Loose Ends... Vol. XXX

This week we celebrated the birthday of Abraham Lincoln. I intended to do significant research this week and write down some thoughts regarding Lincoln's presidency. I'm going to put this subject aside for now; however, I would like to share a few thoughts (somewhat disconnected).

Lincoln seems to be quite the skilled politician. He was our President during a very difficult time in history. Slavery is, of course, deplorable. Lincoln navigated through the issue as a politician. He is probably over-glorified. The act of ranking our Presidents is not necessarily bad, but it serves to create hero-worship. This has led to an enormous increase in executive power which is antithetical to the design of our country. Further, the Civil War reflects the conflict of State's Rights versus Federal power. When is secession acceptable? Did Lincoln go too far in asserting power to hold the Union together?

I know those are random thoughts, but that's all I've got on the subject for now.

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Judd Gregg (R-NH) has withdrawn his designation as Secretary of Commerce. This pick seemed sketchy from the beginning. Obama will have to go back to the drawing board again - he's 0/2 for this position.

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I don't have the details immediately available here, nor a good link for the readers on this... but, Indiana is considering a statewide smoking ban. I don't smoke (except about once a year), so this won't impact me personally. But, this is an affront on individual liberty and personal responsibility.

First Update On S&P Forecast

One month ago, I provided my predictions for the S&P 500 which can be reviewed here. According to data from S&P (available here in Excel), with 85% of earnings reports in for Q4 2008, the year did not end well. No surprises there. The estimated earnings for the S&P is coming in at $5.77. That puts the earnings for 2008 at $55.37. That is about $10 less than what was forecast for 2008 just one month ago. The current estimate for 2009 is $67.55. One month ago, I was predicting a range of $55-$60 while the S&P was reporting a bottoms-up forecast of $81.80.

While the market had a rough month in January, it did maintain levels above the lows set on November 20th. So, my first prediction milestone, Valentine's Day, has come and gone without new lows. However, I still think we are well on our way to my target range of 600-640 based on the earnings estimates. My predictions from just one month ago have already turned out to be much better than what was provided by S&P. I think it could get uglier than I thought.

The following chart shows the quarterly breakdown of earnings with annualized totals. The values from Q4 2008 on are estimates (from S&P).

Notice the optimism still coming from the estimates beginning in Q3 of this year. In fact, the rolling 12-month estimates throughout this year are near my target range (mostly due to the horrible Q4 2008 numbers). I still believe that the earnings will come in lower than these numbers for each and every quarter in 2009. I also believe that we will see the P/E ratio decrease during the same time.

The Senator From Massachusetts

From the floor debate in the Senate on February 7 regarding the American Recovery and Reinvestment Act:

Incidentally, let me share with a few of my colleagues why this is sort of this old ideology versus new. The Senator talked about the tired ideology of the past. What is it? Well, I think today Michael Steele, the new chairman of the Republican National Committee, made a statement on behalf of the Republican Party. He said:

For the last 2 weeks, we have been trying to force a massive spending bill through Congress under the guise of economic relief.

Well, we are having votes. This is a democracy. We are not forcing anything. We are trying to get the job done because there is an urgency to getting it done.

But then he says:

The fastest way to help those families is by letting them keep more of the money they earn. Individual empowerment, that is how you stimulate the economy.

That is a big ideological/philosophical difference about how you most rapidly stimulate the economy. Let's think about it for a minute, the individual empowerment. OK, we turn around and we give every family in America the great big tax cut that the Republicans are talking about. Here is what he says: We want to give--the first 16,000 bucks you make, you are going to be taxed at a lower percentage.

Terrific. We lose revenue at the Federal level that we could put into schools, fire, police, education, energy investment, investment in airports, rail, all of those things for which we do not have enough money. But we give it back to the people.

Then he says: They will go out and buy things. They probably will. Some of them may save it. What are they going to buy? Is there a guarantee they are going to go out and buy energy-efficient materials? No. Is there a guarantee they will go out and buy an American car that is a hybrid, that actually does better? No.

They could go out and buy a car made in China or Japan or Germany. That does not help us a lot. Or what if they pay off their credit card bill because it is so big that they need the money to pay the bill? That is just paying for past things already purchased, for services already given. It does not stimulate the economy. Please. And if they do have some money to invest, there is no guarantee they will choose to invest it in the United States of America. They might think it is much better to invest it in some international mutual fund that is investing in a country that has a better economy right now.

So that is a tired old philosophy. That is what we did in the 1980s and many of us opposed it. I voted against that tax cut. You know what. We took the deficit of this country to an unprecedented level, crowding out the private marketplace in terms of borrowing, and we did not invest in the things in which we needed to invest in the country.

From thomas.loc.gov

These are the words of John Kerry (D-MA). He does not trust you - the average American. He does not believe that you - the average American - are smart enough to manage your own money. He does not think that you - the average American - have any idea as to what is in your best interest.

No. He believes that 535 members of Congress (or at least the 311 who have a "D" after their name) are smarter than you. He believes that they know what's best for you. He believes that you should not spend your own money...

In the immortal words of Owen Hart: "Enough is enough and it's time for a change."

Loose Ends... Vol. XXIX

Ok. First the good news: I am not traveling this week - my trip was canceled. So, I will be writing and posting this week. The bad news: I am more tired than usual on a Sunday night. There are several topics which I was planning on writing about, but I have been pretty busy all weekend.

A few quick thoughts (without the benefit of links if you care...)

Judd Gregg (R-NH) as Commerce Secretary? I first heard about him from a documentary about an old lady running for Senate against him. He seemed a bit slimy then, but that was the intention of the filmmaker. But, I have come to dislike him more over the last few months as he has been an unapologetic supporter of the Wall Street bailouts. There's a lot more to this story, but the one thing that irks me the most is that there is apparently some sort of deal which has been reached so that the Democratic governor replaces him with another Republican in the Senate. I don't like "deals".

The Senate is still debating the stimulus package. Obama is going to use the bully pulpit tomorrow night on national TV to garner public support. This is not yet over, but it will pass. It is an a"bama"nation. ;) - sorry for the bad joke.

There's so much more to talk about, but I have to get some rest... Until next time...

Groundhogs in Congress?

This is something I've wanted to write about for a long time now but I had wanted to take the time to do some research; well, I've not had enough time to really "research" and was prompted earlier in the week to write something about this after seeing some of the Senate floor debate on the stimulus bill. Maybe this is just a weird pet peeve of mine but I really get angry when watching House and Senate floor debate or speeches (of course, most normal people don't watch these at all I suppose) and see the endless parade of silly, pointless charts and signs that congressmen use as "props" when speaking.

For a long time, I've wanted to try and find out just how much the government spends on producing all of these giant charts in both materials/printing and labor to design them. I suppose that compared to other types of government spending, this would be a drop-in-the-bucket so to speak but it seems just so wasteful and ineffective. Often, the signs/charts are simply comprised of large amounts of text that are kept up on the easel for so short of a period of time that no one would be able to read it, and this is apart from the fact that the text would most certainly be too hard to read from a distance. I am constantly wondering why they don't just invest in a nice projector and screen, a few laptops and some laser pointers and learn how to use Powerpoint! This would certainly save tons of ink and cardboard at the very least. What gets me the most though is how such a large proportion of these charts are either very poorly designed (to the point that they are laughable and thus completely ineffective) or just plain silly.

Here is my example from earlier in the week--Senator Chuck Grassley, R-Iowa, was giving a speech on the Senate floor about his opposition to the economic stimulus package. I had it streaming from C-SPAN on my computer but was not paying full attention; I happened to glance up a minute or two after Sen. Grassley had started speaking and managed to take the following screenshots:

Yes, a cartoon drawing of a groundhog followed by Bill Murray from the movie "Groundhog Day" in the scene where he abducts the groundhog to "free' him (the groundhog appears to be steering the car in the photo). Granted, Sen. Grassley was somehow using a groundhog day analogy in relation to the stimulus but c'mon? Not only are these charts just silly, but they were only up on display for 30 seconds at most. I wonder what happens to them afterwards...does the government have a big storage area for these things where a congressman can send an aide to look for a picture of a groundhog to use in a speech? Do they get thrown away? Recycled? I'd really be curious to know. Here are a few others, just for fun. I could find a million others...



This one was used by Representative Peter DeFazio, D-Oregon, during a 1-minute House floor speech on offshore drilling on September 16, 2008. He was using this picture to show President Bush with his Saudi Arabian "buddy," King Abdullah.

Here's one from Senator Byron Dorgan, D-North Dakota, used in a speech about the lack of transparency from the Fed and Treasury about the first bailout. Toward the middle of the speech, he used this poster for about a minute to compare the "old" economy to a house of cards with, literally, a house on top to stand for the mortgage crisis that triggered the rest of the house to fall down.

What Is Going On Here??!!

I've become convinced that in order to be selected for a high-level position in the U.S. government, you must check the yes box on the candidate questionnaire (yes, I know this doesn't really exist but I think you can follow me) when it asks "Ever engaged in tax evasion?" Today, President Obama's choice for the positions of both deputy director of the Office of Management and Budget and the "chief performance officer" for the entire federal government, Nancy Killefer, withdrew herself from consideration due to personal tax issues resulting from neglecting to pay unemployment taxes for household help during 2005 and 2006. After Ms. Killifer failed to make the required payments for a year and a half, the IRS placed a lien for $946.69 on her home in Washington D.C.

Hey, I'm starting to sense a pattern here!! Now-confirmed Treasury Secretary Timothy Geithner neglecting to pay $35,000 in self-employment taxes. I actually just started here to write a statement about the nominee to be the Secretary for Health and Human Services, Tom Daschle, and in the process of searching for a citation link have discovered that just about an hour ago he has also withdrawn his nomination because of his tax issues ($120,000 in unpaid taxes).

I just don't get it--am I the jerk here? I don't agree with the current U.S. system of taxation nor do I enjoy giving the government my own money so it can spend it on stupid things, but I have no interest in being charged thousands in fines and penalties or even thrown into jail for failing to do so. It seems like these high-level political functionaries have no such qualms and are content with being willfully dishonest (no, I don't believe any of their "it was an honest mistake" rubbish) up until the last possible second, when they are forced to act apologetic or else be denied their plum government position. It's really disgusting. I suppose there's something to be said for the fact that these nominees withdrew themselves but I can't help but assume that it wasn't because they truly felt unfit after some reflection but rather because they didn't want to be grilled in confirmation hearings.

This sort of blatant disrespect, along with years of similar situations, leads me to what seems a logical conclusion (if a bit of an exaggeration) that the people actually involved in our government do not take paying taxes seriously. I then begin to wonder why I even bother; why should I continue to dutifully pay my taxes so that the government can toss it immediately out the window, when so many of their own don't bother? Yeah, it's easy to cook up $900 billion "stimulus" bills using taxpayer funds when you yourself aren't putting in what you should. It's just this kind of idiocy that really makes me honestly consider tax resistance. This reminds me of a Latin quote that I heard some time back, I can't remember where: "Qui vult dare parva non debet magna rogare." Translation: "He who wishes to give little shouldn't ask for much."

I think it's kinda funny how at the very end of today's press conference announcing Judd Gregg as President Obama's choice for Commerce Secretary, a reporter shouts a question to Obama about why his nominees seem to have so much trouble paying their taxes. Check out the last 10 seconds of the video.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Loose Ends... Vol. XXVIII

I don't have a lot to talk about tonight. It's getting late, and I'm getting tired. I'll be traveling the next two weeks, but I'll do my best to check in and keep posts going...

This week, the Bureau of Economic Analysis released the statistics on GDP for the last quarter of 2008. GDP declined in the U.S. in both real and nominal dollars. It was a bad quarter. I am closer to formulating some alternate measures to the GDP - that will be the subject of some upcoming post. In the meantime, it is important to remember that politicians and economists use GDP as the key measure of "the economy". GDP is essentially spending. If we spend more, then GDP goes up and politicians can claim success in "growing" the economy.

Stimulus, spending, multipliers, ... all of these things are aimed to grow GDP - which, as you may recall, according to Okun's (so-called) Law, is linked to unemployment. These two simple measures have the eyes of Washington. So, as we watch the Senate debate and edit the American Recovery and Reinvestment Act, remember that spending - even when we don't have any money or when the spending produces nothing - will be the key measure of success.

If the government borrows money to pay someone to dig a hole and fill it up... unemployment will decrease and GDP will go up. I hardly see this as economic growth.