only two classes of Americans
any more. The rich of both left and right, and the rest of us.

And in my opinion, that's not a recipe for continuing
social peace or order. Up until now, the American People
have been remarkably patient. Ten percent unemployment
is not pleasant, but we've always grown out of it before.

Not this time. In a year, unemployment will be 20% and rising,
the divide between rich and poor will be even greater, and the
first organized armed revolts since the Civil War may break out.

Mark Twain said History doesn't often repeat itself but that it
does rhyme. And the rhyme we would be repeating
would not be Philadelphia 1776, but Paris 1789.

These will be interesting times indeed.

Sharron Angle: An Uphill Fight Until November

2010-06-20T12:40:00.001-07:00

Now comes the hard part for Sharron Angle.

Having won the Republican nomination for the
Senate seat now held by Majority Leader Harry
Reid, Ms. Angle must now take on the mammoth
and well-funded Reid organization to prevail
in November.

And judging from what we have seen so far, it
isn't going to be easy.

First of all, the majority leader has only begun
to spend the $16 million he currently has in the
bank for the fall campaign. Another $9 million
is on the way (adding up to the predicted $25
million war chest), and already the effects are
very noticeable.

Reid signs and billboards are everywhere
overnight. The radio and TV airwaves are full
of Reid commercials, extolling the many "things"
good ol' Harry has done for Nevada. And this is just the
opening salvo.

The negative ads attacking Angle have yet to start.

And on the surface, there's plenty of material for them
to pick from. Angle's stated positions include the abolition
of Social Security, Medicare, the Departments of Energy
and Education and the IRS. Her other positions include
the abolition of the Federal Reserve, a return to the gold
standard, and reinstituting Prohibition.

Not exactly a "mainstream" conservative agenda - but
one calculated to appeal to the tin-hat and wingnut
crowd.

And Ms. Angle shows few signs of "moderating" her
message. Despite a quick trip to Washington to meet
with top GOP operatives Dick Armey and Roger Ailes,
who advised her to downplay the "Tea Party" aspect of
her campaign, she promptly returned to Nevada to state
that we may need a "Second Amendment" solution to our
problems if things don't improve.

While this may play well to the "God and Guns" segment
of the electorate, it doesn't exactly sit well with mainstream
voters, who are far more worried about jobs and the economy
than taking to the streets with rifles and shotguns.

And this is starting to show up in some high-profile defections
from top GOP officeholders. The Republican mayor of Reno,
Bob Cashell, has come out for Reid, as has State Senate Majority
Leader Sig Rogich, who heads up the statewide "Republicans
For Reid" effort. Moreover, there are rumors that Sue Lowden,
of "cluckers for checkups" fame, may leave the GOP and endorse
Reid in the fall.

Add to this the fact that the big casino operators and mining
interests are all firmly in the Reid camp and Ms. Angle may
be outgunned on all sides.

But she has probably one one card to play - and that is to make
the election a referendum on Harry Reid himself - to make the
whole campaign one of Harry Reid vs. the little guy.

If I were Sharron Angles' campaign manager, I would be asking
just how Harry Reid's ties to big casino and mining interests,
his coziness with Big Government and Big Public Employee
Unions, and his slavish devotion to a far-left Democratic agenda
are going to help Nevada with its current 14.7% unemployment
rate and nation-leading foreclosure rate.

As a Senate Majority Leader he hasn't been particularly effective;
I can't imagine a Lyndon Johnson or even a Tom Daschle letting
himself get rolled on a badly-needed extension of unemployment
and Medicare benefits by members of his own party.

But I don't think that Sharron Angle is the solution - she's so
extreme that even Sarah Palin has avoided her. And while the
"Tea Partiers" may have had their feel-good moment in getting
her nominated, I think they are going to come up way short
in the fall.

And when Harry Reid exposes her "Club For Growth" backers
as apologists for multinational corporations (including BP),
the game will be all but over.

Anyhow, we'll see. A lot will happen between now and
November.

California's "Mama Grizzlies" - Meg Whitman and Carly Fiorina

2010-06-19T19:27:00.000-07:00

When Sarah Palin said that 2010 would be the year of
the Republican "Mama Grizzlies" , she wasn't kidding.

What she was referring to was the rise of conservative
Republican Women in this year's electoral contests.
And, there have been a number of very surprising
"Mama Grizzly" wins.

First there was the upset win in the South Carolina
Republican gubernatorial primary by Palin-endorsed
Nikki Haley. In deep-red-state South Carolina, winning
the Republican primary makes the attractive daughter
of Indian immigrants the odds-on favorite in November.

Next, there was the out-of-nowhere win by Tea Partier
Sharron Angle in the Nevada Primary to face Senate
Majority Leader Harry Reid in the fall. However, as Ms.
Angle's somewhat extreme views become better known,
she may face an uphill fight in November against the
well-financed Reid.

But the biggest "Mama Grizzly" winners on Primary Day
were the California female multi-millionaire tech
CEO's - Meg Whitman and Carly Fiorina.

Meg Whitman, the former eBay CEO now Republican
nominee for Governor, spent an unprecedented $71 Million
in the primary, and is prepared to spend up to $50 million
more in the general election contest against former Governor
Jerry Brown, making her campaign the most expensive
in California history. But, as a virtual unknown outside
corporate CEO circles, she contends that this was necessary
to succeed in the nation's most competitive and expensive
political media market.

Touting her experience in the business world as someone
who will "Get Things Done" for California, Whitman
has brought a raft of top-flight GOP endorsements to her
side, including Newt Gingrich and Mitt Romney. Her
campaign manager is none other than former Republican
Governor and Senator Pete Wilson. And even though she
has been self-financed thus far, contributions from
GOP-affiliated PACS have been pouring in, as well as
money from the Republican National Committee and
the National Republican Governor's Conference.

Should she accept and spend all this money, hers will be
the second-most expensive Republican campaign in history,
behind only John McCain's 2008 Presidential bid.

And she will probably need to spend it all to win. Both parties
have identified the California gubernatorial race as one of
the most important in the nation, and former Governor
Brown will also be receiving major financial help from the
Democratic party. But, running in one of the most
liberal states in the union, with a built-in 60%-40%
disadvantage in voter registration, Whitman will
need to make a compelling case for change to go to
Sacramento. And I'm not sure that she can do it.

To begin with, most of California's problems do
not come from the Governor's mansion - rather, they
originate in a dysfunctional legislature which grinds
itself to gridlocked impotence every session in battles
between an extremely liberal Democratic majority
and an extremely conservative, compromise-hating
Republican minority.

In such an atmosphere, it's no surprise that California
has not produced a timely budget in the last seven years,
it's no surprise that the state is virtually broke, and it's no
surprise that the state has the nation's highest taxes, the
nation's worst business and regulatory climate, and a
bloated state bureaucracy almost third-world-like in
its incompetence and inefficiency.

Given this background, it's hard to see how Meg can
make a difference; if elected, she'll find out very quickly
that she cannot push around legislators and bureaucrats
like she did her employees. And Jerry Brown, well known
as "Governor Moonbeam" during his previous eight years
as Governor, might not do much better. But he'll at least
have the advantage of a legislative majority and the full
support of the highly-partisan state bureaucracy.

Given a "choice" of who is more likely to get necessary
change to stick in California, I would reluctantly have to
say Jerry Brown.

And this brings us to the other "Mama Grizzly" on the
California ticket - former Hewlett-Packard CEO Carly
Fiorina, the Republican nominee for The Senate against
incumbent Barbara Boxer.

With Sen. Boxer's thin record of accomplishment in the
Senate, and her admittedly prickly and unpersonable
persona, she should be a vulnerable target. And, in
pre-primary matchups, she trailed all likely Republican
challengers - except Fiorina.

However, given her huge personal war chest (she spent
$19 million in her campaign), and a timely endorsement
from Sarah Palin, she easily beat underfunded true
conservative former legislator and Congressman
Tom Campbell, whose pre-primary polls showed him
beating Boxer 53%-47% in a general election contest.

However, unlike Meg Whitman, Fiorina's corporate
record of accomplishment is decidedly mixed. Her
stormy tenure as CEO of Hewlett-Packard was marked
by the botched acquisition of rival computer maker
Compaq, the layoff of 25,000 loyal, longtime H-P
employees, the subsequent outsourcing and offshoring
of another 20,000 H-P positions, a 50% decline in H-P's
stock price, and loss of market share in all of H-P's important
businesses. Ultimately, it took the intervention of the Hewlett
and Packard families with H-P's board to hand Fiorina her
walking papers and multimillion-dollar golden parachute.

That Boxer's campaign people rated Fiorina the candidate
they would most prefer to face in the general election doesn't
help either.

And this points up the biggest problem that both of California's
"Mama Grizzlies" face - they are both too corporate and too far
removed from the struggles of California's overtaxed and
overstressed electorate to be credible "tribunes of the people".
Neither is an authentic conservative - and in an era when the
legitimacy of Corporate America is very much in question,
"Corporate" experience is very much a coin of doubtful value.

This is not to say that the Democrats are any better - Barbara
Boxer is well-known as the Senate's "Queen of Mean", with a
heartfelt and documented contempt for ordinary people
only an elitist could love. And Jerry Brown wasn't called
"Governor Moonbeam" for nothing - some his positions on
the issues went beyond the quixotic to the downright
bizarre. And this time around, he's referred to as
"Governor Moonbat" (as in "Bat@#*t Crazy").

You have to feel sorry for Californians - with such a beautiful
state, perfect climate, and a unique culture the whole world
wants to emulate you would think that they would produce
political leaders to match. But they haven't. And in these
two important races, they won't be choosing between
"the lesser of two evils" - rather they'll be embracing
"The Evil of Two Lessers".

Back On The Blog

2010-06-18T11:51:00.000-07:00

It's been an interesting week.

I've had about a week off, but now it's time to go
Back To The Blog.

Last week, I took a much-needed few days off to attend a
family reunion in Monterey, CA. In that I had waited just
a bit too long to get a cheap airline ticket from Las Vegas
(I could have flown on a last minute Priceline deal, but it
would have entailed a four-hour wait in Salt Lake City in
each direction), I decided instead to drive.

From Las Vegas to Monterey ( actually Salinas), is about
591 miles, so I was expecting a pleasant eight or nine
hour jaunt. Loading up my trusty Jeep with my overnight
bag and some bottled water, I set out across the Nevada
desert to Barstow - the first refueling point and the takeoff
for Central California.

Heading west on California Highway 58, you transit
through miles of Joshua Tree scrubland, past the town
of Boron with its tribute to the "Twenty-Mule-Team" of
Death Valley Days fame, and skirt the town of Mojave,
with its airport a sea of mothballed retired airliners.
Then, you start to climb up out of the Antelope Valley
toward the town of Tehachapi and its world-famous
railroad grade of switchbacks and tunnels, which parallels
the highway and offers a spectacular view of mountains
and bristle pines, with air so cool you can turn off your
air conditioning, even in the middle of June.

Crossing the Tehachapi summit, you descend into the
Bakersfield area, where despite the much-advertised
water restrictions, Big Agriculture appears to be
thriving. Motoring past miles and miles of orange and
almond groves, you arrive at the city of Bakersfield,
home of country music stars Buck Owens and Merle
Haggard.

A running California joke is that if for some reason
you want to impress people that you are "country",
or "a redneck", or a "hick", you don't have to pretend
that you are from Arkansas, Tennessee or Oklahoma -
just say you're from Bakersfield or Fresno and they'll
get it. And judging from the number of pickup trucks
and farm vehicles I saw, it's probably accurate.

Heading North on California 99 - the main artery of
the San Joaquin Valley, you leave Bakersfield looking
for Highway 41 and the Wasco exit. Turning onto 41,
you pass Wasco and more miles and miles of almond
orchards and alfalfa fields until finally you get to
open rangeland, with real cattle and cowboys on
horseback. Finally you come to the little hamlet
of Lost Hills where Interstate 5 cross the 41. This
is the next refueling stop and now it's time for lunch
and stretching the legs.

Leaving Lost Hills and its surrounding oil fields (the
area resembles nothing so much as West Texas with
the oil derricks and bobbing pumps), you stay on
41 all the way to the picturesque town of Paso Robles,
with its surrounding wineries and green fields of
broccoli and asparagus. Leaving Paso Robles,
you head north on US Highway 101, and cover the
last ninety miles to the Salinas-Monterey area,
the Salad Capital of California.

After a pleasant three days in Monterey, we retraced
the same route back to Vegas, the trusty ol' Jeep riding
the road as if on rails and putting out a respectable 22
mpg at 75 miles per hour without even breathing hard.
Upon arriving back in Vegas, I found a small assignment
waiting for me. Now that that is out of the way, it's Back
On The Blog - with lots to talk about.

First topic up will be the rise of California's two Republican
Mama Grizzlies - Meg Whitman and Carly Fiorina, running
for Governor and The Senate respectively. Both are hugely
wealthy ex-tech CEO's, and both are intent on using their
accumulated fortunes to attain office.

In my view, the record of wealthy ex-CEO's succeeding
in government is decidedly mixed, as the skill sets
required to be a CEO and a success in government are not
the same. But, that is a topic we'll examine in the next
post.

All in all, it's good to be home - and good to be Back On The Blog.

Eye on Nevada: Sharron Angle Surges Forward !

2010-06-07T21:47:00.001-07:00

What is probably the most-watched political contest in the
Nation will be decided tomorrow.

And, against all odds, it appears that Northern Nevada's
Sharron Angle will get the nod to go up against embattled
Senate Majority Leader Harry Reid.

When I first wrote in these pages three months ago about
Reid's travails, I predicted that the GOP would quickly coalesce
around either Sue Lowden, former State Senate Majority leader
and State GOP Chair, or behind businessman Danny Tarkanian,
the son of UNLV coaching legend Jerry Tarkanian.

Both are attractive, articulate candidates and early polls
showed both leading Reid by statistically significant margins.
At that time, Sharron Angle was a minor candidate of the
Libertarian fringe, with virtually no name recognition in
Clark County or the Las Vegas metropolitan area.

Therefore, I didn't even mention her as a factor in the
race. And, like all pundits both famous and obscure, I
do sometimes Get It Wrong.

In the past three months, Sharron Angle has shot from
obscurity to leading the polls, not only in the Primary
contest but against Harry Reid in the general election.
The Reno Gazette has her leading Reid 47% - 41%, while
the larger Las Vegas Review-Journal poll has Angle leading
Reid 44%-41%, (Tarkanian also leads Reid 45% - 41%) .

And in the primary, the polls break down this way:

Angle - 32%

Tarkanian - 24%

Lowden - 23%

Minor candidates and undecided - 21%

Clearly an outstanding result for an outstanding and
unwavering conservative. But, she has had some
important help along the way.

First, the Tea Party Express (the closest thing to a
national Tea Party organization), endorsed her at its
Washington conference in April. This brought the Angle
campaign national-level organizational talent and badly
needed funding. Next, the Club For Growth came aboard
with more money and organizational help.

And then, Divine Providence struck.

As we previously reported, Sue Lowden's campaign
almost totally self-destructed over "Cluckers For Checkups";
the wildly humorous soundbite that transformed Lowden
from political leader to an object of national ridicule overnight.
Incredibly, when given the opportunity to "walk back"
her comments in a friendly media forum, she instead
expanded on them and went on to opine as to how "barter"
could be acceptable health care reform.

Exposed as an out-of-touch Establishment elitist, her
campaign never recovered - indeed, in both statewide polls,
she now trails Reid 46%-41%.

But, there's a lot of time between now and the General
Election. Harry Reid has amassed $9 million of the
estimated $25 million he will need for the general
election, and he has made it clear to Democratic
audiences that he will "vaporize" any opponent
with a tidal wave of attack ads. And Sharron Angle
has just enough "libertarian" baggage (abolish
Social Security, The Fed, The IRS), to provide some
grist for Reid's mill.

But to many Nevadans, that may not matter. In
their eyes, Harry Reid has gone from Representing
Nevada in Washington to Representing Washington
in Nevada.

And when it comes to things like the economy,
joblessness, and foreclosures, Reid isn't just useless -
he's rapidly becoming irrelevant, along with the vast
majority of incumbents of both parties.

It's not news that we badly need change in Washington;
and I am now convinced beyond a doubt that re-electing
incumbents is not the way to get it. With only a few
exceptions, I am recommending that whenever you
encounter an incumbent on a ballot for any national,
state or local office You Vote For The Other Guy.

When things get this bad, some new faces couldn't
possibly do any worse.

Chris Christie and Oscar Goodman: Holding the Line Against The Parasites

2010-05-30T11:22:00.000-07:00

(h/t) Mish's Global Economic Analysis and The Las Vegas Review-Journal)

Just like my fellow blogger Mish, every time I see New
Jersey Gov. Chris Christie take on New Jersey's
parasitic teacher and public employee unions, I
want to stand up and salute.

As "The Great Recession" drags on into its twentieth
month, with continuing private sector job losses,
it's time to tell the truth about Unionized Public Sector
Employees - the third group of villains of this piece, along
with the banksters and their corrupt enablers in the
Congress.

In a time when private sector employees have been
battered by layoffs, outsourcing, job exportation, and
the "in-sourcing" of illegal immigrant labor, the unionized
public sector has only one answer - More.

More pay. More benefits. A more lavish retirement program.

There's only one problem. An eviscerated and
impoverished private sector, which pays the taxes that
fund all this generosity, has literally no more to give.

And unlike most elected leaders, Gov. Christie understands
this. That's why he's campaigning all across the state not
only for givebacks in wages and benefit contributions, but
also for caps on property and income taxes to prevent
further grabs by the greed-inspired public sector.

Here's Gov. Christie laying it on the line for everyone:

And in the question-and-answer session that followed a loutish,
overweight, overpaid parasite of a teacher has the gall to
complain:

Here's a partial transcript:

Overpaid, overweight loutish teacher: " You are not compensating
me for my education and experience". (Note: this parasitic lout
is paid $ 86,389 a year plus $20,000 a year in medical benefits
and $20,000 a year in retirement benefits).

Gov. Christie: "Well, you know what, you don't have to do it."
(Huge Applause).

Lout: " Teachers do it because they love it"

Gov. Christie: " Teachers go into it knowing what the pay scale is"
(More Applause).

And out west, here in Las Vegas, we are facing the same problem.

Next to Michigan, Nevada is Ground Zero not only for foreclosures
but for skyrocketing unemployment as well.

Nevada's overall unemployment rate is 13.7% - second highest
in the nation. And in Clark County (Las Vegas), the
unemployment rate is a Detroit-like 14.1%.

And Las Vegas Mayor Oscar Goodman, normally
an ebullient salesman for all things Las Vegas with an
ever-present martini in hand and a showgirl on his
arm, has been turned stone-cold sober by the economic
facts of life.

He has proposed the following to the Las Vegas
City Employees Association (the union representing
all non-uniformed city employees):

1) An 8% pay cut in all classifications, through a
giveback of the last two cost-of-living increases;

2) A freeze at this reduced pay level;

3) Suspension of all step increases, longevity pay,
and further cost-of-living increases;

4) Furloughs and a four-day work week;

5) A split between the city and the employee
of PERS (Public Employee Retirement System)
increases;

6) Abolition of right-of-restoration from layoff
lists and an allocation method for placing re-hired
employees at lower wages and job classifications;

7) An increase in the employee share of health
benefit costs and a reduction in the city contribution.

When you consider that the average non-uniformed
city employee makes from 25-30% more than his
private-sector counterpart and the city is facing a
$40 million budget deficit in the fiscal year beginning
July 1, Mayor Goodman has no choice.

Employee wages and benefits make up an astounding
80% of the city budget - it's the only place that can be cut.

The alternative - drastic permanent layoffs. And if you're
a laid-off city employee, I wouldn't want to be you trying
to get a private-sector job, trying to convince a skeptical
private employer how "efficient" you were in your last
position.

The image of the fat, lazy, overpaid and inefficient
government employee isn't just a stereotype - it's
an altogether accurate portrayal as anyone who has
ever had to deal with government at any level
can attest.

The private sector has already "restructured" by
wage cuts, firing its most highly paid and experienced
employees, placing its few new hires on drastically
lower wage and benefit scales, outsourcing and exporting
jobs to the Third World, and in certain industries hiring
illegal aliens "under the table" wherever possible.

The government has no choice but to follow suit -
because the private sector 's changes have left
nothing more to tax to feed an over-entitled public
sector.

There's nothing left to share but the poverty. And
the sooner public employees are subjected to the
same sort of wage and benefit competition that
happens every day in the private sector, the better
off we'll all be.

So Governor Christie and Mayor Goodman, here's a toast
to you.

I'd raise my martini glass, but as gin and vermouth
are "off-budget" for me for the foreseeable future,
a glass of ice water will have to do.

Cheers.

Deep Horizon, BP and The Gulf: The Oil Industry's Three Mile Island

2010-05-29T12:24:00.000-07:00

It's been forty days now.

That's how long it's taken BP (British Petroleum) to try
to cap the runaway oil spill at its Deepwater Horizon site
in the Gulf of Mexico.

Ever since the Deepwater Horizon drilling rig exploded
and sank on April 16, the responses of BP to try to
contain the spill have ranged from the ludicrous to
the bizarre, reinforcing liberal belief in oil industry
venality and incompetence.

In point of fact, however, when it comes to
"incompetence" in dealing with the situation, the response
of BP is nothing compared to that of the government.
Be that as it may, there's plenty of blame for this mess
for all concerned.

To begin with, when it comes to deepwater drilling
competence, BP is not an industry leader. Rather, they
have a reputation in the Gulf and elsewhere for being
notorious cost-cutters and short-cut takers, especially
when it comes to environmental protection and safety
precautions.

In fact, when current BP CEO Tony Hayward (a former
investment banker), took over last year, he said that
BP's principal problem was that it had "too many people
trying to save the world" and not enough people focused
on improving BP's depressed stock price.

Given that sort of mindset at the top, it made a disaster
like Deepwater Horizon all but inevitable. Ironically,
the very depth and complexity of the Deepwater site
actually helped mitigate the disaster - had this event
happened in shallow water, the spill could have been
many times worse.

As matters now stand, we're waiting for "Top Kill" -
the latest in a series of seriocomic "fixes" attempted
by BP to cap the leak. But, laughable as BP's attempts
to fix the problem may have been, they have managed
to be outdone in clownishness only by the government.

Under the direction of renowned geologist and energy
expert Rahm Emanuel, the government did its usual best
not to let the crisis go to waste. In a speech to a Democratic
fund-raiser, President Obama announced an immediate halt
to all further offshore oil exploration, pending "stringent
environmental reviews" expected to last at least until 2014.
According to Emanuel, this to put the problem
"past the next two election cycles."

And, then, when Louisiana Governor Bobby Jindal wanted
to use his emergency powers to build dikes and sand berms
to protect endangered wetlands and marshes, Obama told
him no - no until a detailed "environmental review".
Results - the oil washed up on the marshes anyway,
destroying livelihoods along with an admittedly fragile
ecosystem, and the whole affair degenerated into that
favorite political sport- "the blame game" - with BP and
the Feds pointing fingers at each other with the people
of Louisiana caught in the middle, as usual.

And Congress, busy as always in selling itself out to
special interests for election funds, ran for cover and has
been nowhere to be seen during this whole debacle.
Even Obama, once the obligatory anti-oil-industry
speeches had been made, tried to distance himself
from the whole matter, only venturing down to
Louisiana Friday for a carefully scripted two-hour
"photo op", with press and public access carefully
minimized.

And how will this thing likely turn out? In my
opinion, four things will happen. First, I do
think BP and the rest of the industry will get the
leak stopped. The rest of the Gulf oil industry has
contributed men, materials and money to the effort,
in a not-so-surprising effort to defend their own self
interests. Second, this will wind up doing to the US
offshore drilling industry what Three Mile Island did
for US nuclear power. Only in this case, the industry will
just pick up and move to wherever Brazil, China, India
or Russia can use their expertise for difficult drilling
projects. Thus, while the BRIC countries move toward
energy independence, the U.S. will move to ever-greater
oil dependence on such friends as Venezuela,
Russia, and Saudi Arabia. Third, while "emerging
nations" move forward with "energy independence",
the U.S. will succeed in hamstringing all its energy
projects (not just oil) with ever-greater burdens of
bureaucracy and red tape. And finally, will BP
ever be made to pay for cleaning up the mess?
Don't count on it. Liability will be litigated forever;
and ultimately, the taxpayer will foot the bill
without recompense.

And why not? The one area where the U.S. excels is
in creating ever-greater levels of government waste,
mismanagement, and bureaucracy as the preferred
solution for any problem. Does the "government"
solution for healthcare, financial reform, or chronic
unemployment give you confidence that they can solve
this one?

I didn't think so.

The Class of 2010: Deep Trouble And No Way Out

2010-05-24T10:34:00.001-07:00

(h/t Mish's Global Economic Analysis)

It's not easy being a new college graduate these days.

Just as most graduates of the Class of 2009 are resigning
themselves to more-or-less permanent unemployment
or underemployment, along comes another cohort of
new graduates to add to the competition.

According to the Wall Street Journal, these graduates:

"Will enter a labor force that neither wants nor needs them.
They will enter an economy where roughly 17% of people
aged 20-24 do not have a job, and where two million college
graduates are unemployed. They will enter a world where
they will compete tooth and nail for jobs as waitresses,
pizza delivery men, file clerks, bouncers, trainee busboys,
assistant baristas, interns at bodegas."

You can read the original article here.

Oh well, you might say. It's just what you'd expect of
sheltered, middle-and upper-class kids who went to
an expensive private college or Ivy League school,
who graduate with a "useless" Liberal Arts degree.

But, it's the kids with useful degrees (Science, Technology,
Engineering, Mathematics, Business and Finance) who
may be having the toughest time of all.

As my colleague Mish tells it:

"Ten months after graduating from Ohio State University
with a degree in civil engineering and three internships,
Matt Grant finally has a job - as a banquet waiter at a
Clarion Inn near Akron, Ohio.

" "It's discouraging right now" says, the 24-year-old,
who sent out nearly 100 applications for engineering
positions. "it's getting closer to the Class of 2010, their
graduation date. I'm starting to worry more".

And worry he should. Colleges from Harvard University
to Ohio State and everywhere in between are sending
almost two million young men and women a year into an
economy with almost 9.9% unemployment, up from
9.7% a few months ago.

And the problems don't end there. While the economy
is slowly "recovering", it has yet to create any meaningful
gains in employment. And, according to experts, this means
that those unfortunate enough to graduate in this recession
are likely blighted for life, as successive cohorts of graduates
compete with each other in an economy that is producing
progressively fewer and fewer entry-level jobs each year.

And then there's another problem. And that has to do with
the clash of values and perceptions between the new graduates
and those who would employ them.

For starters, let's take a look at the "typical" employing
manager at a company likely to have "professional
entry-level" openings. First of all, he's likely older - in
his 40's to his middle 50's. He doesn't "Facebook" or
"Twitter". If he "texts" at all, it's on one of those oversize
smartphones with a mini-keyboard. If he has a degree,
it probably took him more than four years to get it -
and his graduate degree (if he has one), is from night school.

The one thing he doesn't have is a sense of entitlement -
because when he graduated, between 1977 and 1982, the
economy from an employment standpoint was even
worse than it is today.

He bitterly remembers coming out of college in the
days of Jimmy Carter, with 10% unemployment,
18% inflation, and 21% interest rates. It probably
took him three to five years of trying before he
finally landed the professional-level career
position that gave him his start.

And now he's sitting across the table from
Mr. or Ms. Entitled College Graduate, wondering
just how he could be wasting his time talking
to this inhabitant of another planet, who has
nothing but expectations and no relevant
skills or experience to offer his organization,
regardless of the degree.

And, as he considers your application, he's
thinking of how his own college-graduate son's job
was outsourced to India and how his younger
kids can't find part-time jobs, having to compete
against adult illegal immigrants.

And then he remembers how it was "the college kids"
as much as anyone else that brought us The
Great Kenyan as President and the plethora of
job-destroying laws and regulations spewing forth
from Congress. And he knows all too well that The
Kenyan and his Congressional minions, while destroying
the real economy of Main Street, have given a free pass
to Wall Street and the large multinational corporations
who caused the current economic mess.

And, finally, he remembers the "informal" conversation
he had with his boss, hinting that the few positions they
might create this year should go to his family friends and
relatives, provided they have the right skills and
experience.

Translation: That means no job for you.

But, here's what you can do in the meantime. Take any job
you can find. Move back home if you have to. Keep applying
for jobs, even if you don't expect a reply right away. Try to
develop a new skill unrelated to what you studied in college;
it just might land you that job. And get politically active.

No, I don't mean join the Democrat or Republican parties.
The Democrats are socialists in sheep's clothing - and if
you'd like to see where their policies lead, just look at
Europe - street battles between the masses of private-sector
unemployed and "protected classes" of government employees,
and both of them fighting weak, feckless governments
that can deliver neither a social safety net nor social order.

And the Republicans are just as bad - hiding behind the
mantra of "free enterprise" and "property rights", they
conspired with Wall Street and the great Corporations
to outsource our production base and destroy the
real economy. In its place, they created a Ponzi Scheme
of Debt and Entitlements that we cannot afford and will
never be able to repay.

Outsourcing, job exportation, unchecked illegal
immigration, skyrocketing debt and a destroyed
real economy didn't just happen - they were deliberately
created by a Congress utterly and completely in hock
to the banksters, oligarchs and kleptocrats who profited
from them.

So, when you come home at the end of the day, after
another fruitless day of job hunting or doing your
shift at Starbucks or McDonalds, consider your
political options. Don't be afraid to go extreme -
at this point, you have nothing to lose.

If you are a "liberal" - that is, if you have "progressive"
views on the environment, race relations, class
and gender equity and so forth, you need to take
a good hard look at how those views impact you and
your future. If you look hard, you'll see that future
playing out in Europe right now - with street battles,
skyrocketing unemployment, and weak, indecisive
governments too bound up by "Political Correctness"
to take the bold, draconian, even undemocratic measures
necessary to restore order and a reasonable prosperity.

I'm not talking Hitler here - but a De Gaulle, a Franco, an
Adenauer or a Churchill would not shrink in an instant
from imposing whatever drastic measures might be needed.

And if you don't know who those gentlemen were, then
your education was seriously deficient.

And if you are by some chance a conservative, then you
need to abandon the Republican Party right now, as it
has become nothing more than a club of craven apologists
for Wall Street, the outsourcers, the unfree and unfair
traders, and large-corporation America, none of whom have
a place for you in their scheme of things.

And if the Tea Party isn't exactly your cup of tea (although
Tea is gaining more and more fans with each passing day),
you still have the ultimate weapon in your hands -The Vote.

And all you need to remember is one thing - the fate an
incumbent fears most is being turned out of office at
the next election. So just remember - this November,
if your Senator or Representative voted for the
bailouts, voted for the mess that is "healthcare reform",
voted against financial reform - indeed, if he voted for
anything that benefits the "big boys" rather than you,
your job is simple - regardless of party or ideology,
You Vote For The Other Guy.

It's that simple. Really. And if enough of us put enough
"other guys" (and gals) in office this fall, we just might
get change we can believe in - for a change.

Immigration - We're All Arizonans Now

2010-05-16T20:22:00.000-07:00

Wow.

The last post on Immigration brought me more
e-mails and comments than almost anything else
I've written.

Obviously, the failure of the present Administration
to both secure the border and deal with the estimated
twelve to twenty million illegal immigrants presently
in the country has touched a raw nerve in this country.

And what are we doing about it?

With the brilliant exception of Arizona, we've decided
to do nothing, except turn a blind eye to the wholesale
violation of the border and murmur kind words about
the necessity of treating those already here illegally
"humanely".

Translation: The elites have decided. It is best to maintain
"open borders" - so we have the "right" sort of labor force,
and of course, since we can't deport ten to twenty million
people who have broken our laws, the only thing we can do
rationally is forgive them ... declare amnesty.

Here's faux-conservative Charles Krauthammer on the
subject:

And why Arizona? It's Ground Zero for the "Silent Invasion" ;
the uncontrolled flow of illegals into this country.

See the video below:

Illegal immigration is no longer a minor "labor" problem.
Add in the drug-fueled all-out insurgency now happening
in Mexico and the steady stream of migrants could become
an unstoppable human wave.

This isn't a "civil rights" issue, as some apologists
for illegal immigration want us to believe. Rather, this
is an existential threat to the territorial integrity of
the United States, and needs to be treated as such.

To cure the problem. we have to deal with two threats:
first, the migrant flow at the border, and second, the
"fifth column" of activists and apologists for illegals
in the media, in Congress, in academia, and yes,
in the business community.

If illegal immigration is brought under control, there
will be both winners and losers. The losers will include
the Democrat party, who will lose the electoral
advantage of another bloc-voting minority group.
The losers will include those sectors of the business
community, most notably agriculture, residential
construction, and hospitality, who have become
immigrant-dependent. And the losers will also include
the proponents of "racial identity politics", who have
become extremely powerful in the media, in Congress,
and in academia.

But the winners will include the Republican party
and the "Silent Majority" of Americans who pay the taxes
and foot the bill for the continuing failure at the border.
And if recent events are any indication, the "Silent Majority"
is remaining silent no longer.

Arizona Governor Jan Brewer's support has increased since
she signed the immigration law. And former Rep. J.D.
Hayworth, challenging incumbent amnesty-supporter
Sen. John McCain in the Arizona Republican primary,
has seen his poll numbers jump since the bill was signed.
And Sarah Palin has found both her voice and her footing
with her calls for a secure border and no amnesty, drawing
huge crowds in a joint appearance with Gov. Brewer.

On immigration, as on health care, financial reform, taxes,
and spending, institutional Washington and its apologists
in the media just don't seem to get it.

But, in November, when it appears likely that many of
them will be swept from office, our governing classes
just might start paying attention.

Eye on Nevada: Sue Lowden and "Cluckers For Checkups"

2010-05-16T18:15:00.000-07:00

The Senate Race in Nevada has never failed to provide
its amusing moments.

But now, thanks to an almost unbelievable gaffe by
Republican front-runner Sue Lowden, Majority Leader
Harry Reid looks likely to prevail once more, and earn
a fourth term in the Senate.

According to the Las Vegas Review-Journal, Harry Reid,
once given up for dead, has surged to the front among
all candidates, leading Lowden 42% to 38%.

Now bear in mind two things: First, when paired with a
generic Republican candidate, Reid still trails 52& to 48%.
And, the poll cited by the Review-Journal comes admittedly
from a Democratic source. But when compared with the
numbers from the same pollster back in February, this is
a remarkable turnaround; back then, Reid polled an
anemic 35%, trailing both front-runner Lowden and
second-place Republican candidate Danny Tarkanian
in hypothetical matchups.

Now, those positions are almost exactly reversed.

And it all has to do with the utter myopia and cluelessness
of Sue Lowden. In a voter symposium on Health care, Lowden
suggested that, instead of health insurance or a national health
care plan, we should try something else - Barter.

Take a chicken to pay for your checkup. I'm not kidding -
I couldn't make this up if I tried.

Here's some video of the original meeting:

The media, of course, were quick to pick up on this. But,
instead of "walking the comments back" , or say that she
was misquoted, she instead re-iterated her comments, saying
"she wouldn't back down one bit".

Here's how the Tarkanian campaign played it up:

And, of course, the nation's comedians had a field day with it.
Here's Jay Leno on "Cluckers For Checkups":

But this isn't the first time Lowden's been in hot water on this issue.

A little background: A former Miss New Jersey, Ms. Lowden
originally came West to to make it in TV news, eventually
becoming a popular local evening news anchor.
Shortly thereafter, she left TV to become the much-younger
"trophy wife" of casino magnate Paul Lowden, who owned a
chain of locals-oriented casinos in Nevada, including two
sizable properties in Las Vegas.

At her urging, Mr. Lowden decided to make health benefits
and anti-unionization two big issues in running his casinos.
When the Culinary union decided to try to organize his two
Vegas properties, Lowden fired all those he could identify
with the organizing effort, and he cut off the health benefits
of all but a few of the remainder - in violation of federal law.

The union sued in federal court - and won. As a result,
the Lowdens were forced to divest themselves of their
Vegas properties in order to satisfy a judgment for damages
and their legal bills. Worse, it made Paul Lowden persona non
grata among his fellow casino operators, whose strategies for
keeping unions out center on good wages and benefits for
their full-time employees.

But the occasion made Sue Lowden a heroine to Nevada's
ultraconservative GOP, and she quickly parlayed the incident
into a career in politics, ultimately becoming Majority Leader
in the State Senate and afterwards Chairman of the Nevada GOP.

In short, she was ideally positioned to boot Harry Reid from
the Senate - until she laid an egg on the issue.

And I'm not surprised. To me she is typical of
the "Country-Club Republicans" - smug, secure in an
"I've Got Mine" mentality, and deeply resentful of
anyone else, especially anyone in her employ, trying
to "get theirs" by striving for better wages and benefits.

It's no wonder that the "Tea Party", which has actually
energized the GOP far beyond the wildest dreams of
the country-club set, wants nothing to do with Lowden
and her ilk. Rather, they are focusing on the "values"
that made America and taking on with equal
vigor the selfishness of the Republican oligarchs and
the thinly-disguised socialism of the Democrat party.

All the Tea Party needs is a credible Leader, and both
major parties could be in serious trouble.

If the Tea Party and Republicans generally can find a
credible re-incarnation of Ronald Reagan, watch out.
But, if Sue Lowden is typical of "mainstream" Republican
candidates, the GOP had best prepare for a long time in the
political wilderness.

The 1000 Point Market Drop - Two Really Great Videos

2010-05-08T22:36:00.000-07:00

A couple of really great videos (Courtesy of Infectious Greed
and YouTube) which really depict the crash as it unfolded.

The first is one of shameless shill and all-around investment
Assclown Jim Cramer from CNBC.

How this guy (along with Dick Bove and Steve LIESman)
manages to keep his job I don't know. Suffice it to say if
you take Cramer's advice on anything at all you deserve
what you have coming. Here's Jimbo:

The next is some "stocktrader guy" giving a "webinar" on
day trading.

He's pretty full of himself at the beginning, apparently
referring to a previous session where he was saying
the market was overbought.

But as the market begins its freefall, he goes complete
Dick Vitale or Walter Sobchak with self-congratulation.

Take a look:

Lessons for everyone out there:

1) Be careful about who you take trading or investment
advice from. In most cases, you're better off doing it
yourself if you can. If you can do your own research,
and it makes sense to you, go with it. Before you invest,
investigate - it's your money, therefore it's your
responsibility. If you don't know how to trade or
invest, take some classes and learn;

A fellow I know who has been hugely successful
over the last three years didn't know anything about
investments at all except that he was now laid off and
had a 401(K) distribution and an IRA to tide him over.

Embittered by his treatment by Corporate America
and distrustful of brokers and financial planners, he
decided to do it himself - after he taught himself what
he needed to know. So, he decided to get his securities
license - just to acquire the knowledge he felt he needed
to be successful managing his own money.

Today, as an independent proprietary trader, he's more
than replaced his last full-time income and added to
his trading capital besides. All this in a down market.
He was one of my instructors in the trading course I just
completed. And no, he's not some high-powered Harvard
guy; he's the typical worker that Corporate America is busy
"outsourcing" - his background is IT/Computer Science.

Moral: Learn how, do it yourself, get a comfort level,
and trust your judgment;

2) If you don't understand a stock, a bond, or other
security, stay away. Being still in learning mode, I
stick with two basic trading models that almost anyone
can understand with a five-minute explanation.
I don't do options, futures or indexes - not that I
don't know what they are, but I'm not yet sufficiently
experienced or trained to work with them effectively.

This why Warren Buffet is so successful - you'll
notice he stays away from anything that isn't
traditional "plain vanilla" , that isn't superbly
managed, and that he can't get at a great price.

But, you might say, doesn't he use derivatives,
swaps, and other exotic things in his business?
Sure he does - to protect his real positions in the
real economy. Which is how they're supposed to be
used. Remember, twenty years ago he bailed out
a Wall Street casino - Salomon Bros - and he
propped up another -The Squid - after beating them
down for a below-market price and an above-market
return.

As the world's second or third richest man, who
got that way by taking only the most conservative
of risks, I would say he knows what he's doing.

And all along, he's stayed with what he knows;

3) Trade or invest with the trend - not against it;

4) Use position sizing and risk limitations in terms
of position size to apportion your portfolio. If you
must use leverage, adjust your risk parameters
accordingly. The more leverage (borrowed money),
you use, the tighter your risk tolerance must be;

Bear in mind that Wall Street, before the crash, had
extensively used leverage to expand , not reduce,
the amount of risk they could take on;

5) Buy on rumor, sell on news. Buy when others are
fearful, sell when others are greedy;

And finally, enjoy yourself - trading and investing,
as a full time job, a supplement to retirement, or
just as a hobby can be very rewarding.

And to my mind, reward comes in one color - Green.

The Market On Thursday: The Thousand-Point Bungee Jump

2010-05-08T11:31:00.001-07:00

Just when you think that the markets couldn't get any
crazier, they continue to surprise us.

At 2:47 PM EDT on Thursday May 6, the financial
system's "autopilots" suddenly uncoupled and the
markets went into uninterrupted free-fall.

At 2;46 pm, the NYSE and the Dow were cruising along
to another down day in the markets, expecting a (-300)
down day. Profit-taking has been in order ever since
earnings week, and with declining volume, a mild
downtrend was expected. This was totally in line with
my own expectations as a trader, as declining volume
absent other considerations, usually means slightly
declining prices.

And I was expecting this. As a technical trader, I look
at the on-balance volume (advances vs. declines by volume),
in terms of support vs. resistance, comparing broad indexes
(SPY, $spx, $ndx) with trends of support and resistance for
the individual issues I cover. For you technicians out there,
it's a garden-variety OBV support-resistance model.

And I noticed one other thing. Tracing my stocks with
"candlestick charts", I noticed that the candlesticks
appeared to be growing long tails or downward wicks,
which tended to get longer as volume declined. So
I prepared. I stayed up until 2:00 am Thursday a.m.,
tweaking the model, closing out all my long positions
including the profitable ones, and loaded up "All Short"
for Thursday opening.

And at 11:48 am PDT, my patience was rewarded. Until then
most of my shorts were chugging along just fine, but some
had corrected slightly upside, putting me at a loss but not yet
hitting stops. And then - Free Fall!

at 2:48, the Dow dove fifty points. Then, a minute later, down
two hundred. Splitting screens to watch my stocks on one side
and the Dow on the other, I saw the Dow go into what can only
be described as a terminal-velocity dive, ultimately dropping
to 9869.62 - a drop of almost a thousand points in just seven
minutes.

Then, matters began to correct themselves. The Dow then
jumped two hundred; then fifty, then up another hundred,
ultimately closing at 10, 520.32 - a drop of (341.90) for the
day, in line with my expectations.

But during that period, all hell broke loose over here.
Both my cell phone and landline were jammed with calls
from trading pals. Those who couldn't get through were
filling up my IM message box. One trading buddy from
California told me how he could not get through to
Scottrade either online or by phone and couldn't get
either his buy or sell orders executed.

And then, after the markets closed, the explanations
started to roll in. At first, attention centered on a
Citicorp prop trader on the CME who shorted 16 billion
S&P e-mini futures instead of 16 million. And I think that
that was highly unlikely. If you've ever been in a trading
room, traders have assigned stocks or other securities to
watch, with fixed position limits and other parameters.

A mistype like that would have been immediately flagged to
both a manager and a "floor walker" - a roving supervisor, who
would be at the trading station in an instant to ascertain what
was going on. So scratch that explanation.

Next, there was an explanation of a mismatch between
automated "bots" not being able to match buy and sell orders
due to mismatches between allowed position limits and
'circuit breaker" sets between the NYSE, Nasdaq, and the
many "private" off-exchange exchanges such as NYSE
Euronext, Nasdaq OMX (Off-Market eXchange), BATS,
Direct Access, Liquidnet, and others.

These exclusive exchanges, and the closely related
"dark pools" in which results are not forwarded to the
governing exchanges until the close of trading,
are nothing more than "high-limit" private gambling
rooms for the largest automated "algorithmic" traders.
The object with all of these "private" gaming floors
is to prevent "price discovery" and "national best
bid and offer" rules from taking effect and allowing
the ordinary trader or small investor to fairly
participate.

This is what makes "front-running", "flash trading "
"subpennying" and the other abuses possible. If
I'm a deep-pocketed "algo" shop with off-exchange
access, I can do this all day knowing that because
of my private access elsewhere, I can fade any
bid or offer you make and beat you every time.

And that's what I think happened Thursday.
Certain important components of the Dow, notably
P&G and 3M Corp, came under heavy selling pressure
at about 2:40 pm, most likely as a result of related
off-exchange moves in the futures markets.

As it was after 2:30 pm Eastern time, the circuit breakers
were off, and it would take human intervention to
halt trading, which happened - at least on the NYSE.

But that didn't halt the "bots" - the robot traders
on the "sell" side, who simply moved their action
in a nanosecond to the private exchanges and
continued selling.

However, the "buy" bots, electronically noting
the halt on the NYSE, refused to make bids.
Thus the selling pressure continued, with some
truly absurd results - Philip Morris, Accenture,
and Boston Beer (all NYSE) all saw their prices
prices drop literally to zero - until the "front-running"
subroutine kicked in to make a token one-cent "front-run"
bid.

However, once the bots were shut off and humans
intervened, things were, for the most part reset.
In the absence of circuit breakers, The NYSE and
Nasdaq are going to disallow trades that exceeded
a maximum 60% drop or rise from previously
allowed clearings.

But some of these extreme trades are going to be
allowed to go through - most notably some trades
by Goldman Sachs who shorted some issues all
the way down to a penny (at which they covered),
and then re-entered on the longside to take
advantage of the reset.

Reason? They all happened off-exchange - and the
"counterparties" were all other "big boys" who could
take the hit.

Just what you'd expect from a rigged casino - only
this time, it was the "Big Fish" who probably got
hurt most.

If that's true, couldn't happen to a nicer bunch.

But there's also another explanation other than
"algos gone wild", which has to do with politics.
At the same time all this was going on, the
Brown-Kaufman Amendment to the Financial
reform bill was being debated in the Senate, and
this would negatively impact the too-big to-fail,
too-powerful to-regulate crowd on Wall Street.

So the Street might have decided to send their
would-be masters in Washington a message -
Mess with us, and we'll give you a taste of what
we can do to you and the country in the markets.

That message got through - after the markets closed,
the Brown-Kaufman amendment was defeated 33-61.

Lesson for the day? This whole thing needs to be
restructured. New rules are needed - especially
new rules governing "High-Frequency Trading" ,
which as we now see, can as easily "evaporate"
liquidity as they provide it.

No responsible government can allow the markets - the
heart of what's left of the economy - to be held hostage
to the electronic equivalent of a Gulf oilwell blowout.

But until Washington gets some backbone nothing will
change, and nothing will be done.

Immigration: Hooray For Arizona!

2010-05-02T19:55:00.000-07:00

Finally, there's some sense out there on the immigration
front.

Fed up with the flood of illegal aliens, drugs and criminals
spewing forth from Mexico, the State of Arizona decided
to take action.

It took the unprecedented but necessary step of passing
a law making undocumented presence in Arizona a state crime,
and prescribing certain police methods and procedures for
compliance and enforcement.

And just what does the law prescribe? It prescribes that when
state and local police come in contact with a person that they
have "reasonable belief" is in the country illegally, then that
person is to be detained until he can be turned over to
federal immigration authorities.

That's it. No "sweeps" of areas of cities and towns with heavy
concentrations of Latinos. No arbitrary arrests for "driving
while brown". No roundups at day labor sites. And absolutely
no racial profiling.

Even though Maricopa County (Phoenix) Sheriff Joseph
Arpaio did all of these things and more, and he'll now be
legally prevented from doing so in future, he's solidly
behind the new law, as are 70% of all Arizonans.

And the punitive provisions of the law? They're directed
at those who employ illegal aliens - in violation of existing
federal law. In addition to the federal punitive provisions,
the law provides for fines, loss of business licenses, and
jail terms for repeat violators.

In fact, 95% of the law's provisions - especially the punitive
sanctions and the ban on "racial profiling", are copied
word for word from related federal statutes. And by
passing this law, Arizona now joins 23 other states that
mandate that state and local police also enforce federal
immigration law.

But to listen to the organized apologists for unlimited
illegal immigration you would think that Arizona had
created a state Gestapo, with guys in fedoras and
trenchcoats asking everyone for "papers, please" in a
German accent. And in truth, organizations such as La Raza,
the NAACP, the Urban League, the ACLU, the SEIU, and
the Southern Poverty Law Center have done much to
undermine respect and enforcement of current
immigration law.

But the principal culprits in the complete and widespread
non-enforcement of current law can be found in the halls
of Congress, among members of both parties.

Democrats want a malleable, racially distinct
ethnic bloc of voters that will reliably and lopsidedly
vote Democratic. Republicans and business interests
on the other hand want a cheap and easily exploited labor
force to take those service and manufacturing jobs that
can't be easily outsourced to Third World countries.

And amnestied and legalized immigrants are the
solution for both parties.

And of course, the costs of all of this are passed off
onto the general population, who can be silenced by
calling them bigots and racists. But, of course, it is
citizens and legal residents who are paying the higher
taxes for the educational, welfare, and policing costs
of unlimited illegal immigration.

And it was only a matter of time until some voters
somewhere stood up and said "enough!"

And Arizona is effectively "Ground Zero" for illegal
immigration. Estimates of the illegal immigrant
population of Arizona run from 460,000 to over a
million, in a state of six million people.

And in the Tucson area alone, over 250,000
illegal immigrants were apprehended last year,
with an estimate that for every immigrant caught,
another three get through.

And with Mexico facing an existential threat from
a drug war that has morphed into an all-out insurgency,
the crime and violence has spilled over the border.

Something finally had to be done.

And, in my opinion, this is only the first step that
state and federal governments need to take, working
together, to reclaim the borders and re-establish
American sovereignty in what is now a no-mans-land.

Herewith, therefore, is my prescription for immigration
reform:

1) NO AMNESTY, now now, not ever, for those here in
violation of existing immigration law;

2) Immediate militarization of the entire Mexican border,
from Matamoros to Tijuana. Bring the Army, National
Guard, and Marine Corps home from Afghanistan and
Iraq and put them on the border. Their skills in desert
fighting and patrolling and urban combat are desperately
needed here at home. Border Patrol and ICE detachments
can be embedded with combat units for law-enforcement
support;

3) Sweeps at places of employment to ensure that all employees
have legal status to work in this country;

4) Prosecution, with mandatory fines, forfeitures, and prison
time for employers knowingly hiring illegal aliens;

5) Denaturalization of "anchor babies" born to illegal immigrant
parents;

6) Making it a federal crime for states to give illegals driver's
licenses or access to educational or welfare benefits, including
access to higher education;

7) Requiring that arrested illegals forfeit any and all property
found in their possession before deportation;

8) Set numerical goals and targets for reduction of the estimated
23 million illegal immigrants currently here by at least half
over the next five years;

9) Impose a two-year "timeout" on ALL immigration, legal
and otherwise, until we can decide among ourselves who to
admit and who to keep out of the United States. In my
opinion, future immigration to the U.S. should be limited
to the highly educated and skilled and should come
primarily from China, India, Western Europe, Canada,
and Australia.

There will be a lot to do to put the current situation right,
but historically, Americans have always risen to a challenge.

And this may be the most important challenge of all.

Enron On The Hudson: The Justice Dept. Piles On (part 4 of a series)

2010-05-02T17:30:00.000-07:00

And now, finally, The Squid will face off against the Justice
Department.

Earlier this week, the DOJ announced that it is investigating
Goldman's ill-fated Abacus deal for possible criminal violations.
Under most circumstances, this is routine once the SEC serves
a target with a "Wells" notice - referrals for possible criminal
violations are virtually automatic as a result.

Yet the Justice Department has been strangely silent during
all the commotion surrounding The Squid and its blatant,
multifaceted history of wrongdoing. Attorney General
Eric Holder seems far more interested in prosecuting
the violations of "civil rights" of terrorists and illegal
immigrants than going after the gangsters of Wall and Broad.

But all that changed Tuesday when Rep. John Conyers (D-MI),
Chairman of the House Judiciary Committee, sent Holder a
letter, co-signed by all 40 members of the Committee,
demanding that he open a criminal investigation of
Goldman Sachs in light of the SEC civil charges.

Translation: if you don't jump on this now, expect to find
yourself before the Committee, on the hot seat under the
hot lights, explaining why.

And Holder would have a lot of explaining to do.

Thus far, he has been far more interested in going after
former Bush Administration officials for their lack
of solicitude in the treatment of terrorists and illegal
immigrants than in prosecuting complex financial
crimes in his own back yard. With few exceptions, he
has totally ignored the financial equivalent of the
Taliban and Al-Qaeda operating openly on Wall Street.

That may be about to change. The public has now caught on,
and they are beginning to "connect the dots" between actions
taken by Wall Street and job losses, outsourcing and job
exportation, the collapse of pensions and 401(K) accounts,
the collapse of the housing market, and the complete lack
of credit for the "real" productive economy.

But in point of fact it may be too late. Financial
deregulation has put the law enforcement community
hopelessly behind the curve when it comes to prosecuting
crimes based on extremely complex financial instruments
and exotic, computer-driven trading schemes.

We have arrived at the point where the only people who
understand the nature of the wrongdoing, the schemes used,
and the technology behind it all are the criminals themselves.

And that, in my opinion, constitutes an existential threat
that no free society can tolerate. As Baron Rothschild said
two hundred years ago: "Allow me to control a nation's
money and I care not who makes its laws, nor what those
laws are".

Replace Rothschild with "Goldman Sachs" and you have a
succinct, twenty-word explanation for our current
predicament.

And will indicting Goldman criminally change anything?
Not likely. Now, instead of being forced to answer questions
in the "Show Trials" of Congressional hearings, they can now
dummy up as smooth, Armani-clad Wall Street lawyers
ritually intone "my client takes the Fifth" on every question.

The same will happen with the SEC case.

The best course, in my opinion? Hard as it may be, drop
any thought of immediately prosecuting the "top dogs"
at Goldman or Goldman itself.

Instead, roll out a vast, multi-count indictment against
a slew of lower-level players, most notably the "Fabulous
Fab" Tourre and his immediate superior, Jonathan Egol.
And, the lead charge should be " deprivation of honest
services"; that by committing criminal acts, they
fraudulently deprived both Goldman and their clients of
their "honest services".

The usual defense, of course, to an "honest services" rap
is that they committed all of these acts with the full
knowledge of and at the direction of their superiors.

And that's what we want to establish. The deal should be,
"Roll over on Blankfein and the others before the Senate
Committee and at the SEC trial and these charges will be
either substantially reduced or dropped altogether. It's
up to you".

And my guess is that we'll see a horde of lower-level
Goldmanites rolling over on their betters like
snowballs headed down the hill.

Unlike The Mob, who for all their wrong doing were
men of honor, who took care of the families of
"standup guys", these lower-level folks know exactly
who they work for at Goldman: Harvard-educated slimeballs
and sleazebags who would rat out their grandmothers to
escape one day of jail time.

It may happen, folks - seeing Lloyd and the gang exchange
pinstripes for jail stripes would bring bring joy to all
America. But it's going to take a lot of work to get there.

It will take civil prosecutions, lawsuits, some judicious
criminal indictments of low-level players, and constant,
ongoing investigations in Congress to make this happen.

But the public is now demanding this. And we won't let up
until we get it.

Congress, Administration, are you listening?

Enron On The Hudson: The Goldman Defense (part 3 of a series)

2010-05-01T16:36:00.000-07:00

This was a rough week for The Great Vampire Squid.

No sooner were they hit by the SEC lawsuit but they
were hauled before the Senate Permanent Subcommittee
on Investigations to answer questions they would
prefer not be asked, especially in light of the pending
SEC enforcement action.

And in listening to the proceedings on C-SPAN, I couldn't
help but wonder if the participants were all on the same
planet.

The Senators, all interested in appearing to be "on top"
of the causes of the financial collapse before a confused
and angry public, berated Chief Squid Lloyd Blankfein
and his lieutenants, Chief Risk Officer Craig Broderick
and CFO David Viniar about the "sh***y" deals they
foisted on their unsuspecting clients.

But Blankfein and his fellow mollusks didn't bat an
eye or even twitch a tentacle.

And, in their responses to the committee, they in fact
outlined what will no doubt be their defenses to the
SEC charges.

Now, I'm not an attorney, so I'm not going to get into
the particulars about "affirmative defenses" and the
finer points of both case and regulatory law that Goldman
will no doubt raise. In fact, Goldman's attorneys have yet
to file their legal response to the SEC charges, which will
cover all of these matters in minute detail. When they do,
we will cover the response.

But to me, there appear to be three things that will make up
Goldman's defense:

1) "We were a Market Maker, not an Originator, in this transaction".
This is perhaps the most plausible defense that Goldman has. In
modern finance, institutional buyers and sellers often approach
investment banks to put together packages of securities to
either "Go Long" (hold in expectation of a profit), "Go Short" (sell
short to profit from a decline) or to "Hedge" ( buy or sell securities
to mitigate risk on an unrelated transaction).

In the Abacus transaction, Goldman put together a
package of securities for its client Paulson & Co. that
reflected Paulson's desires - Paulson believed that the
housing market would collapse, and wanted to go short
on a package of existing mortgage-backed securities likely
to fail in that instance. Goldman, as market maker,
put together such a package.

Now, it takes two sides to make a transaction or a market,
and if Paulson was going to short the package, Goldman
had to find someone willing to take the other side. It found
three such parties - ACA Capital (then a subsidiary
of soon-to-fail Bear Stearns), ACA's client ABN Amro, and
IKB, a mid-range German bank. It even engaged ACA Capital
to be the selection agent for the deal - to pick out the very
securities going into the package. Thus, at one stroke, Goldman
made a market for its client, bringing both sides of a transaction
together, and pocketing a nice $15 million fee for its trouble.

In conclusion, then Goldman was, according to its lights,
both market maker and honest broker - doing something
it has done thousands of times before, in bonds, commodities,
equities and derivatives, according to the normal rules and
procedures that govern such transactions. Was it obliged to
tell ACA and the others that if they bought long, that a
particular party was going to sell short? Absolutely not;
in fact, doing so might have been a larger violation
of other SEC rules governing confidentiality and due
diligence. However, that will be a matter for the court
to decide.

2) "We've been unfairly singled out - everyone was doing this".
Point conceded. As the events of the past year and a half have
borne out, everyone on Wall Street was doing this kind of
dubious "business" - and, in point of fact, Goldman wasn't even
the largest player. That unsought-for distinction can be shared
by JP Morgan, Deutsche Bank, and the late-and-unlamented
Bear Stearns and Lehman Bros. Even Merrill Lynch, Bank of
America and Citicorp were heavily involved.

But, few of these institutions sought out this kind of
business with the naked aggressiveness of Goldman Sachs,
and its institutional willingness to skirt regulations and
bend the rules brought it huge notoriety along with huge
profits. Not for nothing did muckraking journalist Matt Taibbi
name Goldman "The Great Vampire Squid" - an unflattering
sobriquet that is now commonly used by the mainstream
media to describe Goldman and its attitude toward the
minimalist sense of morality and ethics that prevail on
Wall Street.

3) "We will completely prevail on the narrow points of law and fact".
A very troubling set of circumstances that just might happen. In
fact, due to its undue influence with lawmakers and regulators,
Goldman has done more to undermine what little remains of
a rule of law on Wall Street than any other institution.
As Simon Johnson points out in his book 13 Bankers, the
deregulation and unfettered "innovation" that made the
collapse of 2008 all but inevitable owes much to former
Goldman Chairman and CEO Robert Rubin and his total
domination of both Treasury and the regulatory
community during the Clinton Administration. And
the anti-regulatory zeal was brought to fever pitch by
former Goldman CEO Hank Paulson during his tenure
as Treasury Secretary in the second Bush Administration.

And where was Congress when all this was happening?
Busy lapping up campaign contributions and other favors
from Goldman's and the others' lobbyists. Small wonder
than when it came time to clamp down on the Wall Street
casino, these worthies were nowhere to be found.

But now, these folks may have seen the light. Stung by
the overflowing anger of the public, they may now be
shamed into reforming the "casino capitalism" of
Wall Street. But I'm not going to hold my breath
waiting for it to happen.

In fact, I'll make this prediction - if Goldman walks,
or gets away with a tap-on-the-wrist small fine by
copping a plea to violating an obscure rule or two,
neither the Army nor the police will be able to
contain the torch-and-pitchfork-wielding crowds
that will descend like locusts on both Wall Street
and Washington.

We want Calamari- and we'll take it either fried
or broiled.

David Letterman on the Goldman Sachs Accusations

2010-04-22T15:32:00.000-07:00

Just for the fun of it, Here's America's favorite late-night
funnyman on the Goldman Sachs deal:

Enron On The Hudson: Goldman Circles The Wagons (part 2 of a series)

2010-04-22T12:47:00.001-07:00

The Vampire Squid isn't dead yet.

After what many perceived to be an "opening error" in its
ill-timed response to the SEC action (an opinion I do not
share), The Squid has got its act together and is pressing
a vigorous defense on all fronts.

As expected, Goldman Sachs "vigorously denies" any
wrongdoing in any of its actions regarding the
Paulson- Abacus deal, claiming that the allegations
raised against it are "unfounded both in fact and law",
and that it fully expects to prevail in court. Moreover,
The Squid has been busy contacting its many alumni
at The Fed, The Treasury, the regulatory agencies and
on Congressional staffs, distributing "talking points",
and getting its side of the story told to those in positions
of influence.

And Goldman has also been very active in the media
(especially on CNBC), saying that this was a "normal"
CDO deal done by large, sophisticated investors who
were very experienced in these matters and knew full
well the risks involved.

In short, Goldman Sachs is doing what they do so
very well anytime they are subjected to scrutiny -
circle the wagons, take their opponents under fire,
and mount a huge media campaign to both demonize
and discredit their detractors.

And as of right now, the strategy appears to be working.
Goldman stock, after taking a 22-point beating on Friday,
appears to be recovering, closing up slightly today. The
Wall Street Journal, which under the ownership of
Rupert Murdoch has become an uncritical cheerleader
for much of what happens on Wall Street, has been
editorially questioning the "timing" and "appropriateness" of
the SEC action. This same theme has been picked up by
Congressional Republicans, who feel that Goldman Sachs
is being used by the Obama Administration to unfairly
strong-arm the Congress into approving a "flawed"
financial reform bill, in much the same manner that
they used the Health Insurance industry as an "ogre"
to pass the health care bill. And, as the SEC decided on a 3-2
party-line vote to prosecute Goldman in the first place,
the Republican minority on the Commission is preparing
to take the unprecedented step of going public with their
dissent.

If you're going to take on The Vampire Squid,
you had better be prepared for a fight. And Goldman,
in response, has served notice that it intends to press
its case without pause or letup in the courts
of law and regulation, in the Halls of Congress, and
most importantly, in the court of public opinion.

And, judging by its win-loss rate thus far, The
Squid just might win this one. The court case will
hinge on narrow interpretations of securities law
applied to a complex and contradictory set of facts.
The divisions inside the SEC over whether or not
to prosecute will be fully explored in discovery.
Goldman has powerful allies in the financial media
and in corporate boardrooms around the world, and
rather than run away, many of these folks are speaking
out in Goldman's defense. And in Congress, where
many of the "gray areas" of Goldman's actions might
well be made illegal by financial reform, Goldman is
busy calling in its chits.

It will be, in the words of Winston Churchill, " a struggle
both grim and great, with neither mercy nor quarter
granted by either side". And in the final analysis, it will
depend on whether or not the SEC and the Administration
have the stomach for this kind of thing.

Judging by what I've seen so far, I'm hoping for the
best but I'm not optimistic.

In the next installment, we'll examine (from a
devil's advocate point of view), the merits of
the defenses Goldman is raising and the implications
for the rest of Wall Street and and the cause of
financial reform.

Stay tuned - it's about to get very interesting.

Goldman Sachs: Enron On The Hudson (first of a series)

2010-04-17T21:29:00.000-07:00

The infamous Vampire Squid may finally have met its
Calamari moment.

In a stunning blow to its image as the all-powerful,
unquestioned ruler of Wall Street, The SEC has formally
charged Goldman Sachs with fraud concerning a major
"synthetic CDO" deal.

This transaction, labeled ABACUS 2007-AC1, was conceived
by Goldman Sachs and its hidden "partner", famous hedge
fund operator John Paulson, as a means of "shorting" the
subprime residential mortgage market during the heady
days of 2007.

Now, there's nothing really wrong with "shorting" a market,
a security, or an expected future financial event. For every
Bull, there has to be a Bear - and the proper expression of
both positive and negative market sentiment is necessary
for financial markets to function properly.

But ABACUS 2007-AC1 wasn't set up as a vehicle for investors
to take short positions in the residential mortgage market.
Rather, it was a scam set up secretly by Goldman and Paulson
that required the participation of unwitting "long" investors
to succeed.

And the story reads like something out of a crime novel.

First of all, a little explanation of what a "CDO" like ABACUS
actually is. A "CDO" is a special purpose entity ( a shell
corporation), that purchases securities, arranges
them in slices ("tranches") according to credit, interest rate,
and maturity risk, and then issues notes to the investors,
who can pick and choose among the various tranches
according to their appetites for risk and return.

Properly structured, CDO's assist in providing liquidity
to the fixed-income marketplace, while offering sophisticated
institutional investors a greater range of choices than would
otherwise be available. And, to further assure the
integrity of the offering, several parties, each independent
of one another, work to put the deal together.

The securities to be purchased by the CDO are selected by an
independent adviser in accordance with the goals set forth in
the offering documents. The CDO is managed by another
party, independent of the others, to receive payments
of principal and interest from the bonds and make payments
to the investors. Each bond or bond pool purchased by the CDO
is rated for credit and other risk by an independent ratings
agency - either Moodys, Fitch, Standard and Poors, or all three.
Finally, the CDO sponsor, in this case Paulson, puts up a small
amount of equity to serve as a loss buffer in case of defaults
in the bond portfolio. Normally, when the CDO is dissolved
(usually in 3-5 years), this equity is recovered, plus a profit,
from the onward sale of the remaining portfolio.

So far, so good - except in this case, as Goldman and Paulson
had intended for this CDO deal to go bad, none of these
protections really applied. The selection adviser (a little-known
company called ACA), was brought to the deal by Paulson.
In an "efficiency" move, Goldman elected to act as CDO
manager itself - removing a critical level of protection
for the investors - as it had already created some nineteen
other similar "deals" in the ABACUS series and thus had
more "experience" in this type of transaction. And, when
it came to rating the bonds in the CDO - which can only
be charitably described as "toxic waste" - Goldman put
immense pressure on the ratings agencies to give them
"investment grade" ratings (AAA through BBB-).

A more truthful rating for the whole deal would be
one word - junk.

With the deal in place, then, all Goldman had to do
was find some willing "marks" or patsies to fund it.
And for this it turned to a 27-year old Managing Director
in its London office - Fabrice Tourre - who had helped put
many of the ABACUS deals together.

This enterprising Sorbonne and Stanford-educated
Frenchman had a Rolodex full of European institutions
eager to get in on the never-ending bull market in U.S.
residential real estate. And, using the exalted reputations
of Goldman and Paulson as parties "already in" on the deal,
he found two players - ABN Amro, a Dutch bank,
and a mid-size German bank, IKB, to take major positions.

Just one thing was omitted by M. Tourre - that Goldman
and Paulson were in on the deal all right - but on the
short side, betting that it would fail.

And once ABN Amro and IKB ponied up, it was time to
sting the marks. Goldman and Paulson loaded up
on collateralized debt swaps ("CDS's") to insure their
payoffs. Only these CDS's had one unique feature -
unlike most CDS's which would pay off only on a
default, these would pay off on a mere rating agency
downgrade. Among the insurers on this deal were
ACA Capital, Ambac and AIG - all of whom would
ultimately collapse in the wake of this and other
frauds perpetrated by Goldman and the other
"major players" on Wall Street. So eager was
Goldman to start collecting on the scam that it even
advanced Paulson the money for its "equity"
portion, in exchange for a fee.

And just as Goldman and Paulson intended, no sooner
did the deal close than it started to go south.
Within three months, all of the ABACUS tranches below
AAA had been downgraded - triggering the payouts to
the perpetrators. Within six months, half of the tranches
were in default. And within ten months, the entire CDO
was bankrupt.

And the outcome?

ABN Amro was seized by Dutch regulators
as a result of this and other deals and sold off
to Royal Bank of Scotland. IKB was partially
nationalized and restructured by the German
government. Many of the clients and shareholders
of both these institutions lost their shirts.

Bernie Madoff couldn't have done it better.

And at this point in time, Goldman wasn't
alone in creating these types of toxic scams -
it faced brutally intense competition from JP Morgan,
Merrill Lynch, Bear Stearns, Lehman Bros. and Citicorp
for this dubious type of "business". In its defense, Goldman
will no doubt make much of the fact that "everyone was
doing it", and that had it passed on this particular deal,
Paulson would have just gone elsewhere.

And from where I sit, that's just bulls**t - just because everyone
else in your industry is doing frauds and crimes doesn't mean
you have to. Besides, if you're Goldman, you've got an edge
the others don't have - you've got all the politicians and
regulators in your pocket, if not in fact on your payroll.

And now all that seems likely to go away. The investigation
of almost every deal Goldman has done in the last ten years
will now get under way. Goldman's "business practices"
in other areas of finance are now going to get intense
regulatory and enforcement scrutiny. The lawsuits are
already starting, and criminal indictments may shortly follow.
Goldman's friends and protectors in high places are already
running for cover.

Let's see - off-balance-sheet "special vehicles", hidden
"inside partners", manipulation of ratings, balance sheets,
income statements, assets and liabilities - hmmm ... we've
seen this movie before, folks.

Remember the "Energy Company that became a Hedge Fund"
down in Houston called Enron? Well, we now have Enron II,
with Lloyd Blankfein playing the part of Kenny Lay, with
Gary Cohn as Jeffrey Skilling and David Viniar as Andy
Fastow.

Yes, It's Calamari Time for The Squid - and I like mine
fried and breaded, with plenty of Marinara on the side.

More Eurozone Trouble - Will Portugal or Ireland Be Next?

2010-04-15T12:24:00.000-07:00

(h/T Economix (NYT), The Baseline Scenario,
The BoomBust Blog and Zero Hedge)

As we noted in our last post, Greece is saved for now.

All that remains there is for the Greek Government
to "activate" the package and the aid Euros will begin
flowing.

Despite some lingering grumbling from Germany,
the deal will ultimately go through. The markets,
though, are not convinced.

As of today, the yield on Greek debt on the London
markets was 6.86% - down from 7.83% last week,
when it really looked as if a Greek default was going
to happen. Even though the CDS (default insurance)
rate is now up to a staggering 453 bp, the ECB and IMF
have bought Greece at least a year or two's time to
straighten matters out.

Attention will now turn to the next two basket cases
in the EU infirmary - Portugal and Ireland.

And of the two, Portugal looks to be the more immediate
problem.

Like Greece, Portugal's two main industries are
agriculture and tourism - trades that are principally
carried on with other members of the EU. Industry
is practically nonexistent, and Portugal lacks
Greece's foreign-exchange-earning Merchant
Marine. And, also like Greece, the principal reason
Portugal is in trouble is that the Government spent
far beyond its means on social services and transfer
payments, resulting in a fiscal deficit of 78% of GDP
(compared with Greece's 114%).

This deficit, like Greece's, has been financed with
foreign borrowing (mostly from other EU countries).
And, again like Greece, the additional borrowing has
gone to finance interest payments on current debt.
As a result, Portugal's deficit as a percent of GDP will
reach Greek levels by 2012 - at which point the money
tap may well dry up.

And making this even more difficult is that all three
countries are saddled with the Euro, which prevents
the far-reaching fiscal adjustments necessary to cure
the problem.

To use The Baseline Scenario's example, Portugal
this year forecasts a primary deficit of 5.2% of GDP
(all budget items less interest). Assuming
that the ECB/IMF consortium offers them the same
terms as Greece, Portugal will have to run a 10.4%
primary budget surplus almost immediately - which
could only be done with drastic budget cuts and
massive unemployment.

And thus far, with a total deficit of 8.3% for the
current year and 8%+ forecast for 2011, 2012 and
beyond, the Portuguese government's policy thus far
has been to hope and pray for a global economic
miracle - which everyone except the Portuguese
recognizes is not about to happen.

And Ireland is in even worse shape. Thanks to a
record fall in GDP last year of 7.5% (the highest
in the Eurozone), Ireland's budget deficit for
the current year is 11.3%, with 12.5% forecast
for 2011 and 13.3%+ for 2012 and beyond.

However, the Irish government at least took action.
It imposed layoffs and wage and pension cuts on its
public employees, and raised taxes on everyone else.
As a result, despite its problems, the interest rate
on Irish government debt is only 1% higher than
that of rock-solid Germany.

But in Ireland's case, it was the private sector, not
the public, that caused the problem. As a result of
Ireland's positioning as the "Celtic Tiger" - the
low-cost, low-tax, low-regulation alternative
to mainland Europe - Ireland quickly developed
an outsize financial sector relative to the size of
its economy. As of 2008, the assets of Ireland's
banking system were two and a half times its GDP.

And then the fun began. Taking a leaf from the
American savings and loan playbook, Ireland's
property developers began buying up banks, which
led to an orgy of speculation and overbuilding.
Property prices more than doubled between 2002
and 2008. When the crash hit, property prices fell
by half, private sector unemployment doubled, and
the number of non-performing residential and
commercial real estate loans skyrocketed - all in
less than a year.

And like their American cousins, Ireland's
politically well-connected bankers were bailed out.
Result - the banks kept the upside, and almost all of
the defaulted loans were transferred to the public
sector, more than tripling Ireland's total public debt
as a percent of GDP to 87%. Today, over one-third
of all property loans in Ireland are either already
defaulted or "under surveillance" (i.e. underwater) -
an astounding 80% of GDP.

Translation - had the Irish government made their
banksters suffer , they would today be one of the
strongest economies in Europe.

And that's the biggest issue - in both Europe
and the U.S. When you create moral hazard, you
don't get a fix - just more of the same problem,
whether the guilty parties are bloated banksters or
a bloated public sector. And at some point,
someone in a position of power somewhere
is going to wake up and say: "Enough!"

Judging from the way things are going just about
everywhere, The Thinking Nationalist thinks
that that long-delayed moment of truth will come
sooner rather than later.

Greece Is Saved - For Now.

2010-04-12T10:11:00.000-07:00

(h/t Peter Boone and Simon Johnson, The Baseline Scenario)

"The Europeans announced Sunday they would provide
thirty billion Euros of assistance to Greece, amid informed
rumors that the IMF would provide another 10- 15 billion.

" With 40-45 billion Euros in the bag - more than the market
was expecting - the Greeks have time to make changes.

" The Greek government, helped by the market threat of
a near-term collapse, appear to have strong-armed the
other Eurozone countries without making efforts to
change seriously their (Greek) fiscal policy. This is
good for near-term calm, but does not solve any of
the problems now inherent in the eurozone.

" Often, assistance packages of this nature just help
"the smart money" to get out ahead of a default.
This could be the case here; 40-45 billion total Euros
could last roughly one year. Both Russia and Argentina
got large packages in the late 1990's but never regained
access to private markets, so eventually everything
fell apart.

" Sunday's package should make it possible for Greece
to borrow short-term but it takes courage to lend for
5 to 10 years to the Greeks unless there is much more
fundamental change.

" There are two key things to watch for:

" 1) Is the global recovery so strong that Greece's economy
picks up fast and their budget deficit comes down fast?

" 2) Will the IMF and Greeks now come up with a real
austerity program that sharply cuts the deficit so that
a year from now, when the official bailout money could
run out, the market is receptive to Greek debt?

" The danger for private debt holders is clear. Sovereign
loans are invariably treated better in a restructuring
than private debt. So the European aid in some sense
squeezes private debt holders. They will be pleased that
there is no near-term default, but it means their recovery
value has gone down if things get bad again. Greek
long-term yields will probably stay high. The key market
reaction to watch over the next 6-12 months will be
long-term yields, and whether these come down to
levels that imply low risk of default.

" And there is still definite risk of contagion. The
actions of the EU show that they are willing to
intervene when yields get up to 7-8% on long-term
debt and markets close off to a nation.

" And what does this mean for Portugal or Ireland?
People holding Greek debt lost a lot of money in the
last few months. That will not come back soon, as
market will for a long time be wary of buying their
debt - especially as Fitch just took the Greek rating
to BBB minus - i.e. the floor at which the ECB lets
banks borrow against ("repo") government debt.

"The Portuguese, therefore, are not at all out of
the woods. If they do not start making serious
moves towards cutting their deficit, they are
next for a test.

" Surely the Eurozone will bail out Portugal
next - but where would it stop after that?
The stronger Europeans, by coming to Greece's
rescue at this time with little conditionality,
are effectively showing all the weaker nations
that they too can get a package. This will
undoubtedly reduce the incentive for
needed fiscal reforms across the European
periphery.

" We are still lurching from crisis to crisis
in Europe. "

My take on all of this, as "The economist
watching from the bleachers" :

First, as I predicted in these pages a few
months back, the ECB and the stronger
Euro powers would not let Greece go
down the tubes, and that a "rescue"
would also involve the IMF. That has
now happened.

Second, I do have a slight "bone to
pick" with the composition of the
package. Were The Thinking Nationalist
the governor of the ECB, I would have
preferred a guarantee of funds raised
in the private debt market to outright
direct aid, and would have induced
the IMF to proffer any direct cash
assistance required. With an ECB
guarantee, the coupon rate on new
debt might have been just a bit less
(although not in the sub-market
5.00- 5.125 rate that the ECB is now
contemplating), and with an IMF - blessed
austerity plan in place, confidence in the
market for Greek debt might ultimately
have been restored - especially if the
guarantee had been extended to the most
recent 12 billion Euro debt issue.

No doubt this option was considered -
and probably rejected as inadequate for
the task at hand. But now we have the
worst of both worlds - the current holders
of Greek debt will have to take a substantial
haircut owing to restructuring priorities (if
it comes to that), precious little will have been done
to restore real confidence in the Greek debt market,
and moral hazard will now have been broadcast
to the rest of the Eurozone as the plan du jour.

The line for aid will now form to the right -
please keep it orderly, folks.

And finally, 45 billion Euros will only get
Greece halfway there - estimates of Greek
needs over the next 2-3 years run from
80 to 100 billion Euros. But, we'll see.

Greece has bought precious time for now -
whether any good comes of it is still an
open question.

Rent-Seeking and Public Employment - Time To Change

2010-04-04T10:01:00.000-07:00

A relatively obscure economic concept has recently
come to the fore in the national economic dialogue.

That concept is Rent-Seeking.

As defined in Wikipedia and The Dictionary of Economics,
rent-seeking is defined as the extraction of unearned value
from economic transactions by manipulation of
the economic environment, rather than by earning profits
through economic transactions and the creation of added
wealth.

And there are different types of rent-seeking behavior - direct
rent-seeking, which is an attempt to gain monopoly or oligopoly
control of a scarce resource, or collusion by market players to
control a market by rigging prices, allocating market shares,
and restricting output.

And then there's indirect rent-seeking - the pursuit of above
market returns through control of a legislative or regulatory
process, where the "rent" extracted is in the form of either
regulatory barriers to market entry or tariffs, tax breaks or
subsidies not generally available to those outside the favored
group or class.

Of the two, the latter is by far the more dangerous, as it implies
control of legislative or regulatory processes to extract "rents"
from the public at large and funnel them to the favored recipients.

And, according to classical economic theory, when rent-seeking
exists in a market, more and more players abandon profit-seeking
for the greater returns of rent-seeking. Ultimately, this causes a
fall in output and productivity, as not all players can become
rent-seekers and those who remain choose to withdraw from
from the market rather than see their profits reduced by
rent extraction.

And where do we see an example of all of these economic
pathologies simultaneously?

In Unionized Public Sector Employment.

To begin with, access to public employment is tightly
controlled, both formally and informally. Not only does
the prospective public employee have to jump through
many bureaucratic and regulatory hoops, but often the
only path to public employment is through an "informal"
connection to either an elected official or family members
already on the "inside". Further, public employment is a
monopoly, for which no corresponding demand exists in
the "private" marketplace.

And do Public Employees extract "rents" from the public
at large? In spades. Through unionized collective bargaining
and campaign contributions to the politicians who set the
wage and benefit scales, the wage and benefit "rent premium"
extracted by public employees have risen in some cases to over
30% compared to similar private sector employment.

And, as would be predicted by economic theory, more and
more people are seeking employment in the Public Sector
than in the private marketplace. According to the Heritage
Foundation, while the US private sector produced NO net new
jobs over the last ten years, total government employment has
risen by over 17%. And the Obama "economic stimulus" plan,
has, as predicted, resulted in both more government employment
(more rent seekers), and less employment in the private
sector (fewer profit seekers).

But now, a tipping point may have been reached. As more and
more private profit-seekers leave the market, either through
outsourcing to other countries (avoiding the rent-seekers), or
withdrawing from the market altogether ( refusal to pay "rents"),
economic output (upon which the rent-seekers depend), is falling.

And, in response, the politicians, who enabled the problem in the
first place, are now having to make some awful choices - namely,
which rent-seekers will be thrown off the gravy train?

If you follow the news, the talk in statehouses and city halls
all across the nation is about wage and benefit cuts, givebacks,
renegotiations, and even permanent layoffs, furloughs, and
terminations. And sooner rather than later, the federal
government will have to follow suit.

And this was all perfectly predictable.

In economic terms, once the aggregate amount of extracted
rents exceeds the amount of profit that could be produced
by the non-rent-seeking sector at any given level of output,
the whole scheme collapses.

And, in many parts of the country, we are now literally at that
point.

The following video sums it up quite nicely (h/t Mish's Global
Economic Analysis)

Tough Week For Michael Steele

2010-04-03T17:56:00.000-07:00

It's been a tough week for Michael Steele.

Not only is the Republican National Committee
head having to live down the scandal of "fundraising"
at a lesbians-and-bondage themed West Hollywood
night club, but he's now having to answer new questions
about his RNC-paid expense account.

Then, there's the matter of charging his travel expenses
to the RNC while accepting speaking fees at $20,000 a
pop.

And, finally, there's the matter of just how effective he's
been in his main job - which is fundraising for Republican
candidates.

Thus far, compared to his Democratic counterparts, not
very. Through the last reporting period, The RNC has
managed to raise only $9.5 million for its Congressional
arm, the RNCC. In the meantime, the DNCC, its Democratic
counterpart, has raised about $25 million for its candidates.

And all of this raises the one question that no one wants to
ask - why would a party that is largely composed of older,
rural, Angry White People choose a scholarly, moderate
Black Man as its head?

And, in my opinion, here are the answers.

First of all, the "lesbian nightclub" event would not have
come to light at all had the reimbursement not been
included in a required FEC filing and been seized upon
by alert liberal bloggers. In truth, the event was paid
for by a fundraising consultant, and reimbursed by
the RNC as a matter of course.

Now, despite the fact that this particular consultant
relationship has been terminated, there's a reasonable
explanation for the event. And it has to do with the sorts of
people that the "consultant" was cultivating - younger,
wealthy, creative entrepreneurial types who might
otherwise contribute and vote Democratic.

Needless to say, the party of Barney Frank would have
no problem with such an event; and the GOP is going
to have to compete for that demographic - socially
liberal, even exotic in their tastes,but receptive to a
conservative economic message.

And on the expense account thing, it's the price
of doing business. No Republican National Committee
head is going to be credible raising money from the
wealthy staying at Motel 6 on the road and hosting
fundraising dinners at Denny's.

Like it or not, if you are soliciting donations from
the wealthy, you have to travel in the same circles,
stay in the same hotels, and frequent the same restaurants
and resorts that they do.

You have to show that you belong - and that you get it.

And on the matter of $20,000 speaking fees at fundraisers,
Hailey Barbour, one of Steele's more illustrious predecessors
at the RNC, asked for and got up to five times as much. But
then, as a former Governor of Mississippi and head of the
Republican Governors Conference, he had just a bit more
heft and clout.

And Barbour didn't just fly first class - he flew strictly by
private jet, usually underwritten by the same contributors
he was wooing.

And on fundraising results to date, this is par for the election
cycle. The Republicans are challenging more seats than are
the Democrats in both the House and Senate - and the primary
season for Republicans is still a couple of months away.

And, because of the influence of the Tea Party, the RNC is
going to wait until after the primary season to begin the
general election fundraising cycle.

It's going to make sure that its general election candidates have
reasonable chances of winning - and it knows, that come
Election Day, it's got the Tea Partiers in its pocket anyway.

But in one respect, Steele has been unusually effective. He's
doen a remarkable job in attracting genuine conservatives
who are Other Than White to the GOP banner.

No fewer than 33 conservative African Americans are competing
for House seats this time around. And there are similar numbers
of other minority candidates as well.

Unlike liberalism, the conservative theme of low taxes, limited
government, and individual freedom has a universal appeal
to hard-working folks of ALL races. And this time around, it's
the Democrats who can be effectively painted as the friends of
corporate rent-seekers and outsourcers and the loyal retainers
of Wall Street.

And the GOP this year cannot afford to let Sarah Palin and
the Tea Party steal its message.

Much as the Tea Party might have a gut appeal to true
conservatives, the reality is that a movement built on
conspiracy theories and a frank appeal to the racial and
religious prejudices of rural, uneducated White People
cannot win nationally.

And Michael Steele gets that. And he's doing something
about it.

But, we'll have to wait until November to judge.

Healthcare Reform: The real fight is just beginning

2010-03-23T09:59:00.000-07:00

Well, he finally did it.

After a full year of wrangling with a recalcitrant
Congress to the exclusion of almost all else, President
Barack Obama has his victory on healthcare reform.

In a strict party-line vote, this historic legislation passed
the House 219-212, with, as predicted, zero Republican
support.

And, as George Will pointed out in today's Washington Post,
the President views this as a transformative measure, one
that will put him alongside FDR, Truman, and LBJ as a
successful Democratic President who changed the national
debate and altered the nation's course for the better.

And while in my view this bill falls short of what is needed
to truly reform the nation's system of healthcare delivery,
it's at least a start.

To begin with, it will bring the estimated 32 million
uninsured into the national "covered" pool. As I have
maintained from the beginning, unless everyone is
in the insurance pool and paying, reforms such as
banning coverage denial for pre-existing conditions
and severely restricting claim denial or lifetime caps
on coverage are just not possible. And, to make it
possible for uninsured individuals to purchase such
insurance , there will be a whole panoply of
credits, subsidies, and direct payments to make this
possible.

And that's the hard part that has yet to be tackled.

To be sure, the Republicans have been united in
opposition to all of this. True to their ideological leanings,
they have trumpeted the primacy of "the private sector"
in delivering health care to all affordably.

But the "Private Sector" is the biggest problem in all
of this. In the Health Insurance industry, the private
sector has morphed from profit-seeking to rent-seeking.
In most states, one or two companies have monopoly
or duopoly positions in both the group (employer)
and individual insurance markets. In these markets,
claim denial, coverage exclusions, and ever-smaller caps
on coverage are the order of the day. To the extent that
the health care bill tackles these problems, it's a reform
long overdue, and the Republicans are just plain wrong
about this.

But on one issue and one issue only - COST - the GOP
has found an issue that has undeniably registered
with the public.

In an age of trillion-dollar bailouts to Wall Street,
declining GDP and mass unemployment, another
980 billion dollar entitlement that has to be paid
for by either increased taxes, increased deficit
spending, or both is just not going to sit well with
the voters.

And right now, I have to count myself among the
skeptics. When it comes to entitlements, the
government's track record on cost control is not
a good one.

Right now, both Medicare and Medicaid are
approaching bankruptcy, and nowhere in this
bill do I see any realistic attempt to bring the costs
of these massive health care entitlements under
control.

The GOP is undeniably right on just this one issue.

And that is what is going to set up the continuing
health care fight. The "amendments" to this bill
now pending in the Senate are just the start.

There will also have to be enabling legislation
to set up the bureaucracy to run this program
and give it the power to write regulations. And,
in order to meet the 2014 implementation deadline,
appropriations under this bill will have to be made
starting in Fiscal Year 2011 - and that debate will
start this fall.

That means another series of partisan fights
right up until the mid-term elections.

As I said, this fight is not over - it's just beginning.

Decision Sunday: We're Still Waiting

2010-03-21T11:30:00.001-07:00

Decision Sunday has arrived.

Today was the day we were supposed to learn whether or
not the Rube Goldberg contraption known as Health Care
Reform was finally going to pass the House.

As of 12:00 noon PDT Sunday, March 21, we're still waiting.

And nothing substantial seems to have changed in the
last few days.

Oh, to be sure, a few stragglers on the Democratic side
were rounded up and corralled by the President.

Rep. Dennis Kucinich of Ohio, a tireless campaigner
for economic justice and for Universal Single-Payer
coverage (the ONLY reform that in my mind makes
sense), finally succumbed to Obama's persuasion
and is now on board.

So also were local Las Vegas Reps. Shelley Berkely
and Dina Titus, albeit reluctantly. In Titus' case,
as she represents an increasingly conservative
district in suburban Las Vegas, her "yes" vote
on Health Care Reform may well be "political
suicide", according to the Las Vegas Sun.

But, suicidal or not, these folks are now committed.

On the other side of the aisle, though, The GOP is
facing no such atmosphere of arm-twisting and high
pressure.

Their lock-step sense of disciplined opposition to
the Obama plan, has, if anything, grown stronger
in the last few days. As House Minority Leader
John Boehner confidently predicted, there will
be zero Republican votes for the measure. And I
believe him.

Just look at the events of the last few days. Nancy
Pelosi's plan to use legislative sleight-of-hand to
"deem" the Senate's Bill "passed" without further
amendment or alteration went nowhere, not only
because of Republican opposition but also due to
the Senate's fears that the House would do something
to the bill the Senate could not accept.

Majority leader Harry Reid quietly let it be known
that anything other than an "up or down" vote on
the Senate's Bill "As Is" would not sit well in his
chamber with either party. And that was that.

But regardless of how the House votes, whenever it does
take place, I believe we have not seen the last of the issue.

If the House makes any changes to the Senate bill, (and
I believe they will), the whole thing will again have
to go to a conference committee, and the whole horse-trading,
log-rolling and sausage-making process will start all over.

And if that happens, I predict that this time it will self-
destruct, handing the GOP a popular victory and
leaving the President's coffers of political capital
empty.

But then again, maybe not - but as of right now,
we're still waiting.

Healthcare: We're All Waiting

2010-03-17T14:06:00.001-07:00

Well, we're all waiting.

The Great Healthcare Drama is about to finally play out
in the House Of Representatives.

And because of the importance of this issue to President
Obama, who has gone "all in" on his political capital on this
one, the consequences of either passage or failure will be
deeply felt.

If by some miracle Obama wins, he's a hero. If he loses,
he will be forever marked as "Jimmy Carter with a deep tan"
and had better resign himself to a one-term Presidency.

And, right now, things aren't looking very good for Team Obama.

To begin with, the final product as passed by the Senate and
presented to the House is good for exactly no one.

There's no Public Option. No provision for "insurance exchanges"
to enable consumer choice. Only limited prohibition of coverage
denial for pre-existing conditions, no prohibition for claim denial,
and no criminal provisions in the law for any violations.

There are no caps or cost controls on premiums. No provision for
Medicare and Medicaid to either negotiate "best prices" for
pharmaceuticals or procure them from overseas. And, most
importantly, no revocation of the exemptions from anti-trust
law that the Health Care Cartel now enjoys.

What is in the bill is a mandate that everyone purchase private
coverage - at whatever rate the private Health Care Cartel decides
to charge. Also, there are selected cuts to Medicare and Medicaid
coverage, raising premiums and reducing federal assistance to
those states and individuals least able to afford them.

In short - there's lots of things in this 2,204 page bill for everyone
to hate, and nothing in it for anyone except the Health Care Cartel.

And what do the people think? Almost everyone, both Left
and Right, is saying NO.

NO to more power and influence to the Health Care Cartel.
NO to the rising costs and reduced coverage that are sure to follow.
NO to government interference with private, employer-based
health care plans that are working satisfactorily for those
concerned.

And above all, NO to the massive tax increases that will
be necessary to fund the whole mess.

And the Democrats, to the delight of the GOP, are caught
squarely in the middle. For the Senate, voting for Obama's
healthcare plan, weak and ineffectual though it may be, has
become a political suicide pact. And the House is starting to
see things the same way.

Nancy Pelosi now faces a desperate situation in the House.
Faced with united GOP opposition, she now sees the list of
Democratic defectors grow with each passing day. Her latest
gambit, to use a little-known parliamentary maneuver to
"deem" the Senate Bill "passed" by passing a raft of "popular"
amendments, is going nowhere - even in Washington.

The only thing that is growing is the fury of the public - which,
once again, is seeing needed reform throttled by both the power
of vested interests and Washington's penchant for short-term
political opportunism.

As I said, this will be an interesting week - and we're all waiting.

Chris Christie: Raw Courage in New Jersey.

2010-03-06T13:54:00.000-08:00

(Hat Tip: Mish Shedlock of Mish's Global Economic Trend Analysis. )

In today's environment, no one ever says governing is easy.

In an unusually candid appraisal of the sorry state of affairs
of the "Soprano State" of New Jersey, newly-elected Governor
Chris Christie laid it on the line for 200 mayors of the New
Jersey League of Municipalities at the statehouse in Trenton.

Fortunately, the speech was carried live by New Jersey Public
Television. A link to the speech can be found here.

Warning: This is not an easy speech to listen to. It's twenty-six
minutes long, beginning with a few public service messages.
And when it comes to the painful realities of taxing, spending,
and governance in general, Gov. Christie's blunt candor will
shock a few and surprise many.

A few excerpts:

" In the time we got here, of the approximately $29 billion
budget, there was only $14 billion left. Of the $14 billion,
$8 billion could not be touched because of contracts with
public worker unions, because of bond covenants, because
of commitments we made accepting stimulus money. So
we had to find a way to save $2.3 billion in a $6 billion
pool of money.

" When I went into the treasurer's office in the first two weeks
of my term, there were no happy meetings. They presented
me with 378 possible freezes, cuts, and lapses in order to
balance the budget. I accepted 375 of them.

" There is a great deal of discussion about me doing that by
executive action. Every day that went by was a day where
money was going out the door such that $6 billion pool was
getting less and less. So something needed to be done.

" The people did not send me here to talk, they sent me here to
do. So we took the executive action we did to stop the bleeding.

" As we move forward, and we evaluate what we need to do in
three weeks in our 2011 budget address, you all need to
understand the context from which we operate.

" Our citizens are the most overtaxed in America. U.S.
mayors hear it all the time. You know that the public
appetite for ever-increasing taxes has reached an end".

In the same vein, Gov. Christie goes on to talk about
problems with school boards, public employee unions,
and the old saw about how ferreting out waste and abuse
will somehow miraculously balance the budget.

And Gov. Christie knows something about that. Prior
to running for governor, Chris Christie was the U.S.
Attorney for the Northern District of New Jersey,
where his main job was putting corrupt public union
officials, corrupt office holders and their mobster
friends in jail.

When it comes to tackling corruption, waste, fraud
and abuse, (the well-documented principal activities
of New Jersey's public sector), take my word for it -
Gov. Christie is an expert.

More from Gov. Christie:

" You know, at some point there has to be parity.
There has to be parity between what is happening
in the real world, and what is happening in the public
sector world. The money does not grow on trees outside
this building or outside your municipal building. It
comes from the hardworking people who are suffering and
are hurting right now.

"And so we need to get honest with each other. In this instance,
the political class, which unfortunately we are all members of,
is lagging behind the public on this. The public is ready to hear
that tough choices have to be made. They're not going to like it.
Don't confuse the two. But they are ready to hear the truth.

"They are tired of hearing, don't worry I can spare you from the
pain, because they have been hearing that for a decade, as we
have borrowed and spent and taxed our way to oblivion.

"We have done every quick fix in the book that you can do.
And now we are literally left holding the bag.

"And don't look to the "private sector" as a source of
additional revenue. During the administration of
my predecessor Gov. Corzine (former Senator,
former Goldman Sachs bankster - ed.), some $70 billion
of private sector capital and investment left the state;
never to return.

"There's literally nothing more left to tax - and nothing else
to do but what we are now doing."

The message coming through loud and clear: The public is
tired. Tired of tax increases. Tired of aggressive and abusive
public sector unions whose pay and benefits dwarf anything
similar in the private sector. Tired of endless state-funded
entitlements and "unmet needs" from which they do not
benefit and for which they must pay.

In just a few short weeks, Governor Christie has:

a) Frozen, cut or allowed to lapse some 375 separate
government spending programs;

b) Challenged the state education and teacher's lobbies;

c) Challenged the "arbitration" system of public-sector
collective bargaining;

d) Demanded public-private sector wage and benefits parity;

e) Demanded public-sector pension reform;

f) Demanded an end to open-ended entitlement programs;
he'll challenge them in court if necessary.

g) Made clear he is not thinking about the next election.

In sum - LEADERSHIP. Something clearly lacking in the
White House, Congress, and almost every statehouse and
city hall in this country.

And, if Chris Christie can make it work, this is not the end
of his public career, but rather a very auspicious beginning.

Attention: California, New York, Illinois, are you
listening? You need to learn how to do this.

Give Governor Christie a call - NOW.

Jim Bunning: Horatio Holding The Bridge

2010-03-05T22:48:00.000-08:00

Courage.

It's getting rare these days when you can use the words
"Courage" and "Politician" in the same sentence - especially
when referring to the resident Critters on Capitol Hill.

Yet just this last week, we saw ONE politician demonstrate
real Courage - standing, almost totally alone and unaided,
against the taxers and spenders that dominate both
political parties.

And just who was this courageous individual?
The ol' Kentucky spitballer, Jim Bunning of Kentucky,
the only Senator in the Major League Baseball Hall of
Fame.

And if there's anything consistent about Jim Bunning,
it's that he's determined to do things his way. Just as
he did in seventeen years in the Majors, he managed to
both confound the opposition and drive his own team
to distraction at the same time.

But last week, in the twilight of his career, Jim Bunning
probably pitched his greatest game. Standing up alone
to the taxers, spenders, and pleaders for "business as usual" ,
he brought the Senate to a complete halt for five glorious days,
forcing it to confront the error of its ways.

And what exactly did Jim Bunning do? He demanded that the
Senate find a way to pay for extending unemployment and COBRA
benefits, Medicare funding, and some highway projects other than
just adding it to the national debt. In short, he insisted that the
Senate use cash in the pocket rather than pull out the national
credit card. In other words, "Pay As You Go."

A modern day Horatio At The Bridge. In the words of Lord
MacAulay:

" Then up spake brave Horatius
the Captain of the Gate:
' To every man upon this earth
Death cometh soon or late
And how can man die better
Than facing fearful odds
For the ashes of his Fathers
And the temples of his Gods' "

Now, it's not as if he had a grudge against the unemployed,
doctors, or highway workers. All he was insisting upon was
that the Senate either use stimulus funds already appropriated
(cash in the pocket), or find something else to cut to pay for
these programs.

Lord MacAulay again:

" Hew down the Bridge, Sir Consul
with all the speed ye may;
I, with but two to help me
will hold the foe in play.
In yon straight path a thousand
may well be stopped by three;
Now who will stand, on either hand,
and keep the bridge with me? "

And, like Horatius, Bunning found supporters. Two
brave senators, Jeff Sessions (R-Ala.) and Bob Corker
(R- Tenn.), stood with Bunning ,helping him keep the
Senate tied in knots for two straight days and nights.

But the victory was not yet won. The taxers and spenders,
led by (who else?) Harry Reid, kept pressing forward. Along
with their allies in the media, they tried to paint Bunning
as a grinch and a ogre opposed to unemployment assistance,
doctors and highway workers. But in reality, nothing could be
further from the truth.

For Jim Bunning had a plan. If the Senate did not wish to use
its "cash in the pocket", it could cut a few things that in reality
do nothing to stimulate the economy. Among the cuts
he pointed out that could entirely pay for the program were:

a) An expiring subsidy for the biofuels industry. All the Senate
would have to do is agree not to renew it;

b) A tax credit for "recycling" for the paper pulp industry;

c) Price supports for the sugar industry, which would fund
unemployment benefits for an entire year.

But the Senate doesn't want to hear about that. Tax credits,
subsidies, and handouts for undeserving special interests
are what keep Senators in office and Congress in business.
But eventually, Bunning got his wish. Grudgingly, Harry
Reid and the other taxers and spenders allowed him
to offer his amendment to the bill requiring balancing
cuts to other programs.

Naturally, it was quickly defeated on a party-line vote.
Back to business as usual.

How far we've fallen from ancient times. Macaulay again:

"Then none was for a Party
Then all were for the state;
Then the great man helped the poor,
And poor man loved the Great
Then lands were fairly portioned,
Then spoils were fairly sold,
The Romans were as brothers
In those brave days of old. "

And how might that stanza be written today? With
apologies to Lord MacAulay, here goes:

" Now All are for The Party
And none are for the State;
Now the Great exploit The Poor,
And poor man envies Great;
Now the lands unfairly portioned,
Spoils stolen, and not sold;
How unlike Citizens and Brothers
From those great days of old "

The "Tea Party" and the GOP: Mixing Oil and Water?

2010-02-25T11:29:00.001-08:00

The "Tea Party" movement has reached a critical moment.

This loose and spontaneous movement, which seeks to
unite Conservatives under the principles of "limited
government", "free markets", and "individual liberty",
has now grown large and loud enough that it is attracting
serious attention from both major parties.

And the GOP, the so-called "Conservative" faction in our
two-party political monopoly, is making a serious effort
to court the movement. Last week in Washington, GOP
National Committee Chairman Michael Steele met with
thirty leading "tea party" activists, to explore "ways in
which the GOP and the Tea Party movement can work
together to further our mutual goals".

And here's where The Thinking Nationalist is going to
issue a warning to both sides: be very careful about
who you are about to jump in bed with.

First, for the Tea Partiers:

1) The GOP, as it currently exists, is no longer the
party of Limited Government, Free Markets, Sound
Money, and Individual Freedom. Rather, the GOP
is the party of Wall Street bailouts and bonuses,
big banks and transnational corporations, real
estate and stock market bubbles, vast unchecked
illegal immigration, a diminished social safety net,
outsourcing and job exportation, and endless
inconclusive wars against "terror";

2) Owing to "numbers" (i.e., there are
many fewer wealthy than there are middle
and working class), the GOP has always had
to co-opt "social conservatives" to obtain
an electoral majority. This has been true
ever since the days of Richard Nixon's
"Southern Strategy". Once in power,
Republicans forget the "social" issues
and become "Big Government" conservatives,
taxing, spending and otherwise using government
to reward the powerful and the privileged;

3) Even out of power and in the minority, the
GOP marginalizes "social conservatives" as
rural, uneducated rubes while proposing
"strategic alliances" with groups that
normally vote "bloc Democratic"
(Hispanics, Gays, Asians, etc.).

In short - the GOP has no principles other
than gaining power, and no goals other
than aiding and comforting the top 1%
of income earners.

Tea Partiers - be careful.

And the GOP should be careful too. No
credible national political party should
ally itself with loose coalitions of dissenters
who have no national program, no manifesto,
and no credible national leaders.

I'm sorry - but Sarah Palin and the talking heads
from the Fox network don't qualify in this last
regard.

And the last time the GOP allowed itself to be captured
by a loose "libertarian-conservative" coalition, the result
was the presidential nomination of Barry Goldwater.
And we all know how that turned out.

And the last time I looked, the GOP doesn't really need
the Tea Party crowd to succeed. Just saying "No" to
anything the Democrats propose has already resulted in
by-election victories in Virginia, New Jersey, and
Massachusetts.

But in all three cases, the victories were decided by
mainstream American voters of both parties who turned
out in droves to register their disgust with "politics as
usual" . Both the Tea Partiers and regular GOP voters
were minor factors in each case.

But the tea party movement is not going away anytime
soon. And if it is to succeed, it will need to come up with
a credible national-level leadership and a message that
reaches out to the largest disaffected group in the country-
independent, non-partisan voters equally displeased
with both major parties.

And until that happens, mixing the tea party movement
and the GOP will be like mixing oil and water . There
may be a temporary emulsion, but it will all come
apart sooner rather than later.

And that won't be beneficial for either side.

Trouble in the Eurozone - Of Greece, PIGS, and STUPIDS

2010-02-22T09:20:00.000-08:00

The Greek Debt Crisis has been much in the news lately.

The financial media has been dominated by such
headlines as "Greek Default Imminent" , "Europeans
say "NO" to Greek Bailout", and of course, as expected,
"Goldman Sachs helped Greek Government hide debt,
avoid EU regulatory scrutiny".

Wow - talk about a juicy topic. It's got everything.
Greeks, Default, The European Central Bank, Bailouts,
and everyone's favorite financial pirates, Goldman Sachs,
at the center of it all.

But there's more to it than that. When it comes to
extreme European financial crisis, Greece is not alone.

First of all, there are the truly depressed economies
of the Eurozone's southern tier - a group of nations
(including Greece) that have been called the PIGS -
Portugal, Ireland, Greece and Spain. And, there's a
second group of nations, some in the EU and some not,
who are likely to follow in the PIGS' path, owing to
heavy Euro-denominated external debt. These nations
I'll call the STUPIDS (Slovakia, Turkey, Ukraine, Poland,
Italy, Dubai, and Slovenia).

And the "root causes" of their problems? The same ones
that we in the U.S. have:

1) Huge, ongoing Government budget deficits, with no
realistic plans for fiscal balance;

2) Bloated, unionized public sectors, both in absolute
terms as a percentage of total employment and in
terms of wages and benefits when compared to
equivalent private sector employment;

3) Uncompetitive goods-producing sectors ( manufacturing,
mining, and agriculture);

4) Heavy exposure to "boom-bust" economic sectors
(real estate, hospitality, and tourism);

5) Lack of modern infrastructure for competitive
service economies;

6) Significant untaxed, "informal economies".

And, in the case of the PIGS and Italy, extreme concentrations
of wealth and influence in the hands of oligarchies, with the
attendant problems of capital flight and tax evasion.

And virtually none of these problems were envisioned when
the EU was established with a common currency and common
fiscal, industrial, and social policies. It was as if
with European unification, sixteen nations would become
Germany overnight.

And that's a big, under-reported part of the problem.

Germany is the leading economy of Continental Europe -
its leading exporter with world-class technology and service
sectors, Europe's best-trained and educated workforce, and
modern infrastructure that in many respects is the envy of
the world. And with traditional German traits of industry
and thrift, its budget deficit is minor - in fact, it is in the
awkward position of having to avoid large surpluses to
help keep the Euro from becoming too "strong", which would
hurt the exports of the entire group.

Greece, though, is a different story. Its current budget deficit
is currently 14% of GDP, its total outstanding foreign debt
is 156% of GDP, and its percentage of sovereign (government)
debt to total public and private indebtedness is an astounding
94.3%.

Translation: while the Greek private sector is relatively
conservative and under leveraged, the Greek government
spent like crazy. And now the bill has come due.

And Greece doesn't have a lot of options. As part of the
Euro zone, it no longer has control of the printing press;
inflation is not an option. Neither is default - were Greece
to default on its external debt (most of which is held elsewhere
in the EU), it would trigger a run on all Euro-denominated debt
and on the Euro itself. Neither Germany nor France will tolerate
that. And a Bailout? By overwhelming margins, the people of
the other EU nations are saying "No".

But, a solution is in the works. Recent pronouncements and
developments from both the Greek government and
The European Central Bank indicate that despite all denials,
a "fix" is at hand. Here's why:

1) The ECB, the Greek central bank and the finance ministry
have all requested "Technical Assistance" from the IMF;

2) Despite the fact that the IMF ( the world's sovereign
"receiver in bankruptcy"), normally doesn't intervene
when a country is part of a currency union, the IMF will
have a large say in how Greece will restructure;

3) Greece has already announced a draconian "Austerity"
program including layoffs and pay cuts for public workers,
downward "adjustments" for pensions and benefits, tax
hikes on the middle class and wealthy, and an unprecedented
crackdown on the "informal" economy by virtually outlawing
cash transactions above 1000 Euros;

4) And, most importantly, Greece has just replaced the head of
its debt management agency with a former Goldman Sachs
Europe Managing Director. That means the "deal" is likely to go
down soon.

And here's what will most likely happen:

1) Greece is planning an auction of €17 billion sometime
in the next 30 days to roll over existing debt, with a
coupon somewhere in the 9-11% range and a Moody's
rating of BB- or lower. The auction will fail
(not be fully subscribed);

2) While normally this would be "an event of default",
the ECB, instead of lending money directly, will now
provide a "conditional guarantee" of the rollover,
providing Greece meets the austerity conditions it has
negotiated with the IMF. This will permit the auction
to go through, but this time with interest penalty clauses
that would be triggered if Greek government debt is further
downgraded in the markets;

3) The austerity program, which will be imposed
immediately, will lead to strikes and riots in the streets,
mass poverty and unemployment, and further capital flight
by the wealthy;

4) The continued unrest in Greece will lead to a further
downgrade in Greek debt, triggering the penalty clauses.
At this point, with Greece unable to meet the mandated
interest charges (150-200% of the coupon rate), the
ECB guarantee will come into play, at which point
Greece will have to surrender its treasury and taxation
powers to Brussels.

At this point, Greece will cease to be an independent
nation and become an EU "colony", with its finances,
taxes and government revenues totally in Brussel's
hands.

And who will benefit from this? The usual players,
led of course by our favorite financial pirates, the
Squid Nation of Goldman Sachs. The Squid, along with
JP Morgan, Citicorp, and Morgan Stanley ( and European
banks Societe Generale and Deutschebank), have been
quietly buying up CDS's on Greek debt, and shorting
existing Greek issues in the market which means
that the worse the situation gets, the more they profit;

The banksters can't lose. If the Greeks default completely,
both their shorts and CDS's win. And if it looks as if the
guarantee will pay off, they'll be in position to scoop
up the debt at pennies on the dollar and get paid in full.

It's the same hustle The Squid pulled off so successfully
with AIG, Fannie and Freddie in the U.S., although not
quite so large and profitable.

And can the EU do anything about it? They can make some
noises about "audits" and "banning Goldman Sachs from
European markets" , but that's about it. Were they to
even try to take punitive action against The Squid, they
would be guaranteeing that all of the weaker EU economies
would be open to unrestricted speculative attack.
Moreover, to rein in Goldman and the others, they would
have to get co-operation from Washington - which will most
likely not be forthcoming.

Besides, speculators, vultures and pirates serve a useful
corrective function in the marketplace; when companies
and countries falter, the speculators are there to enforce
financial discipline, and the consequences are usually
painful for the people involved.

It's just too bad that that pain can't be visited on the
Greek government as well.

Crisis Or Opportunity: Which Way On Global Warming?

2010-02-13T20:58:00.001-08:00

Global Warming.

It's a problem and an issue that won't go away.

And this issue is one that isn't just a pet conceit of
Western elitists - it's something that is definitely
happening, and it's something we have to do something
about.

But there's two ways of looking at this - as either Crisis
or Opportunity. And all we've heard so far is just the
"Crisis" side of the argument.

Now to be sure, the proponents of the Global Warming
crisis meme have been at times been their own worst
enemy.

First, there was "Climategate" - the expose that some
climate researchers had fudged some of their data to
reach a predetermined conclusion. Naturally, this
inspired some commentators, most notably Glenn Beck
and Rush Limbaugh, to hint rather strongly that the
whole issue is just another elite conspiracy to "Blame America
First" and should be disregarded by "right-thinking" folks.

However, as a writer on economic and political issues,
I deal with all kinds of people where "fudging" the data to
reach a predetermined conclusion is nothing new.

To the politician, bankster, or economist, fudging
the data and lying about it is an everyday tool of the
trade - so why should I be surprised when some environmental
scientist does it? I'm not. And in fact I was a skeptic - until I
read in U.S. Naval Institute Proceedings about the potential
strategic effects of climate change .

That changed my mind. That convinced me that Global
Warming is a fact. But, I am still skeptical that "Global
Warming" is entirely man-made. And it seems that a lot
of otherwise sensible people aren't buying it either.

The anthropogenic theme was what Barack Obama
took to Copenhagen last year - and the BRIC coalition
of newly industrializing countries promptly shut him
off.

They sense - accurately, in my view - that "Global Warming"
and the mechanics of a proposed new "carbon control" regime -
Cap and Trade, carbon sequestration, new carbon taxes,
carbon-neutral trade - are nothing more than a plot
by Western nations to re-arrange global trade patterns
in their favor. China bluntly told the world it will continue
to burn coal - of which it has a 300-year supply - in its drive
for manufacturing dominance. And the others - Brazil, India,
and Russia - showed no willingness to "compromise" with a
West they view as fading, decadent, and corrupt.

And I'm not surprised. The professional "environmental"
movement has many times, on issue after issue, been
embarrassingly and consistently wrong. Whether the
issue is overpopulation, global warming, resource exhaustion,
or otherwise, the causes are always the same - Western
(that is American) lifestyles, Capitalism, and Democracy.

Blame and Guilt are not good selling points to a skeptical
and distrustful audience.

So, despite all the evidence, we might well be alone on
this issue. If that's the case, and especially if it comes
to light that the principal causes of global warming
are not anthropogenic, what do we do?

Doing nothing is not an option. The evidence of
"global warming" is both widespread and plain to
see even for the layman. And I don't think it's wise
policy to be only a volcanic eruption or two away
from a truly catastrophic climate situation. So
what do we do?

First of all, we have to accept that Global Warming and
Climate Change are facts. Even if the causes are not
all man-made, our response will of necessity have to be.
And the first thing we must do in this regard is to
change our mindset to view "Climate Change" not
necessarily as a Crisis but rather as an Opportunity.

And, in my view, there are some things we can do right away
to start taking advantage of the opportunity and in the
process start correcting things.

First of all, Reforestation. Biomass - trees - may well be our
best friends in ameliorating climate change. And deforestation,
especially in Africa and Brazil, may well have contributed to
the present situation. Trees are a natural carbon sink; and all
the good we might do here in reducing carbon emissions
might well be undone by overharvesting the Amazon
rain forest and traditional African slash-and-burn
agriculture. But we in the U.S.are not entirely without
blame - the recent mudslides and floods in Southern
California can directly be attributed to the failure to
reforest the areas burned in the fires two years ago.

And why wasn't this done? The environmental impact
report required to replant these burned areas won't be
completed for another year, if at all.

Second - phase out burning coal for power generation.
Clean coal? No such thing. Besides, as a solid hydrocarbon,
coal may well be more valuable as a chemical feedstock
material in place of increasingly scarce oil. We already have
the technology to convert coal to these other uses - why
not use it? The same thing applies to natural gas, which though
clean and abundant, is more valuable as a feedstock than
a fuel;

Third - let's lose our unwarranted aversion to nuclear
power. If we're serious about a limited-carbon future,
nuclear power will have a huge role to play, whether we
like it or not. Thanks to the unyielding opposition of
the same folks people pushing the Global Warming
alarms, we are currently stuck at Nuclear Power
Technology 1.0. Meanwhile, France, Japan, and China
are currently at Nuclear Power Technology 3.0, with
the fourth generation in the planning stage. And the
French and Japanese have the technology to recycle
spent fuel rods into more usable fuel. We don't. We
have a long way to go here if we are going to catch up;

Finally, if we're serious, we have to do more to wean
ourselves from oil-based motor fuels. Methanol is
both renewable and cleaner burning than gasoline,
and becoming available in more and more places.
However, it is highly corrosive, and cannot be used
in most cars without major modifications to both
the engine and the fuel system. A few years ago, most
of the major manufacturers produced a few models
that were "flexible fuel" - could burn either methanol
or gasoline, or any mixture thereof. Today, they don't -
except for fleet vehicles such as taxis and delivery
vehicles. And CNG and propane have the same problem
as methanol - limited availability of vehicles, and a limited
number of fuel outlets. For these reasons, these are both
dead-end technologies;

But once again, foreign nations are showing us the way.
For the last three years, Europe has had diesel hybrid
vehicles, which take current hybrid technology and marry
it to a small-displacement, clean-diesel engine. And later
this year, Audi will bring the first clean-diesel hybrid
to the U.S. If the Toyota Prius was hybrid technology 1.0,
the forthcoming Audi Tdi Hybrid is hybrid technology 2.0.
Go to the alternative-fuel diesel hybrid, and you have hybrid
technology 3.0; vehicles that can get 40-50 mpg on clean,
renewable fuel. They are not in the market yet, but they will
be soon;

If there's a common thread to all this, it's this. All of the
things I've just mentioned are doable now, with technology
we currently possess. Even if they won't completely solve
the climate problem, they will make a considerable start.
But when it comes to actually doing something , we have
been sold short by our elites, especially those now making
the most noise about climate change and "Global Warming".

Our elites are very good at creating ponderous studies and
calling for action on this problem or that, but they fail
utterly on implementation. Being primarily creatures of
thought, they instinctively recoil from people of action, who,
culturally benighted though they might be, just might come
up with workable solutions for the problems.

And if they do propose solutions, it's almost always this tax,
that regulation, or the totally unworkable "Cap and Trade"
scheme that thankfully died a quick and unlamented death
in Congress. No plan of action - no Manhattan Project or
Apollo program - just more carping, pointing with alarm,
and more urging for someone else to do something.

Small wonder that when we talk to the rest of the world
about the climate change problem, they don't take us
seriously. We shouldn't be surprised.

But that is not to say that the rest of the world isn't
concerned. They are. For the most part, they see
solving the climate change problem (or at least
adapting to it), as a tremendous opportunity.

The French will do their bit by proceeding to go
100% nuclear and hydroelectric for power generation
by 2020. Unlike us, they see "wind" and "solar" as
ephemeral technologies unsuitable for large-scale
application. The Chinese have embarked on an
Apollo-program-scale project to be the world's
technology leader in batteries for hybrid and
electric vehicles. And the Japanese are years
ahead of everyone in the technology of
processing nuclear waste into nuclear fuel.

And the prime market these countries see
for their innovative technologies? The United States.

If these sound to you like the "green shoots" of the
"new economy" that the President was talking
about, you're right. But as usual, these high-wage,
high-skill, "jobs and industries of the future" will
happen elsewhere - not here. For when it comes to
"green jobs" and industries suitable for Americans,
the President is talking about weatherstripping
homes or recycling bottles and cans.

And that's a development you can thank our
anti-industrial, anti-manufacturing elites for.

So, when the President, Al Gore, or some left-wing
Hollywood celebrity talks about "Climate Change"
or "Global Warming", I'm skeptical. The discussion
is all problem - no solution.

But when I hear Rush Limbaugh, Glenn Beck,
Sean Hannity, Ann Coulter, or Bill O'Reilly talk
about the issue, I'm encouraged. While they may
dispute the details, they are also quick to emphasize
that if there is in fact a problem, there's also a solution,
one that can and should be turned to America's
advantage in a competitive world.

Technology? New Industries? Jobs of the Future?
Sorry, but that's part of the problem; not part
of the solution according to environmentalist
dogma.

And that's why I'm with Rush on this one.

What Happened To Toyota?

2010-02-13T18:03:00.000-08:00

It's another black eye for Japan, Inc.

In this case, it's Japan's "National Champion" global
automaker Toyota, Inc. which last year overtook a
weakened GM as the world's largest automaker.

The problems started back in early 2007, when reports of
sticking accelerators in certain Toyota models began to
filter back to Toyota's headquarters. But, as these incidents
were isolated and didn't affect the home Japanese market,
they were dismissed as minor and handled through the
warranty process. But later that year, there was a premonition
of problems to come when 2 million 2002-2005 U.S. market
Toyota Camrys were recalled to fix a seat belt assembly that
could detach from the car floor in a crash. This one was
caught early and handled relatively quickly.

But a year later came the real problems. Two million
2005-2007 Camrys sold in several markets were recalled
for sudden unintended acceleration, a problem ultimately
traced to accelerator pedals and throttle linkages that
became worn and would become trapped in the floor
mats, which themselves were poorly designed.

And now came the real problems. Two million more
Toyotas, this time including several models, have been
recalled not only for the previous "floor mat and pedal"
problem, but for problems with the electronic throttle
module. And, unlike the older models, these cars come
with electronic pushbutton starters - which means
if the car gets away from you, you can't shut it off.

And then finally, came the crusher. Toyota's flagship
product, the innovative 2010 hybrid Toyota Prius,
has been recalled for failure of its regenerative braking
system, affecting some 410,000 vehicles worldwide.
And this time, Toyota's luxury brand Lexus is also
affected, with its IS 250 hybrid recalled as well. To
cap off the embarrassment, this particular problem first
cropped up in Japan, where to their credit the Japanese
Transport and Trade ministries were instrumental in
alerting the U.S. and other markets to the extent of the
problem.

This, of course, has resulted in every global automaker's
worst nightmare - a complete halt to both production and
sales in the company's most important markets, while
engineers and safety experts inside Toyota and the U.S. and
Japanese governments feverishly search for solutions.

To my thinking though, something like this was bound to
happen sooner or later. While Japan, of course, has several
global automakers, including Honda, Nissan, and Mitsubishi,
none of these approaches the global scale of Toyota, which
manufactures not just in Japan but in the United States,
Brazil, India, Britain, and China as well. Adding
in countries where Toyota assembles cars from
partially built kits or has joint ventures to manufacture
other brands, Toyota either makes or assembles cars in
twenty different countries and sells them in a hundred
more.

As you might imagine, managing global supply
chains for so many far-flung operations is a huge and
expensive venture, a task that at Toyota was always
under top management scrutiny for cost savings. The
first step in streamlining operations and reducing costs
was to design components and subsystems that could be
used across several different models and platforms - a
common practice among automakers worldwide, but one
that was relatively new to Toyota.

Second, Toyota became a leader in outsourcing the
design, testing and manufacture of these components
to other manufacturers, in order to focus on its "core
competencies" in design and marketing. Many of these
companies in turn further subcontracted their
manufacturing to others, in order to meet Toyota's
demands for "lean inventories" and "just-in-time"
production.

What this means is that the typical Toyota vehicle
assembled in the U.S. may have only 51% U.S. content
(necessary to qualify as a "domestic" vehicle), and the
balance may come from not just Japan but Korea,
China, Brazil, Canada, and Mexico. Indeed, the final
Toyota product may have less than 50% original
Toyota-manufactured content. Contrast this, of course,
to Japanese-made Toyotas, where virtually all content
is Japanese - as prescribed by both law and custom.

And somehow in all the "co-ordination", "supply chain
management" and "global sourcing", Toyota's most
precious asset - its reputation for utter quality and
total reliability - got lost in the shuffle.

To be sure, remedial actions are the order of the day.
Reliable replacement parts are starting to arrive, and
some U.S. Toyota dealers are open around the clock
with help from Toyota to both repair customers' cars
and fix problems with dealer inventory. And Toyota
chairman Akio Toyoda, scion of the founding family,
publicly apologized both on Japanese national TV
and before a committee of the Diet - an unprecedented
loss of face for so important a figure of Japan, Inc.

The likely outcome of all this is that Toyota will, of
course, go on. But I wouldn't be at all surprised if
some of the remedial steps taken include a
"repatriation" of some manufacturing activities
and an "in-sourcing" of some component
design and manufacturing back to Japan.

And I don't think that this will affect overall
U.S. manufacturing employment for Toyota,
as the suppliers for the defective floor mats
and throttle parts, both U.S. companies,
do all their manufacturing in, of course, China.

Super Bowl XLIV - Who Dat? De Winners, Dat's Who.

2010-02-07T21:01:00.000-08:00

Super Sunday was today.

That great 44-year-old All-American tradition, Super Bowl
Sunday, is a big event here in Las Vegas.

Some 280,000 people descended on our fair city, to gather
in the sports books and cocktail lounges, cheer on
either the Indianapolis Colts or the New Orleans Saints,
drop a little cash in the slots or at the tables, and otherwise
have a good time and enjoy themselves.

But, as a Vegas local, I tend to avoid the otherwise
overcrowded and overpriced Strip as much as possible -
especially on Super Bowl Sunday, when both the crowds
and the prices go up dramatically. And, since this a
busy weekend for the casinos (and especially their PR
people), I felt obliged to decline a kind invitation from
my friend The Vegas Insider to attend the big VIP bash
at a certain major hotel on the strip.

I'm not exactly the kind of "high roller" he normally
would be working with on this busy weekend.

So, with the "better half" working today, I decided to
have a small group of friends over to the house to
watch the game. First item up is to prepare my share
of the chow. So, into the kitchen I go and an hour later
a huge pot of The Thinking Nationalists' Famous Chili
is bubbling on the stove, together with hot dogs, nachos
and three microwave bags of popcorn. Oh, and plenty
of liquid refreshment courtesy of Anheuser-Busch.

The door bell rings, and in come my friends with more
"liquid refreshment" and more snacks, and at 3:25
all hands are in front of the big screen TV to watch the
game.

Now, for those few of you who don't follow football,
the Indianapolis Colts were somewhat favored, and
this being Vegas everyone has a bet . Today's line
was Colts by five, with the over/under at 56-1/2.
And everyone was betting Colts.

But, even though Indy was the betting favorite,
everyone's heart seemed to be with the New Orleans
Saints - the "Who Dat?" boys. And that's typical
America. Americans love an underdog that shows grit
and pluck - and ever since Katrina, New Orleans hasn't
been shown much love lately.

The game opened in typical fashion with Indianapolis
getting a 42-yard Matt Stover field goal after holding the
Saints to three-and-out on their opening possession.
Then, after a fiercely defensive first quarter by both teams,
Peyton Manning found Pierre Garcon for a 19-yard TD with
0:36 left in the first quarter. After 1 quarter, Indianapolis
is up 10-0 and momentum seems to be going Indy's way.

But the Saints aren't the Aints any longer. They hung
tough, doing the only scoring in the second quarter on
two Garret Hartley field goals of 46 and 44 yards.
Halftime score: Indianapolis up 10-6. And that
elusive lady Momentum seemed to be changing sides.

The fireworks, though, started after the halftime show
this time. On the opening second-half kickoff, Saints
head coach Sean Payton made the gutsy decision to
open with an onside kick - something never before
done in a Super Bowl and only a few times in the regular
season. Drew Brees and company recovered, and took it
in for the score. New Orleans 13-10 and the joint was
rocking.

But, the game wasn't over. Moving this time on the
ground, Indy came right back and took back the
lead 17-13 on a 4-yard Joseph Addai plunge. The
Saints, though, kept it close with Garrett Hartley's
third 40+ yard field goal of the game. Third Quarter:
Indy up 17-16.

In the fourth quarter though, Drew Brees and
Da Boyz went to work, taking the lead 24 -17 on
a 2-yard pass to Jeremy Shockey in the right corner
and a disputed 2-point conversion to Lance Moore.
The crusher for Indianapolis, though, was Tracy
Porter's 74-yard INT return of a Peyton Manning
pass with 3:16 remaining.

At that point, though there was a second Mardi Gras
going on in the French Quarter, there were some
long faces in the group. But not me.

I had New Orleans and the points.

The Smell of Money - Learning to Trade Stocks

2010-02-04T20:00:00.000-08:00

Continuing Education is a wonderful thing.

No matter what you do for a living, the world is
changing so fast that if you're not keeping up with
developments in your field, you're falling behind.

And, even if a requirement for continuing education
doesn't apply to you, (say, if you are retired), you
should never pass up an opportunity to flex your
mental muscles.

So, having the benefit of a flexible schedule (one of the
good things about being self-employed), I decided to
enroll in a Professional Stock Trading course, taught
by a reputable broker with a trading floor here in
Las Vegas.

Now, I know what you're thinking. We've all heard the
story that the best way to make a small fortune in stock
trading is to start with a large one. It's a guaranteed way
to lose money. But, as the instructors make clear, you can
make money doing this if you do the following:

1) Take formal classroom training in trading, even if
you have professional experience in finance, accounting,

securities, or investments. This is different enough from
"investing" in both mindset and methodology that you can
get in real trouble real fast if you don't know what you're
doing. Fortunately, all of the reputable trading brokerages
(E-Trade, Scottrade, TD Ameritrade, Charles Schwab, etc.)
offer both classroom and on-line training (in most instances,
free if you open an account), as do many colleges and
universities. In my case, I am taking the course at the local
junior college, taught by instructors from Bright Trading and
Charles Schwab.

2) Make sure that any trading instruction you receive also
covers fundamental security analysis, such as calculating
earnings per share, P/E ratios, free cash flow, and so forth.
You won't necessarily be making trading decisions on this
information, but this information is critical in deciding which
stocks might make good trading candidates and which industries
to focus on;

3) The best way to learn anything is to learn by doing.
So, even if you have no experience in trading, start with
an imaginary account and go ahead and "trade" some
stocks according to what you've learned. Don't be surprised
or shocked if you lose money right out of the gate - that's the idea.
You want to make your mistakes now - not later when there's
real money on the line. Make a simple spreadsheet to track
your daily positions, and keep a log of what you trade.
You should also keep an informal "journal" of why you
picked each stock, what your objective was, and the outcome
when you exited the trade. This will give you a "feel" for what
actual trading is like and if it's for you;

4) Once you have a "feel" for what the trading world is like,
make sure that your instruction leads you to the development
of a Trading System that works for you and that you are
comfortable with. In developing a system, our instructors
stress that simple beats complex every time. One of the big
and expensive mistakes many novices make is developing a
system that relies on two dozen or more different indicators
as to whether or not to trade and when to enter or exit.
Even worse, they immediately sign up for expensive
monthly subscription services that promise to do this for
them. Our course stresses building reliable, simple systems
that are tailored to the needs of each individual and that you
don't need a Phd. in Statistics to understand;

5) Risk Analysis and Position Sizing in Terms of Risk is the most
crucial concept to absorb, whether you are a trader or a
long-term "buy-and-hold" investor. It's one of the first topics
we've covered in class, and it's stressed throughout. This issue
governs your entries, exits, and protective stops, and what to
trade as well;

6) A big part of having a profitable trading system is keeping
expenses down. In this internet age, there's no point in buying
information that you can get free. Yahoo! Finance and Google
can give you a wealth of fundamental and technical information
at no cost. Our instructors suggest that instead of buying
expensive newsletters and "tip" sheets, your money is better
spent on a regular subscription to the Wall Street Journal,
Barron's, or Investor's Business Daily. And for technical
analysis, when you open a trading account, you'll get a
Trading Platform that includes all the charts, graphs,
and indicators you'll need to make trading decisions,
and you'll enter your orders online right from the
platform. No need to spend a lot of money on a separate
charting service;

7) Finally, when it's all said and done, and you have a
trading system built, relax and have fun with it .....
especially during the trial phase before you invest any
money. It's informative, exciting, and educational.
Even if you ultimately decide not to trade or invest,
you'll be better equipped and better informed when
you do.

And how did I do this first week? Well, after starting out with
my imaginary $100,000, after eighteen trades (far too many
in the opinion of the instructor), by sheer luck I managed to
wind up right back where I started, with $100,000.

Did I make mistakes? Sure I did - I used the wrong indicator
for the wrong situation about six times, I traded out of good
positions too early twice, and some of my picks were
definitely of the "What Were You Thinking?" variety.
All rookie mistakes. But we'll improve - after all, if
you didn't make mistakes, there would be no need for
instruction!

Anyway, at this rate I'm in no danger of becoming a
one-man Goldman Sachs - or a Gordon Gekko for that
matter either. But, then, I'm relying on free, published
information - not the kind Goldman and the others pay
out good money for. And, without the ability to to "flash"
trade, I'm not peeking at the other guy's cards in this
poker game, either.

But, just as in poker, if you have system with rules and
stick to it, you'll come out way ahead of the guy who just
tries to "wing it" and bluff his way through.

Well, we'll see. Watch for future developments.

Ben Bernanke - Reappointed Without Enthusiasm

2010-01-31T14:14:00.000-08:00

As predicted in these pages last week, Fed Chairman
Ben Bernanke was reappointed. The Senate, however
grudgingly and unethusiastically, did its duty and
re-appointed him by a vote of 70-30.

The much-anticipated filibuster on the nomination
failed to materialize, and the motion for cloture on
debate passed easily. From there, the re-appointment
was easy.

Helicopter Ben has another four-year lease on the
Huey.

But, the re-nomination did not come without
warnings. Both Senate majority leader Harry Reid
and Minority Leader Mitch McConnell re-iterated
that we will be "keeping the Fed under close scrutiny"
as they voted for the re-nomination.

And, senator after senator stated their lack of enthusiasm
for the nomination during the vote. In fact, if you had
listened to the comments and nothing else, you would
have thought the nomination was headed for defeat.

But the reasons the nomination eventually sailed
through were fairly obvious.

First of all, there was no serious outside contender for
the job. "Boomlets" for Nobel Laureate Paul Krugman
and former Fed Chairman Paul Volcker failed to materialize.
Which meant, of course, that had the nomination failed,
the Fed would have been left in caretaker hands at a critical
moment in the nation's economic struggle, and the Senate
would have been held responsible.

Even more important, the people were not about to be
fooled. For as much as they might blame the Fed, the
Treasury Department, and Wall Street for the nation's
economic woes, they blame the Congress even more.

On issue after issue, The Congress has ducked, bobbed,
weaved, and otherwise completely abdicated its responsibilities.

On the bailouts for Wall Street and the
automakers, after the photo opportunities had faded,
Congress folded and gave these failed monstrosities
whatever they wanted.

On the "stimulus" package, The Congress so loaded
it up with pork and special favors that it surprised
exactly no one that it failed to accomplish its goals.
Saving the bloated paychecks and benefits of
overpaid state and local government employees
is not "saving or creating jobs" - neither is writing
in special favors and contracts for favored campaign
contributors.

And on the Administration's signature Health Care
initiative, creating a package that does absolutely
nothing for expanding coverage or reducing costs
hasn't exactly thrilled the public either.

And voting down the Bernanke nomination wasn't
going to change matters any. No matter how you
spin it, no matter how much we voters detest
Wall Street, The Heath Care cartel, or the cynically
disloyal transnational corporations, we detest
you critters in the Congress even more.

And we're going to turn out in great numbers this
November to let you know that.

Don't say we didn't warn you.

The State of the Union Speech - Something For Everyone

2010-01-28T19:57:00.000-08:00

It was the moment we've all been waiting for.

After what can only be described as a tumultuous first year,
President Obama delivered his first State Of The Union
Address, to what I am led to believe was a rapt national
audience.

Unfortunately, I missed the great occasion due to a prior
engagement (evening classes), and had to catch the repeat
on CNN later that evening. But by this time of course, both
the main stream media and the blogosphere were full of

commentary, running along the usual lines.

The Huffington Post, of course, was full of where The
Great One fell short addressing liberal causes du jour,
most especially health care and employment. Not to
be outdone of course, Human Events and the Fox
Network were also hitting the "too much big
government" and "not enough free market"
themes.

And I tend to agree with both sides. Not only
was there not enough emphasis on "traditional"
Democratic solutions, but there was almost no
mention of "free markets" or "free enterprise"
in the entire speech. And I found that somewhat
strange - every recent President, from Carter
through Reagan to both Bushes and Clinton has
paid ritual homage in the State Of The Union
address to the free market and free enterprise
miracle wrought by the American people.

But that's not what we heard from Barack Obama.
Rather, what we heard was what Arianna Huffington
called a "speech written by a focus group".

In other words, a little bit of Something for Everyone.

For those worried about jobs, there will be continuing
aid for those out of work, including assistance with
the COBRA program. Left out, of course, was any mention
of what would really help the unemployed - a national
jobs program coupled with real incentives to employers
to add to payrolls. Instead, there will be some money taken
out of the TARP program and re-directed to small business,
and some modest tax incentives for payroll increases - a
total of $30 billion.

Left out of the speech, of course, was that this is about
one-fifth the amount paid out by Wall Street in bonuses
this year.

For the "National Security" crowd, we will be out of Iraq
this year and we will pursue the Afghan effort until the
Afghans can be "responsible for their own security".
Nothing new there. And for the "Deficit Hawks" there
will be a three-year "budget freeze" on most discretionary
spending, beginning of course next year, "because that's
how budgeting is done".

On that one I'm underwhelmed. Defense, Medicare, Social
Security and Veteran's benefits are exempt, which means
that unless there's an economic miracle, everything that
the Administration will be relying on to "stimulate" the
economy will be frozen.

But, I'm willing to give the President credit for trying.
Austerity is about the only thing we haven't tried to
restart the stalled economy. However, I'm not optimistic.
It sounds to me as if the President is channeling Herbert
Hoover in 1931, or FDR in 1937.

That's the last time austerity was tried in the middle of a
recession or depression - and we all know how that turned
out.

But in the main, the speech was a mainstream,
middle-of-the-road statement. No earthshaking
developments - no great new headlines, no
great new initiatives.

It sounded more like the speech a cool, modern,
technocratic CEO might have delivered to an
analyst's conference call, acknowledging a
decline in earnings but cautiously optimistic
about the upcoming year. And that characterization
admittedly fits in with Barack Obama's style.

But, from the President of The United States, I'm
expecting a little more. I expect great themes and
great initiatives. They weren't there.

Maybe next time. After all, you've got three more years.