Where do you think cuts in spending need to be made?

Since there are going to be round the clock negotiations to hammer out a compromise on reducing the debt this weekend. I thought I would summarize the results of my Mini Poll here. Remember all this drama is going on in order for the Republicans to get concessions for their votes to raise the Debt Ceiling. It is clear how folks think these trade-offs should be made. Here's the question and their Vote:

Where do you think cuts in spending need to be made?

Answers and Percent in Favor of the choice
1. Everything, no exclusions. 39%

2. Increase taxes on just the wealthy. 33%

3. Increase taxes on everyone. 7%

4. Cut mainly from Defense. 13%

5. Cut mainly from Medicare, Medicaid and Social Security 6%

6. Don't need to cut anything or raise taxes. 3%

So 39% are in favor of cutting everything and 33% say they would choose adding taxes on the wealthy. That's a 72% majority.

Market and political comments for July 7th, 2011

Weekly Initial Jobless Claims data came in at 418K compared to last week's data of 428K and an expectation of 425K. This was better than an expected number of 425K and clearly better. The big question is can we get down below 400K again? The answer to that is not if, but when.

According to CNN Money today, " ADP numbers showed a gain in Manufacturing jobs in the Private sector for June of 157,000 new jobs. This is 4 times the number of jobs gained in May. Smaller businesses led the charge in June. Small businesses, defined as those with fewer than 50 workers, added 88,000 jobs in June. Medium-size businesses, defined as those with between 50 and 499 workers, gained 59,000.

Larger businesses, with 500 or more workers, added 10,000 jobs last month."

All US market Futures are up this morning in premarket. It looks like we are making a final push to the previous high of 12,800 before we correct. Clearly a "W" pattern, or Head and Shoulder pattern is forming and may be the last necessary ingredient before the market has its correction. But I have been waiting for that for far too long and I know it.

It looks like the President Obama is blinking by setting a precedent and putting both Social Security and Medicare changes on the table to negotiate with Republicans. This was not a good move at this time as it sets up future hostage situations when the debt ceiling must be raised, as inevitably it will. I am very disappointed in this man on some things and this is one of them. He doesn't seem to have any backbone in him. Very upsetting for Progressives in the Democratic Party. He doesn't have to negotiate on this, when almost 80% of Americans favor leaving both programs alone and untouched. That type of tinkering is best left until after the 2012 election.

To use a biblical reference, he is willing to cut the baby in half. He seems more interested in negotiating that in principles. I hope to God we never are in a situation with this President when we are looking at a military situation where surrender is an option the other side puts on the table.

Market comments for Oct. 15th, 2010

The big news today for me was Univ. of Michigan's Consumer Confidence number. It came in at 67.9 vs. 68.2 for September. So it is clearly lower. Market Expectations were for it to come in at 68.5. Other data released was CPI, which came in at +0.1% and Core CPI which came in at 0%. That is one of the reasons there will not be an increase in Social Security checks in 2011, there is no inflation according to these numbers which have been steady near zero, for most of the year.

Retail Sales improved +0.6% for September, was due to large purchase items they say. Expectations were for them to be 0.2%. Well it wasn't me that bought a large ticket item, just a small cute poodle. :)

Not much to crow about today for the Bulls as the market has dropped somewhat. The Dow is down about 25 points at the time of this post.

And as a Public Service announcement, today all late filers must file taxes which are due for State and Federal taxes. They must be postmarked with today's date in order to avoid late penalties.

The next big crisis: Retirement Funds

So do you think that if we can just get this banking crisis behind us all will be well again? Think again! Oh I know you are thinking about the rising Unemployment rate and the number of foreclosures which are tied into the banking problems also as important, and I agree. But what has not been discussed much of late is what has happened to the Pension Funds for retirees and the Agency which Insures them, the Pension Benefit Guaranty Corp.. Here straight from their website is a description of who they are.

"PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of nearly 44 million American workers and retirees in more than 29,000 private single-employer and multi-employer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans."

What I have seen in the news these past few months should raise the alarm bells. Here's a sampling:

April 9, 2009 The Exxon Mobil pension fund has filed a lawsuit against its custodian Northern Trust for breaching its fiduciary responsibilities. The corporate fund is claiming that the funds garnered from the lending out of shares has been invested in risky assets by Northern Trust. These assets are alleged to have included highly-leveraged assets, mortgage-backed securities and collateralized debt obligations. It is alleged that these investments effectively generated losses for the Exxon Mobil pension fund.

April 16, 2009 A special pension fund for railroad workers that was given permission during the Bush administration to invest its assets in the stock market lost more than a third of its value during a recent 18-month period, a loss that could influence an ongoing debate about how to keep government-affiliated retirement programs solvent.

March 1, 2009 Questions arise from GM's use of pension for buyouts, VEBA trust. Details are emerging about how General Motors Corp.'s U.S. pension funds went from a $20-billion surplus at the end of 2007 to a $12.4-billion deficit 12 months later. Newly released numbers show that the funds, which help support more than 650,000 Americans, were tapped for billions of dollars over the past year for employee buyout programs, benefit increases and as part of the UAW's retiree health care trust deal.

February 2009 The Next Catastrophe: Think Fannie Mae and Freddie Mac were a politicized financial disaster? Just wait until pension funds implode. Funds worth trillions of dollars start to plummet in value. Political pressure to be “socially responsible” distorts the market decisions of government-related enterprises, leading to risky investments. Investors who once considered their retirements safely protected wake up to a sinking feeling of uncertainty and gloom. Sound like the great mortgage-fueled financial crisis of 2008? Sure. But it also describes a calamity likely to hit as soon as 2009. State, local, and private pension plans covering millions of government employees and union workers with “defined benefit” accounts are teetering on the brink of implosion, victims of both a sinking stock market and investment strategies influenced by political considerations.

There are serious faults cracking the very foundation and well being of our elder population, as it approaches retirement. The near term focus has been on the immediate Financial system recovery, which is where it should be focused, but behind that curtain is a very large problem with cataclysmic repercussions for all our soon to be retired Baby Boomers. The current Financial crisis has many related and interconnected parts and this one will play a prominent role as a new President thinks of dealing with Social Security policy changes, or should I say Social Insecurity changes as a part of reform.

Under President Bush he attempted to get Americans to take a part of their Social Security retirement Funds and to consider investing them in the stock market. If that had been done by many Americans the current situation would have been worse than it is. The problem is that the Social Security Funds were not in the Lock Box as Gore had promised should he have been elected, but were used by the Government to pay for other things, and now in the Lock Box is a big IOU with no real hope of doing anything to solve it except print more paper money. Eventually citizens are going to wake up that paper isn't really worth anything and they want real assets in exchange for goods and services. God help everyone when that happens! It is called bartering. Get used to it.

$700 Billion: What else could we do with it?

Have you asked yourself yet what could be done with $700 Billion dollars today besides this rescue plan that the Fed and the Treasury are asking from Congress? I'll tell you one thing, a sizable amount could have been used to make Social Security more solvent for one thing. We could have repaired many of the bridges and roads across this country. We could have used the money to solve Global Warming and reduced the Green House gases on the planet. We could have given every teacher in America a minimum salary of $100,000/year and still had $500 Billion left over to do some of the other things mentioned here.

But instead, we are going to pony up this incredibly large sum of money and are not going to observe anything for it. It will not be noticed, as life will go on as it did before the crisis except the unemployment rate will be going up, interest rates will be going up, stocks will be going down and many will fell tight when it comes to spending any of their money. We won't see anything that looks positive that we can point to that will be a measurable observable difference for the better. What there will be is the prevention of a total collapse of our system, THEY HOPE! You see there are no guarantees here. It is like going to Vegas and being able to play roulette and betting on red or black and hoping to win. But it is possible that the ball will settle on the zero (0) or double zero (00) number. That's where we are now. There is probably only a 2 in 37 chance that this $700 Billion investment will faIL, but there is still some chance. Southerners may be thinking of that old adage, "Save your Confederate money folks, the South shall rise again." The only problem is that this time we are all in the same barrel, whether we like it or not.

When this is over, I don't want to hear people say we can't afford Healthcare for everyone or that we can't accept Barack Obama's ideas to grow the economy with Green initiatives or that we can't bring home the troops to help save $12 Billion per month! If we can print money to pony up $700 Billion here, we can print some more and do the other things as well. Yes the wealthiest are going to have to pay more taxes. Get used to it as your life is better than the most of the country and we all must bear a more equal share of the burden.


This is what it must have felt like at the Fall of The Roman Empire.

AIG, now what? Republicans still think derregulation is good?

The news today is that the Fed is willing to give a loan to AIG Insurance company to help it with its liquidity problem. AIG had a Balance Sheet of $1 TRILLION dollars. The Fed is going to lend it $85 Billion dollars for a 2 year period. For the loan the Fed will own 80% of AIG. I don't know about you but that essentially would be equal to $800 Billion of the company. It doesn't make sense unless the company really doesn't own assets worth $1 Trillion dollars in the first place.

All my life I have heard that we shouldn't be regulating business as the Free Enterprise system is the best in the world and regulation, they argue, constricts the free flow of capital to markets needing that capital to grow and develop for the benefit of "shareholders". So the American people bought into that line of reasoning, hook, line and sinker. We bought shares of Stock or Bonds thinking that it was a level playing field and that these markets and companies had some regulation to protect us. Little did we know the limited regulation was there not to protect shareholders and the system. With certainty, it has failed us as proven by several examples, AIG, Lehman Bros and Merrill Lynch and the forced mergers of some and the failures and bailouts of others. The same was true back in 1929. As a result of the crash in 1929, the Glass-Steagall Act was implemented by Roosevelt to prohibit the crash from happening ever again. Then with Ronald Reagan, we saw the beginning of the deregulation process that started to unwind that legislation and allowed Insurance companies and banks to merge.

We are now so integrated in a Global economy, that we have gone from a problem affecting just the US to affecting markets worldwide. Now, when a Bank or Insurance company fails, it has the additional concerns of affecting not only those companies and its shareholders, but other non related businesses, as well as Pension Plans that invest in those businesses and now become at-risk.

Let's me make sure there is clarity as to what this means overall. First, there is no level playing field. As an individual investor, you are on your own and the system is gamed against you. As long as we continue to elect Republicans, we will have little or no protection and our economy will be at risk. It is time we are willing to risk the alternative. Social Security, as a system to help retirees, was instituted by Democrats, and thank God it is still there for people. Many of our Nations problems need fresh thinking from the grip of the Republican party. Even though we had President Clinton, a Democrat as President, he had to deal with a Republican led Congress.

When the Healthcare plans formed HMO’S and PPO’S and were allowed to change from non-profit to becoming for-profit corporations, it was the downfall of healthcare. It changed everything. Now we are faced with higher healthcare costs every year, while executives reap millions and millions of dollars squeezed from us under the guise of operational cost increases. Healthcare is the next system to collapse.

We must have the courage to swing the pendulum the other direction while we still have time. Let's hope and pray that the Democrats, under the leadership of Barack Obama and Joe Biden, will seize this moment and positively change the equation which focuses back on the Middle Class and the Poor and reinstitutes policies that benefit most Americans not just the wealthy. If not, you are seeing the early stages of the Fall of the current Roman Empire, the United States of America!

What if the surge works? Contemplating the spin

So what are Democrats going to say if the surge works? Are they going to take credit for any part of this? Is President Bush going to get a reprieve from the critics? Is Cheney going to emerge a stronger figure, if that's possible, in this Administration and can say, "I told you so!"? This situation that has us focusing on the next few months and reports daily from Baghdad from such distinguished media anchors as Brian Williams, of NBC, has presented a situation where neither Republicans or Democrats know for sure the outcome. Hence, the politics of this is worth noting. I can see 2008 Presidential candidates more cautious in their pronouncements before the media and in their speeches. And my guess is that this period will be marked by all candidates and elected officials focusing on such things as Healthcare, Immigration reform, Medicare, Social Security and other domestic issues. Why, because they are safer to discuss in a period where the outcome is uncertain. But this is all good news because it means for the first time after the successful invasion of Iraq the American people can see the possibility of a glimmer of hope. No one wants to say that yet because somehow stating it might give cause to it disappearing. Dare we dream of a breather in Iraq. God I hope so.

I have found myself being pessimistic for far too long and anyone reading my Blog can site chapter and verse as to where to support their evidence. But anyone that truly knows me knows I hold out always a 1% possibility that maybe there is some hope of a change.

Then again maybe I’m feeling particularly in a good mood today and this too will pass.