How the late Don Ho understands the economy better than many economists

First, I’d like to lay down the lyrics to a song by Leon Pober, made famous by the late, great, Don Ho.  I really wanted to put a video of Don Ho singing this, but I couldn’t find one that I was jazzed about showing. If any of you brilliant readers can send me the link to a video of Don Ho singing Tiny Bubbles, let me know so I can add it here.

Tiny bubbles (tiny bubbles)
In the wine (in the wine)
Make me happy (make me happy)
Make me feel fine (make me feel fine)

Tiny bubbles (tiny bubbles)
Make me warm all over
With a feeling that I’m gonna
Love you till the end of time

So here’s to the golden moon
And here’s to the silver sea
And mostly here’s a toast
To you and me

So here’s to the ginger lei
I give to you today

That will not fade away

I was asked by a friend the other day why I was so negative on the economy.  Their position was that the economy was getting better because of the stimulus and other tactics by the administration.  The conversation was pleasant enough at first, but I could see that my friend was getting more and more agitated because I just wouldn’t buy in to the idea that anything had changed.

“What about the stimulus?’

“What happens when it has to be paid back?”

“How about them saving the banks?”

“Are they really saved, or are we just having to pay the bill?”

“Well what about GM being saved?”

“Well, what about Pontiac?  Or Chrysler?”

“But people aren’t losing their homes anymore.”

“Were the houses really theirs in the first place?

Had anything changed that makes the houses more affordable?

Who has to pay for that deal?”

So what would it take to get you to believe that the economy was improving?”

That question intrigued me.

What would it take to prove that the economy was doing better?  Well, let’s look at what started the whole problem.  Housing prices were artificially increased because people were taking loans they couldn’t afford to pay back, the banks were signing off on these loans, and everybody believed that real estate prices only go up.  It was called a speculative bubble.

When this bubble finally popped, the banks who had made the bad loans suddenly couldn’t afford to stay in business anymore, and the correction (closing) started.  People who couldn’t afford the house they “bought” were forced to re-evaluate their life choices, with many seeking the comfort and security of renting.

What should have happened, and would have without government interference, is that people who shouldn’t have been pretending that they could afford to buy a house would have left these houses, forcing the banks to take a loss on them.  Then people who could afford a home at a reasonable price would step in and buy the houses for close to their actual worth, and everybody would be happy.  What instead happened was that the banks kept telling people that prices would soon correct, people still lost their homes, but the banks were guaranteed that the federal government would come in to buy these bad loans.  Bad banks stay open, bad tenants are still trying to buy houses they can’t afford, and my grandchildren will be paying money to cover all this.  In the meantime, the government has decreed that banks will not fail.  Certain car companies will not fail.  The economy will not fail.  So each of these classes are becomming smallish bubbles in their own right.  Despite what people might want to believe, you just can’t fix a bubble economy by pumping up other bubbles.

So Don Ho, in his best Barack Obama impersonation (and yes, I know Mr. Ho has passed.  He was way too good an artist to talk about him as if he were dead, and his music still lives on), starts talking about the next thing the government is going to try.

“Universal Medical Care”

Forced Unionization

Global climate

Global economy

etc, etc, etc.

Don Ho’s answer was to sit and contemplate the ocean and the cocktails on the beach.  Until politicians on both sides are willing to stop the stupid posturing and start looking out for the people they have sworn to represent, all we are doing is inflating more tiny bubbles to hide the effects of the last one.

No post today!

I’m not going to post today, even though there are plenty of reasons to. Today is my anniversary, and I want to spend today doing things to make my wife’s day a little better. Talk to you soon!

Rules? Who needs rules? We don’t need no rules!

Forgive my grammar in the title, but I couldn’t think of a better way to express what is going on with the market, and to a greater extent the economy.

Today, the Dow was down 290 points, bringing the average below 8,000. Not so surprising given what has been going on over the past year in the economy, right? Well, given the recent suspension of so-called “Mark-to-Market” accounting rules, as well as talks to reinstate the “UPTICK RULE“, this actually is a surprise.  See, it becomes hard to bet that a company is failing when the bank (US Government) makes rules that say you can only bet on success.

Recently both of these practices have come under attack by the government.  To solve the problem, the SEC, along with Barney Frank and ultimately Barack Obama have been working to change these rules to ensure (read: force) the market to go up.  When this happened, the market had it’s best week since the first Depression.  That was no surprise.

See, think of the market as a 100 yard dash.  Each company is a runner, as are people who believe that the companies will fail.  The officials of the race (the government) don’t like people to bet on negative outcomes, kind of like this guy:

So what they do is tell the runners who think the companies will fail to start 15 seconds later.  And they have to run 110 yards instead of 100 yards.

So the idea that the market would still go down after these radical steps should frighten people.  Wether the market starts coming back sooner rather than later, we’re screwed right now.  We’re screwed, and the politicians out there are fiddling while America burns (through our children’s money).

Tea-bagging Obama with lessons learned from Reaper

Today is April 15th. For many people in America, this is the day that taxes are due. President Obama had promised to raise taxes in an effort to give money to those who he feels are deserving. As someone who wasn’t collecting a salary for the past few months, it is easy for me to say, “Yay, Barack!”, but I’m not. I’m not really excited that my salary, now that I’m earning again, isn’t going where I want it to go. Apparently, many people across the nation feel the same way.

In several cities across the country, thousands of people, frustrated with the fact that they have no voice in the direction of the country, frustrated because of the TRILLION DOLLARS of money spent on bailing out broken businesses with no end in sight, and frustrated because the people most responsible for the Depression are the same ones with the checkbook who are going to “fix” the problem.  They are calling these events “tea parties”.

The last tea-party of any consequence was a scene in which a despondent Buzz Lightyear, forced to face the fact that he was a toy, and not a real space ranger, was captured by the children next door to Andy.  With one arm broken (off!), Lightyear, now going by the name of Mrs. Nesbitt, is having a tea party with a couple of headless dolls as Woody plans an escape for the both of them.

The one previous to that with any significance happened in December of 1773, when a bunch of people, frustrated because they had no voice in the direction their (new) country was headed, frustrated with onerous taxes levied on every aspect of life by an absentee leadership, boarded ships in the Boston Harbor and dumped all of the tea into the ocean in protest to the tax on tea and other commodities.

So are they right?

I was invited to several “tea party” events around California, to add my voice to those who were frustrated.  I didn’t go.  Not because I think their idea is wrong, but I don’t believe that they will do any real good.  Too many right-wingers have attached their personalities to these events to make them effective, and too many left-wingers are trying to paint these legitimate protests as political posturing.

So is there even a problem?

Obama’s press people will say that 95% of Americans will not see any increased taxes, but will see lower taxes, even rebates.  The problem is that many of these people don’t pay taxes to begin with.  They are getting refunds on taxes they never pay!  They are getting these refunds on the backs of Americans who are seeing their taxes increase.  They are getting these refunds at the expense of their neighbors, who are also facing hard times right now.

So is there a solution?

I really want to say that there is some magic bullet that will make all of this better.  I want to say that the solution is coming forth from some politician somewhere.  The reality is that the only solution that has any hope in working is education.  Parents need to start teaching their children how to survive on what they can make.  They need to demand that the billions of dollars spent every year on schools go towards providing honest, objective financial education at all levels.  All Americans need to start using their voices (their votes) to get rid of those who did this to us.  Bush is gone now.  That is a good start, but just one step on the path.  We also need to get rid of Pelosi, Reid, Schummer, Cox, Frank, Dodd, Geithner, Bernanke, any other politician who puts their own career safety in front of the will of the public, and maybe even Obama.

With education, future generations will make sure that the mistakes of today aren’t repeated, or even worse, compounded in the future.  What can you do today?  If protesting is your thing, find a peaceful protest and join in.  If not, make sure you are educating yourself on these issues, and don’t fall prey to the talking heads of either political party.

Where does Reaper come in?

Reaper, for those who don’t watch, is a TV show on the CW about a young person who’s soul was sold to the Devil in exchange for immortality for his father.  Let me say that again.  Dad sells his son’s soul to the Devil, so he can prosper.  The son, screwed beyond belief by his parents, tries to make the best of his situation while paying the price of his parents’ greed.  Sound familiar?  Here’s some more.  The young man has to work for the Devil, or be taken to Hell.  The Devil seems like a nice enough guy, he’s actually kind of cool.  But nobody deals with the Devil and comes out on the winning side.  The young man, much like America’s young people, is very forgiving of his family, and even of the Devil.

Did you or your family go to one of these protests?  Share your story in the comments!

Don’t trust the news on the economy!

I have been reading and watching the news and the economy for some time now, as well as reading several blogs and websites. I would like to say that the majority of the sources have it right on, but sadly I can’t. There are essentially three TV stations that are dedicated to money and finance; CNBC, FOX Business, and Bloomberg. I personally choose not to watch the last one because it bores me to tears trying to watch it. I generally flip between the first two because they have characters that are entertaining.

I know a little something about economics, so watching one or the other isn’t much difference, but these networks are pointed at those who know nothing. These are people who might have a 401k or 403b. They might have some education, but they want to sound intelligent when talking about finance at the water cooler. I’ve also suggested that students watch one or both of these networks, because they are very simple to understand. But this is a double-edged sword. On one side, the content is easy to follow, so most anybody can do so. On the other hand, these people are there to sell advertising, and to entertain. They aren’t out there to educate. Their advice may or may not be the best, but it is better than nothing.

Another problem I see is that of credibility. Many people feel that the FOX name is a “right-wing” conservative brand, and therefore (for some reason) can’t be trusted. On the other hand, the NBC brand, including CNBC are decidedly left-leaning, and are at best as trustworthy as FOX.

Either way, lately both have been talking a lot about being at the “bottom” of the Depression. They don’t even call it the Depression. Larry Kudlow and Jim Cramer have bought in to the idea that we are on the upturn in the economy and are preaching about improvement by this year.

There is absolutely no reason to believe that we are near the bottom. All of the problems that existed that brought us into the Depression are still there, and there are new ones as well. Trillions of dollars are being siphoned away from my grandchildren in order to ARTIFICIALLY prop up the economy long enough that money will be made by those in power. Nobody gives a damn about the price you will pay.

So, if you can’t trust the news, and you don’t know which bloggers to trust, what can you do?

You have to do a little research on your own.  Remember I said that I go back and forth between FOX Business and CNBC?  I do the same with news, going between the equally biased FOX and MSNBC.  I have to see both sides of the news coverage, along with other channels to determine what I think about an issue.  I do the same with blogs.  On my Twitter account, I have conservatives and liberals that I follow.  I might not agree with one or the other depending on the issue, but I want to hear what they have to say.  This is what you need to do to make up your mind about issues.  Read this blog, and others that will disagree with me.  Decide which one you trust more and follow them.

Also, look at what someone has to gain or lose by having you listen to and follow them.  For example, when someone likes my blog, I get another reader.  I get no more money, and no more reason to push an agenda.  If you don’t like me, I lose another reader, and no more reason to try and change minds.  Many bloggers are the same.  Others lose money when you stop listening to them, or make money when you start.  Some, like politicians, lose their jobs when nobody believes them and get tired of listening to what they are trying to sell.