Thursday, December 24, 2009

Predictions For 2010

It's that time of year again.

Time when we shop till we drop, attend Christmas functions
and entertain visitors, and then collapse in a heap until
New Years!

In that vein then, with the closing of the old year and the
ringing in of the New, I'm offering some "Predictions"
for the nation and the economy for 2010.

I do want to emphasize, though, that these are strictly
my own observations, with no guarantee that they will
actually happen!

In no particular order, then, here are my fearless predictions
and prognostications for 2010:

1) The Stock Market continues its steady upward climb all
through 2010, with the Dow reaching 11,500 by 3Q 2010.
The S&P 500 will remain in a range between 1100-1200,
while the NASDAQ rises above 2500, and the Russell
2000 index approaches 800-850. As funds flow out
of fixed income into equities, gold will continue to
drop to the 940-960 range, as gold investors take
profits and redeploy funds into stocks;

2) Despite the rise in the stock market, fundamentals
of the real economy remain weak, with unemployment
approaching 11% by 3Q of 2010. Capacity Utilization remains
below 70%, as increasing orders for durables and inventory
rebuilding leads to increased manufactured goods imports
from China. A second wave of mortgage foreclosures hits,
this time concentrated in the "Prime" and "Alt-A" credit
segments. Boosting the trend are an increasing number of
homeowners with good credit but "underwater" mortgages
who decide to "strategically default", further depressing

3) Commercial Real Estate loans begin to default in large
numbers, as borrowers who have remained current on
their loans can no longer re-finance due to depressed
property valuations. As many of these loans are held
by local and regional banks, the number of bank failures
in 2010 will more than double to over 300;

4) The CityCenter resort and casino development in
Las Vegas, a monument to gaudy excess and optimism,
fails to attract additional visitors to Las Vegas, instead
cannibalizing established properties up and down the Strip.
Even unheard-of deals at prime strip properties fail to
boost the visitor count. After splitting off its profitable
Macau properties, MGM Mirage files Chapter 11 in 3Q
2010, unable to keep up its debt service;

4) Despite the travails of the real economy in the
U.S., the dollar continues to strengthen as financial
problems in the Eurozone come to a head. Greece,
unable to resolve its fiscal problems as sovereign
debt approaches 100% of GDP, is saved from default
by a combined ECB-IMF intervention, with Spain and
Ireland following suit shortly thereafter. All this
leads to a flight back to the dollar, despite record-low
interest rates and continued Fed money-supply

5) Due to a strengthening dollar and a linked yuan,
China's exports to the U.S. resume growth once again
as a recovering US economy means more orders for
China's manufacturers. A strengthening dollar also
boosts off-shoring of remaining US-based manufacturing,
and U.S. manufacturing employment falls below 10% of
total employment for the first time ever;

6) The Democrats face huge problems in the November
2010 elections, as rising unemployment and increasing
social distress puts voters in an angry mood. The
Democratic majority in the Senate falls to 53-47, as
key incumbents retire and Majority Leader Harry
Reid is defeated for re-election. Republicans, however,
fail to take over the House of Representatives as
intramural squabbling permits many previously
endangered Democrats to squeak through.
Republicans are helped, though, by a dozen or so
Conservative Democratic Representatives (mostly
in the South), who defect to the GOP. In all,
Republicans pick up thirty seats, increasing
Obama's woes and making compromise more unlikely;

7) A major TBTF U.S. bank actually fails, due to losses
in Commercial and Residential Real Estate and huge
losses in its credit card portfolio. However, because
the machinery for resolution is now in place, the bank
is quickly nationalized, broken up and sold, with
minimal impact on the general economy. In conjunction
with the Fed and Treasury, Goldman Sachs orchestrates
the entire transaction, thus cementing its position as
the U.S.'s most powerful financial institution;

8) Elin Nordegren divorces Tiger Woods, getting
a significant portion of his assets and $2m plus
per year in child support, although significantly
less than originally predicted in the celebrity press.
Tiger, seeing his financial position deteriorate, returns
to golf with a vengeance, entering 25 tournaments,
winning 13 (including two majors), and establishing
an all-time record for money winnings in a PGA season.
Golf's TV ratings explode, and endorsements come
flooding back, making Tiger once again the world's
highest-paid athlete;

9) Sarah Palin, with a huge windfall from "Going Rogue"
and lucrative speaking engagements booked all year,
decides not to run for President in 2012. However,
her continued popularity leads The Fox Network to
sign her to her own daily talk show. Her show becomes
a huge hit, becoming the new "Oprah" for an increasingly
disaffected Middle Class;

10) The continuing drift in the economy leads to several
new "Third-Party" political movements, uniting disaffected
populists with independents and libertarians. Despite
differing ideologies and beliefs, many of these movements
come together to challenge ballot-access laws in many states,
which give a virtual monopoly to the two major parties.
Early efforts focus around building a "unity" 3rd-party ticket of
Ron Paul and Alan Grayson for 2012;


We'll be back with more in January......

The Thinking Nationalist.

Monday, December 21, 2009

The Copenhagen Climate Follies

Mercifully, the Copenhagen Climate Follies have finally concluded.

After two years of painstaking negotiations, the
Copenhagen Summit - billed as the last, best chance for
the world's governments to finally get a Grip On Global Warming -
ended in farce, with plenty of grandstanding and finger-pointing
to go around.

Just by getting a look at the scene you could tell what was coming.

Those world leaders who didn't arrive by Government VIP
aircraft did so on the private jets of some of the world's
most powerful corporations, from there to be shuttled to
and fro by limousine, carefully kept away from the press
and the public.

But, "the public" was also in Copenhagen in force -
protesting the almost complete lack of progress by
the world's governments since the Kyoto Accords
of 1998.

But, as we've learned from The Global Financial Crisis,
the globe's elites are not going to get involved - unless
there's money to be made.

And, judging from the schemes floated at the summit,
there are plenty of ways for the Global Elite to continue
to plunder the rest of us.

Schemes like "Cap and Trade" and "Carbon Futures".
No doubt the Squid and the other investment banks will
be all over that. And "Carbon Taxes?' Just what the doctor
ordered for the recession-stricken populations of Europe and
the U.S. And of course, there are always plenty of "subsidies"
to be talked about - on the order of $100 Billion per year
by 2020 to poorer countries, to help them cope with
environmental degradation and the development of
alternate energy sources.

And how did this epic conference end? No Treaty, no
Binding Accord, but rather a three-page statement of
"glittering generalities", by which we will kick the can
down the road for another few years, and hope things
don't get too bad in the meantime.

Well, what about it? Just this - Global Warming is a Fact, and
in my opinion whether it is Entirely Anthropogenic or not
is immaterial.

Because the truth is, we live in a relatively narrow optimal
climate and temperature envelope. If we were to hold
Mean Global Temperature Increase to 2 degrees Celsius
over the next twenty years, we might have a chance on
stabilizing things, and even reversing the long-term trend.

But, we've got to be careful here - any secular long-term
cooling trend of 2 degrees C. or more, and we're headed
toward a Little Ice Age in as few as two hundred years.

The bottom line is this - human existence depends upon
maintaining long-term mean global temperatures of
between 28 and30 C. Any higher or lower than that,
and you've got problems.

And how did the Climate Follies address the issue?
By alternately ignoring it and protesting it. The
"Emerging Markets" nations, seeing their low-wage,
low-regulation advantage over the advanced countries
about to be regulated away, stonewalled.

China, which accounts for an astounding 44% of coal-derived
greenhouse gas emissions, said it will continue to build
coal-fired power plants, as it "studies" the issue. India
also deferred action. Brazil, which has contributed hugely
to the problem though decades of deforestation, will tackle
the problem - if it gets subsidies from the rich nations to
do so.

So what are we in the U.S. to do? I would say that until
the U.N. Climate Conference can get better organized,
maybe we should just do what we are already doing -
moving gradually away from petroleum-based motor
fuels, getting away from coal for power generation, and
moving toward natural gas, renewables and (yes)
nuclear power for the long term.

Even de-industrialization and offshoring have helped -
by dismantling our industrial base and shipping it
to China India, Korea and Mexico, we've made our
industrial pollution problem someone else's.

Remember, it's better to be unemployed, poverty-stricken
and environmentally pure than otherwise.

Who says mass unemployment can't benefit somebody?

Look for our "elites" to be telling us that around
election time, when we ask about re-industrialization
and "onshoring" jobs back to the United States.

"Can't be Done" - they'll say. "Global Warming" and all that.

Really? Well, I suppose we'll just have to make things a
little warmer for you.

What's the "Carbon Footprint" of Pitchforks and Torches?

Saturday, December 19, 2009

Health Care Reform: Are We There Yet?

It seems to have taken nearly forever, but at last the Senate
seems ready to move on Health Care Reform.

After thirteen straight hours of negotiation with holdout
Democratic Senator Ben Nelson of Nebraska, it appears the
Senate's version of Health Care Reform is ready for a final vote.

After reconciliation with the House version, the plan is to
present this to President Obama for signature immediately
after the Holiday recess.

But, after considering the final product of all this effort,
I'm beginning to wonder if this whole exercise was
really worthwhile.

To be sure, there are some nominal reforms in the bill.
Health care coverage will be extended to some thirty million
people now uninsured. Health Insurance companies will no
longer be able to deny coverage for pre-existing conditions.
Nor will they be allowed to deny claims for illnesses contracted
while covered. Annual and lifetime caps on coverage will
be eliminated, caps and ceilings will be put on premiums,
and premium subsidies will be made available for lower-income
workers to afford coverage.

Well, on the surface it does sound like an improvement.
But, as usual, the devil is in the details. And, after studying the
details of this bill, in my opinion it would be better if it did not pass.

Let's take a look at the first so-called "reform" - the extension
of coverage to the thirty million currently uninsured.
This will be accomplished by "mandating" that these individuals
purchase coverage, or pay a fine.

Now, when it comes to a mandate, I'm all in favor of
"mandating" that people be covered by such things as
social security. Social security is a universal coverage
government benefit program, and the premiums for it are
handled through the tax system.

But I have a real problem forcing people people to spend
after-tax dollars on private health insurance that is subject
to no meaningful cost controls or competitive constraints.
That provision, however desirable it might be, may not survive
the legal challenges it will undoubtedly attract from conservatives.

But wait - aren't there other provisions in the bill that we might
consider reform? How about the ban on denying coverage for
pre-existing conditions?

Well, let's see. As written, the bill contains no fines,
penalties, or enforcement mechanisms to punish insurance
companies wrongfully denying coverage. That means that the
insurers will "handle" pre-existing conditions by raising
premiums so high that no one would sign up unless one
consented to "exclude" the pre-existing condition.
To my mind,that's not reform.

The same situation applies to lifetime and annual "caps"
on coverage. No enforcement mechanisms - only vague
statements of intent. You don't have to be a rocket scientist
to figure out how the insurance companies will get around
that one. The same thing applies to the ban on dropping
coverage once you get sick.

Without enforcement - and the regulatory and
administrative apparatus to support it - nothing will
happen except the Health Care Cartel will gain thirty
million additional customers at whatever prices it
chooses to charge.

Now, let's look at what's not in the bill. First of all,
No Public Option. Without a universally available Public Option,
the Health Cartel will face no competitive pressure and no
restrictions on its profitability.

And no "early eligibility" for Medicare either. This modest
reform, first proposed in these pages three months ago,
would have dropped the eligibility age for Medicare from
65 to 55 under certain circumstances.

This reform I felt made a lot of sense. It would have removed
many of the chronically ill (and those likely to fall ill), from
insurance company rolls and thus actually helped insurance
company profitability. In my proposal, I would have dropped
eligibility immediately to age 59-1/2, and gradually extended
eligibility downward to 50 over a period of years.

This could have been done, championed as a major reform,
and set the stage for the eventual adoption of the only reform
that makes sense for an advanced country - single payer,
universal coverage. But what happened? It was floated up
only long enough to get rid of the public option -and then
it disappeared.

And cost controls on pharmaceuticals? That didn't even
make it to Congress - it was killed in a private,
campaign-contribution laden agreement between the
White House and the Pharmaceutical

To sum up, then, about the only thing in this bill is
thirty million new customers for the Health Care Cartel - and
nothing else that can't either be bargained away in the
House-Senate conference or dropped later.

No wonder Wall Street - that other great bastion of the
people's well-being - sent the stocks of the Health Insurance
and Pharmaceutical companies to 52-week highs.

And that seals it for me. If Wall Street thinks that this is a
great idea, it almost certainly isn't good for the country.

Sometimes, no deal is better than a bad one.

And this is a bad deal for the American Public. It contains
no meaningful coverage or cost reforms. What we'll wind up
with is less care, more costs, and more profit and bonus dollars
in the hands of an undeserving CEO class, wrung out of an
impoverished and increasingly destitute and desperate

Mr. President, on Health Care Reform, We Aren't There Yet.

Scrap this bill - and start over.

Sunday, December 6, 2009

The New Unemployment Numbers: Green Shoots?

Are those "Green Shoots" finally poking up through the snow?

According to the Bureau of Labor Statistics, we may have finally
turned the corner on Unemployment.

In its monthly statistical report released Friday, the
number of "jobs lost" in November was a mere 11,000,
while the overall unemployment rate declined from
10.2% to 10.0%.

Judging by the response, the mainstream media and
the financial Powers That Be were falling all over themselves
in self-congratulation that the "Worst is Behind Us".

The irrepressible (and in my mind completely irresponsible)
Jim Cramer was celebrating the end of the "Jobless Recovery",
along with the usual self-serving promoters and shills in the

The Administration also took this as signs that
"its policies are working" and started thumping the tubs
for its "Employment Summit" later this week.

To all of those with a stake in the status quo, things
couldn't be looking better. And those with an immediate
stake in some economic good news, like embattled Fed
Chairman Ben Bernanke, started grasping at this
straw with the hope of a drowning man clinging to driftwood.

But the question does remain - have we turned a corner?
Or is this merely a statistical aberration? Or, as the conspiracy
theorists have it, have these numbers been doctored to achieve
a certain outcome?

My take on the above: No, Yes, and Maybe.

On the first question, "have we at last turned the corner?"
my vote is No.

To begin with, this remarkable decline in the rate of job
loss is unconfirmed by any other statistical measure.
Hours worked for both manufacturing and non-manufacturing
employees is up from 33.0 hours per week to an anemic 33.1 ,
well below full employment numbers and well within
the range of statistical error.

Other measures of economic activity - rail and trucking carloads,
inventories, and new orders - are flat to slightly down.
Thus, this remarkable piece of "good news", while welcome,
has to stand as unconfirmed by any other measure.

In fact, if you want to take a very pessimistic stance and
drill down a little bit, the complementary statistics for
unemployment are as dim as ever. The percentage of
"counted" unemployed that have been unemployed longer
than 36 weeks (9 months) is 38.6% of all unemployed - the
highest number in 25 years. And while the number of those
unemployed for less then 9 weeks has dropped
significantly (from 15.3% of total unemployed to 11.6%)
over the last three months, the other Quartile measurements
of unemployment duration have been growing.

What does this mean? It means that people, once unemployed,
are moving to the ranks of the long-term unemployed - and
staying there. This is also also confirmed by the broad measure
of unemployment U6, which counts the unemployed,
the discouraged, and the crucially important "unemployment
effect of reduced hours" (i.e. for every four people cut back from
40 hours to 32, add one to the "currently unemployed" head count).

That number remains a depressing 17.2%.

Which brings up the second question - is this miraculous
Unemployment figure a statistical aberration?
I think we can safely say Yes.

To begin with, any raw count of U3 (the official
unemployment rate), has a Mean Statistical Error
of +/- 100,000. This number has remained very consistent,
even adjusting for its dependent variables labor force size
and labor force participation rate. So, allowing for error,
the true number could be anywhere from -11,000 to -111,000,
depending upon sample size and methodology, both of which
the BLS is free to alter at any time.

Further, when you take into account Seasonal adjustment,
which normally adjusts LFS (labor force size) and LFPR
(labor force participation rate) upward to account for seasonal
Holiday retail and shipping employment, this purportedly good
report is skewed further.

So, to confirm whether or not this "good news " is real,
I'm going to look at a proxy for the BLS numbers - The ADP
payrolls report, which measures an approximation of U3 through
payroll rather than household data.

The ADP numbers for November? Job Loss = -169,800
(still dismal, but improving), with a Holiday Seasonal
adjustment of +52,000.

Conclusion? Statistical and seasonal aberration most likely,
with all numbers within allowed statistical error.

Finally, we come to the "Conspiracy Theorist" outlook,
most frequently bandied about by websites such as
Zero Hedge, Naked
Capitalism, Calculated Risk, and others.

Basically, the "conspiracy" meme runs like this - The
Administration, Congress, The Fed, and the TBTF banks
(most prominently Goldman Sachs), were going to drastically
cook the November unemployment numbers to mislead the people.
And on the surface, there's some justification for this.

The forecasters were predicting that retailers were facing
the worst Holiday retail season in a generation. More retail
chain bankruptcies were predicted for the first quarter of 2010,
with all the attendant negative fallout for employment and
commercial real estate.

That's not what the Powers That Be want to hear, goes
the theory, so watch for an "October Surprise" - namely,
unemployment numbers that would be miraculously
optimistic, in order to goose consumer spending.

Did that happen? In my opinion - Maybe, but only because
this relatively meaningless statistical improvement has
been flogged beyond all credibility as being "positive" by
mainstream media types who should know better.

Even Goldman Sachs - the hated Squid - put out its
November expectations as an improving
(but still negative) -101,000, with a qualifier to not
expect much improvement in the first or second
quarters of 2010.

This, in my mind, is consistent with the other data.

So - in conclusion? Things are still bad, but slowly getting
less so, and the economy will continue to bounce along
the bottom for the next several months.

Now that is not good news, for the politicians especially - but
we'll cover that later. And as for the "Green Shoots?"

Relax, they're not here yet.

Saturday, December 5, 2009

Tiger Woods: Crouching Tiger, Hidden Tomcat

It's been an interesting week for followers of Celebrity

This time, it's golfs' Mr. Clean - Tiger Woods - who's
caught up in the latest "Who's been sleeping with who"
media frenzy.

Tiger, my man, what's up with that?

First of all, there was the mysterious car crash
outside your house at 2:30 am.

Next, there was the ambulance ride to the hospital

to be treated for cuts, bruises and lacerations.

Finally, the refusal to talk to the authorities, until
your PR and legal people could damp things down.

Tiger, for a professional athlete, this whole thing
has been a PR nightmare and a potential legal and
financial disaster. For someone whose judgment
on the golf course has been so good, this is the kind
of misstep we might expect of a Tour Rookie.

First of all, if you're going to Tomcat around,
you take some basic precautions.

And one of the first ones is to NOT have your
girlfriends on the cell phone speed dial.

That's how Elin found out. She went through
your phone and found Rachel, Jaimee and Kaliqua.

Next, she hired a "Private Detective to the Stars"
and found out quite a bit.

Like you had Rachel flown out to Australia for the
Australian Masters, and that you later sent her on
to Dubai, of all places, with some cash for her time
and trouble. She also found out that you'd been seeing her
for quite some time, and that you've paid her over $ 1m
for her time and silence.

And just who is Rachel Uchitel? A thirtyish sometime
model and professional bicoastal party girl, previously
linked to Derek Jeter and Manny Ramirez.

Next, she found out about Jaimee Grubbs, a sometime
cocktail waitress and medical marijuana dealer from LA.
Seems she's about to cash in on her fifteen minutes of
fame with a million-dollar tell-all to the tabloids and
a nude photo shoot.

And then, there's Kaliqua Moquin - a statuesque Las Vegas
nightclub hostess, well known as the "Diva" of Las Vegas'
overpriced and under-regulated nightclub scene. She's
been all over the media with stories about champagne and
cocaine-fueled bacchanalia on your very frequent
solo visits to Las Vegas, where, according to her ,
you've also dropped quite a bit at the tables as well.

And her former boyfriends? Rappers Jay-Z, Li'l Wayne
and Eminem.

PGA Tour, meet Da Hood.

Wow - sex, drugs, and gambling. No wonder Elin took a
3-iron upside your head before you tried to get away
in the Escalade.

So, now that's its all out in the open, what do you do?
You need to take charge.

First of all, you should talk to your off-season friends who've
been caught up in the same thing. Guys like Kobe Bryant
and David Letterman.

Kobe will tell you it will not be cheap. Vanessa got $5 million
in cash upfront and a large upgrade in the prenup. Letterman
also had to fork over to the wife big time. And since Elin has
already talked to her friend Vanessa Bryant about how to
handle things, you can expect to pay up several million
immediately, and upgrade the pre-nup as well.

Hey, it's par for the course - don't complain. And since the
thrashing by Elin's 3-iron was nothing compared to the
world-class ass-chewing you got from your own mother,
carrying on about shame, embarrassment and loss of face,
you need to make right with Wife, Mother, and
Mother-In-Law (all of whom live with you - yikes) and
then get your story out in a friendly forum.

And I know just the guy. You know him too.
You need to call Jim Rome and either go on his
radio show (for a whole show including call-ins)
or go on ESPN's
Rome is Burning.

Romey has been all over this all week, but mostly
in a sympathetic vein.

So break off a call to Jay Stew the phone slap, and
go on the show. You've been in The Jungle before,
so you know what to expect. Tough love - but love

And next season, be all business. Get those majors.
And since I expect Elin, your Mother, and your
Mother-In-Law to be "chaperoning" you on tour,
just suck it up and take care of business.

Both your game and your life will be the better for it.

In the meantime, here's a couple of things from
YouTube for my reader's enjoyment: