Mar 032009
 

Well… My crystal ball has been right and wrong in following the ongoing soap opera that is the American Economy.

With talk of (at least partial) nationalization of BofA and Citi, I think I was misguided in my assesment of their strength. My logic was that financially strapped organizations wouldn’t be acquiring large companies who would only make the cash situation worse – I was apparently wrong. I also understated my swag on the size of the eventual bail out by about 100% as well, although it could come down significantly unless they natioanalize AIG, BofA and/or Citi.

I don’t think I put it in a prior post, but I have a mental threashold of 12% unemployment to trigger the word, “depression”.  It was recently announced that California is at 10% – painfully close.  My portfolio of strong stocks has taken a beating in the last couple weeks that I didn’t think possible.

We’ll see where it goes.

 
— John

Feb 222009
 

Well… Let’s see…. Fiscal incompetence?  Yes, that’s it.  Post over…  You still reading?  I said it was over…. Oh, OK!

Is it the fault of the Governator?  Is it the fault of those evil, right-wing Republicans who want to give tax breaks to the rich?  Is it because of the idiotic, left-wing Democrats who always try to spend triple the tax revenue?  All of the above.

Although I can’t fault the current elected officials and exclude their predecessors.  Fiscal incompetence has been around and even rampant for decades.  If you, as many individuals and families do, get to a point where you are spending more than you are earning, you have to figure out what you are going to eliminate so that you can survive.  In the world of government, both Sacramento and Washington DC, they figure how much they want and they take it.  If they can’t take enough from you, they will borrow against the earnings of your grand children to be able to spend it today.  Don’t you wish you could do that – if your personal budget isn’t balanced, just take another 15 or 20% from your employer?  Not only is it incompetence, it is arrogance.  On both sides of the aisle.

The 2007 budget deficit was (only?) $162 billion (source: 2009 Federal Budget, table 1.1)  and according to the Congressional Budget Office, federal revenue will take a dip this year and rebound to just above 2008 levels in 2010, but yet the deficit will be more than $200 billion greater than in 2008.  Why is that?  It is because our elected representatives have an inability to balance the check book. 

There have been years where our household income didn’t increase.  That only means that my spending for that year has to remain at previous year’s levels.  If we went out to eat once a week and inflation made the cost of doing that more expensive, I might have to skip a week here and there.  It happens – and not just in my house.  This isn’t an action that I’m illustrating – it is a principle, and one that has been missed by our elected officials for decades.

Whose fault is this?  Mostly ours, because we’re the nimrods who vote these dip sticks into office.  When we hear of scandals – Clinton/Lewinski, Duke Cunningham, Tom Daschle, etc… we’re surprised and appalled.  Why?  It takes a unique breed of person to want to run for an office like that as a career.  They are highly overconfident which can’t happen without arrogance.  Being successful to the point of thinking you can get away with the stupid crap (most never get caught) only breeds more arrogance.  So what we are left with in office are arrogant, self absorbed people who think that they are above the rules.  If there are any Mr. Smiths in Washington, you could probably count them on one hand and have fingers left over.

Who is the top finance person in your state?  Normally it’s the State Treasurer and/or State Controller.  I’ll bet dollars to donuts that it’s an attorney.  That’s like hiring a hotel manager to be a mechanical engineer – the hotel manager might be a brilliant guy, but he/she probably doesn’t have the skill set to be a decent engineer.  We consistently put square pegs into round holes because they are from the right party or because they are the political up-and-comer without regard as to whether they are qualified to do the job.

So, in a nut shell, we are putting people in office who are unqualified and fiscally irresponsible.  Until we get executives and legislatures who take a stand to not spend what they don’t have, we will continue to wallow in the mire and wonder why it’s happening.

– John