Archive for April, 2008

Run, Don’t Walk To The Voting Booth

April 10, 2008

You hear them all say it, get out and vote, even if you don’t vote for me, just do it.  Both the Republicans and Democrats run huge “get out the vote drives”, but the truth is they only wish to get out the people to vote that will vote for them.  The party that can get the most people out who are likely to vote for them will win, and that is the name of that game.  It has been said that if you were not a liberal in your youth you had no heart, but if you are not a conservative in your maturity you have no brain.  Well that pretty much sums up the parties game plans.


The Republicans target those who have something to loose if the Democrats get in power, the rich and those who would like to be rich, as well as the Traditionalists and Constitutionalists.  They, for the most part base their argument on logic and the pocketbook.


The Democrat’s “get-out-the-vote” effort focuses on the young, the high school drop-outs who can’t even read (thinks to the progressive school system they have been able to entrench), local small-time criminals, homeless people, illegal immigrants (as in the California representative election in Orange County a few years back) , neighborhood thugs and even a few of the dearly departed (as in the Ohio election four years ago).  They base, for the most part,  their argument upon feelings.



They focus their entire platform upon a collection of small minority groups seeking special consideration and representation, the black vote, the gay vote, the 3% atheist vote, the 4.5% unemployed vote, the 2% illegal alien vote, and those who want free health care. Combined, this is their new constituency. Wonder why?  Well these are America’s most politically ignorant voting blocs. It is a collection of voters seeking special consideration, which them easy to pander to, because, unlike their idol JFK, instead of what they can do for their country they are more interested in what the federal government can do for them.


The Democrat Congress passed the National Voter Registration Act (NVRA) in 1993 to easly registers those most likely to vote for them. In addition to law’s well-known “motor voter” provision requiring voter registration to be offered at motor vehicle departments, Section 7 of the NVRA requires states to offer voter registration at all offices providing public assistance benefits. Specifically, offices administering Food Stamps, Medicaid, TANF, and WIC must provide the opportunity to register to all individuals applying for, recertifying, or changing their address with respect to benefits.


The people who vote Democratic these days are in large part people who are attempting to vote themselves either monetary or legislative favors. The Democrats can easily buy these votes with carefully targeted promises that will be paid for by those who tend to vote Republican.  They have the Union Leadership in their back pocket but much to their chagrin not all union members.  They have a lock on most schoolteachers because of their desire to impost their ideas of what is right by fiat, they do it in the classroom and feel that their government should be able to also, as long as it is what they like, besides, the Democrats are always pushing for higher wages for them.


The call of the Democrats to think progressive is nothing more than an disguise attempt to get people accept the ideas and principles of Karl Marx, the ideals that have failed over and over around the globe leaving America the last remaining super-power, they want to use as America’s guiding light.


It’s now considered a progressive idea to reduce America’s power and status to that of all other world’s nations, and put our power in the hands of the UN, in the name of peace. It is now considered progressive to lay down our weapons and accept peace through socialism. Capitalism, once the great evil that brought down the Marxists abroad, is now it is the great evil among many American voters as well… and they all vote Democrat.


Recession 2008?

April 9, 2008

The economy is again at the top of the Democrat’s war cry. We are on the precipitous of another disastrous recession, the housing market has fallen into the deepest doldrums it has been in since the Great Depression, and now 80,000 jobs have just evaporated. Now keep in mind that the ones who are crying the loudest about the economy’s lackluster performance are the very ones who complain the loudest about Bush’s refusal to get on board with the Kyoto protocol.  

This agreement “called on industrial nations to cut heat-trapping emissions to below 1990 levels by 2012.” Heat-trapping emissions, now ain’t that just lovely? What that really means is a cut back in energy consumption, energy that runs plants, factories, trucks, trains or, in case you cannot see this, everything that our economy runs upon. You think that this little bit of a slow down it worrisome then you really do not want to contemplate what the Kyoto protocol would be doing to our economy had we tried to implement it. 

Just what is a recession anyway? No it is not a slow down in the economy’s growth, it is defined as any two consecutives quarters (six months) of negative growth of the Gross Domestic Product. It is the receding of economic progress that we call a recession. In the Carter years, because of the long period of very slow growth a new term wad coined, flagnations, to describe an economy that was neither growing nor receding. 

There has been four U.S. recessions in the past 30 years, they have occurred on the average every eight years. The last recession we experienced was from March 2001 to November 2001. So, statistically we are due for another recession in the near term. But please remember the warnings all the brokers give you when trying to sell you on the growth potential of a particular stock, the very last thing in their prospective says, “Past performance are not indicatives of future results.” In the last reported quarter the economy’s growth was an annual rate of 4.5 percent. 

What then, you ask, about the 80,000 jobs that just went poof in March? Is that not a sigh of the economy dieing? On the face of it, it does seem like it is a very bad indicator, and surly not good for the one’s whose jobs went the way of the dodo. That is if you have not been paying attention to what is going on with the immigration issue. 

They are two surveys that track employment in the US, one of employers and the other of households. As this second survey does not fit the picture which liberals wish to draw, it has not been reported, but you can look is up in the Government list of Statistic Abstraction if you a mind to.  

In the Household survey total employment fell 24,000 (-0.02 percent) from April, Hispanic employment fell 132,000 (-0.65 percent), and Non-Hispanic employment: rose 108,000 (+0.09 percent). Do you not see a picture here?  

The Feds have finally started cracking down on both the illegals that migrated to this country for work, and the employers who hire them without legal documentations. Consider what is happening in Arizona, the illegals are leaving in droves, many back to Mexico, and when they walk away those jobs disappeared with the workers. Okay 80,000 illegals jobs disappeared. Bad for the economy? It surly will drive wage pressure up, bad for employers, good for workers. 

Now the other big boogeyman in the room is the housing market and the mortgage melt down. This is another classical example of unintended consequences of government interference. The idea was good; get more minorities into homes of their own. Who could arguer that this was a bad idea? To this end Fannie Mae and Freddie Mac – announced they have linked up with the NAACP to help more blacks, Hispanics and other minorities become homeowners. And set aside lots of money to help bring this about. As a results of all this the overall U.S. homeownership rate increased from 64 percent in 1994 (about where it was since 1980) to a peak in 2004 with an all time high of 69.2 percent. 

The problem was, most of the minorities to whom this program was aimed had very poor credit, the reason they had poor credit was manifold, lake of income, no credit history, reneging on debts, and what ever, but a push was made to get these people into homes of their own, and the mortgage companies were encouraged to make the loans. 

Now, anyone who has tried to get a lone knows that the interest rate you get depends upon how credit worthy the lender deems you to be. The very best risk get what are called the Prime rate for borrower. Those who do not meet these criteria get what is called a sub prime loan. Since in the eyes of the lenders these loans carry a higher risk of default then the prime loans does, a higher interest is charged to cover the risk. 

Still, because of the income of the people who would apply for a Subprime loan was so low that they just could not afford to pay the monthly mortgage, that is until the bright idea of a variable rate that would be set upon the Fed’s rates to the banks, as long as the Fed’s rate stayed low, the mortgage rate would stay low (ARM). The ideas sold to many borrowers was that as time went on and they continue to meet their obligations their credit rating would improve, and they would be able to refinance their home at a lower fixed rate in the future. 

That is that half of the story, the other half was the selling of the banks to make the loans, banks are notorious for not making loans to people who they deem unable to meet the obligation of the loan. This is when a bit of financial engineering called securitization came into play. Investment banks would buy all the Subprime loans from the banks up front for a discount, take the mortgages and mix them with some other investments and sell them to investors who bought them for the income flow associated with them. 

This predictably led to a housing boom. The forecasters in the industry did not understand that their forecasts were only good if the world did not change. They continued to build houses like everyone would be buying a new home next week. 

Well the world did change; it changed with the Fed response to inflection fears. It changed when the interest rates started going up to slow the economy down and combat inflation. The higher interest rate caused an adjustment in all those ARMs that had been sold. 

For whatever reason very few people had refinanced their ARM’s into lower fixed rate loans, and now with the resulting higher monthly mortgage bill many people just stopped trying, and let the bank take it back. While Subprime ARMs only represent 6.8% of the loans outstanding in the US, yet they represent 43.0% of the foreclosures started during the third quarter of 2007.  

This had far ranging consequences for the investors who bought all these Subprime loans for their portfolio. Many used them for collateral for other investments, and with the rising default rate of the Subprime loans the investor had to come up with other ways to cover the margin they had to keep posted on their investment, or lose what they had invested. Lots of rich cats got their hide skinned on this outcome and pulled back from the market.

It has been suggested that greed was the cause of the mortgage market melt down. Now the way I see it greed, in of itself is not a bad thing. It is what it can make you do, and how blind it can turn your eye so to allow others to take advantage of your greed. Those are the bad things about greed. If in my greed I spend every dime I make on just what I want, never sharing a penny with anyone on harm is done.

If on the other hand I see a greedy man, and offer his a propositions that will increases his holding a hundred fold and the prospect of him holding such wealth blinds his eye to the nefariousness of my plan, then his greed works to his determent. Whether I do it out of my greed or for the thrill of the score you can never know. 

I have had the occasion to meet several con men in my life, one in particular I will tell you about. He rented sever of these large fuel storage tanks and surreptitiously filled them almost to the top with water, and then pumped gasoline to fill them to the brim. He then went to the banks and used the contents of the tanks for collateral for loans, and then rented more tanks, and got more loans. He milked the banks for many millions of dollars, he had wired the money to an off shore bank, and was on his way out of the country when his scam was discovered. No the bankers did not find him out; he was rated out by an accomplice who thought he was getting the short end of the stick. 

In this case it was not greed on the part of the bankers that led them into their downfall, it was laziness pure and simple. Had they bother to look to see where he had acquired all this gasoline in the first place they would have never been stuck with the bad loans. 

A lot of the people who bought the Subprime mortgages had no idea what the income stream they were buying were derivatives of. The people who bought these derivatives did not buy the asset itself, just the cash that flowed from the asset. Derivatives allow investors to earn large returns from small movements in the underlying asset’s price. However, investors could lose large amounts if the price of the underlying moves against them significantly. 

Hedge funds make great use of derivatives, the person buying a hedge fund will pick a derivative that move counter to how his other holding move in a giving market, in this way they are used as a form of insurants to transfer risk among parties based on their willingness to assume additional risk, or hedge against it. 

The Subprimes were packaged in a structured note which was a basket of securities. These structured products are usually issued by investment banks and the buyers did not know of what they were comprised until the underling assets, e.g., Subprime morgages, started to lose value becouse of all the forclosures.  

Now I am not sure if the investment banks intended to bilk all their investers out of their money, but I do know that they were fools to beleve that all thoes poor folks to whome the comerical banks had underwriten so many ARM Subprime loans to would be able to mantaine their payments if the future brough a rise in intrest rates.  

The greed of the invester was, if you want to call it that, was condemplating a income flow that was indexed upon the Feds discount rate. Had he bothered to find out what the actual asset was, he would have made diferent investment decision I am sure, at least I would have. This is why there is now a hew and cry for transparantie in the derivatives market, and full discloser to be required of the investment banks just like the commercial banks have to comply with.


Finally to those who charge that this economic slow down is due to the money that the government is spending on the Iraq War, please explain to me how that is a factor in all this?