Saturday, July 31, 2010

The Latest Surprise In ObamaCare Bill: Your Taxable Income Will Be Redefined Higher

Redsate reports:
Starting in 2011, next year-the W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are provided. It doesn’t matter if you’re retired. Your gross income WILL go up by the amount of insurance your employer paid for. So you’ll be required to pay taxes on a larger sum of money that you actually received. Take the tax form you just finished for 2009 and see what $15,000.00 or $20,000.00 additional gross income does to your tax debt. That’s what you’ll pay next year. For many it puts you into a much higher bracket.
You can find the detais on this clause by going to , enter “HR 3590.” Or you can also search the Patient Protection and Affordable Care bill for Title IX Revenue Provisions-Subtitle A: Revenue Offset “(Sec. 9002) that requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer-sponsored group health coverage that is excludable from the employee’s gross income (excluding the value of contributions to flexible spending arrangements).

UPDATE: Further clarification on this regulation, and what it means, is here.

Ron Paul Seeks to Reverse the SEC Exemption from the Freedom of Information Act

As I reported earlier this week, the Dodd-Frank Financial "Reform" Bill contains a clause that exempts the SEC  from the Freedom of Information Act. Helluva reform.

Ron Paul, every freedom lover's favorite congressman, has introduced a bill, The SEC Transparency Act, that would reverse this outrageous attempt by the SEC to hide its machinations from the public.

Here's Ron Paul's full statement announcing his proposed bill:

Congressman Ron Paul yesterday introduced the SEC Transparency Act of 2010 (HR 5970), a bill designed to force greater transparency in the Securities and Exchange Commission. The bill is designed to repeal the amendments made by section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the confidentiality of materials submitted to the Securities and Exchange Commission.

Recent news reports have publicized the little-noticed provision in the recently-passed financial reform package that the Securities and Exchange Commission has used to deny requests for information under the Freedom of Information Act. Paul’s bill would repeal the provision in the newly-passed legislation the SEC has used to deny FOIA requests.

“It is unfortunate, yet not unexpected, that legislation touted as fixing problems with the banking system actually makes them worse and provides more cover and power for organizations that failed us like the SEC and the Fed,” Paul said in introducing the bill. “I expect in the coming weeks and months that many more harmful provisions like this will come to light and it will take quite a bit of work to undo the damage from this massive and misguided legislation.”

Very Curious Activity in the Gold Bullion Market Leads to Speculation that Banks are Short Tons of Gold

Huge gold swaps have recently occurred between the Bank for International Settlements and various banks in Western Europe and the United States. Bankers are attempting to play this up as "business as usual". However, the gold swaps that have been conducted lately are recording breaking in size, as far from "business as usual" as you can get.

Some believe that the swaps were, in fact, a bailout of various banks that did not have enough gold on hand for gold they were supposedly holding for various clients. As those clients demanded delivery of their gold, the BIS had to swing into action  via gold swaps to obtain gold for the banks that were running up against supply shortages.

GATA's Adrian Douglas makes the detailed case for the gold swaps as a bailout of the usual elite banks, here:

Yesterday the Financial Times published an article headlined "BIS Gold Swaps Mystery Is Unravelled" in an attempt to clarify the recently discovered gold swaps undertaken by the Bank for International Settlements with European commercial banks:

I recently published my interpretation of these gold swaps and concluded that they were most likely a secret bailout of one or more bullion banks that do not have enough physical gold to meet burgeoning demand:

Lawyers always tell their clients to shut up and not speak to the press because the more they say without proper legal consultation, the more likely they are to incriminate themselves. One has to wonder why lawyers at the BIS didn't offer similar advice to the spokespeople at the BIS, because they have opened their mouths and inserted both feet.

The FT reports that "Jaime Caruana, head of the BIS, told the FT the swaps were 'regular commercial activities' for the bank."

The FT also reports that "'the client approached us with the idea of buying some gold with the option to sell it back,' said one European banker, referring to the BIS."

So we are led to believe that the BIS just casually called up some commercial banks and proposed a "regular commercial" activity of a 346-tonne gold swap.

The only problem with this story is that this is the biggest gold swap in history. It was anything but a "regular commercial activity."

The FT tries to palm off the biggest gold swap in history as just a matter of the BIS earning a little return on $14 billion.

The FT says it has learned that the swaps, which were initiated by the BIS, came as the so-called "central banks' bank" sought to obtain a return on its huge U.S. dollar-denominated holdings. The BIS asked the commercial banks to pledge a gold swap as guarantee for the dollar deposits the banks were taking from the Basel-based institution.

And GATA has learned that the moon is made of Swiss cheese.

In central banking $14 billion is chump change. The U.S. Treasury auctions between $70 billion and $130 billion of Treasury debt very other week. Only a few weeks ago the European Central Bank created a trillion dollars out of thin air to defend the euro amid the Greek debt crisis.

There are two sides to a swap transaction, but one would have to have the IQ of a grapefruit to believe that the important part of this transaction is a piffling $14 billion and not the 346 tonnes of gold that make it the biggest gold swap in history.

But the BIS has given us another piece of information.

The FT says: "Three big banks -- HSBC, Societe Generale, and BNP Paribas -- were among more than 10 based in Europe that swapped gold with the Bank for International Settlements in a series of unusual deals that caused confusion in the gold market and left traders scratching their heads."

I had assumed in my last article that only one bullion bank was involved, but we now find that more than 10 banks were involved. The first on the list is none other than HSBC, which along with JPMorganChase holds 95 percent of all gold and precious metals derivative positions among U.S. commercial banks as reported to the U.S. Treasury Department. HSBC and JPMorganChase are also holding a massive short position in gold and silver on the New York Commodity Exchange. Further, HSBC is the custodian of the gold that is supposedly backing the exchange-traded fund GLD.

In my analysis of the BIS swaps I postulated that a bullion bank had made a swap with one or more central banks and had obtained bullion in exchange for $14 billion. I further postulated that the bullion bank made another swap with the BIS whereupon the BIS gave the bank $14 billion but the bullion bank did not hand over the gold to the BIS but instead credited the BIS with a ledger entry of gold in the BIS unallocated gold account. This would allow the bullion bank to have real gold to meet burgeoning demand while the accounts would show that the same gold had been credited to the BIS.

The FT says: "Officials said other commercial banks obtained the gold from the lending market, borrowing bullion from emerging countries' central banks."

So the tripartite nature of this shady transaction is confirmed -- central banks were a source for the real gold. But the real gold wasn't the "gold" that the BIS received as a swap for $14 billion. The FT explains:

"The gold used in the swaps came mainly from investors' deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called 'allocated accounts,' which restrict the custodian banks' ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper 'unallocated accounts,' which give banks access to their bullion for their day-to-day operations."
Obviously, if for some reason you are storing your physical gold at a bank, this is a wake up call to pull it out of the bank, now. You are much more likely to have your gold stolen by elite bankers in suits, with a shuffling of paper, than your are by a common crook, if you bury your gold in your backyard.

Keep in mind that the elite will lie about what is really going on to those that are not part of "the club."  Last November, Phillip Swagel, who was Assistant Secretary for Economic Policy under Henry Paulson at the Treasury Department, from December 2006 to January 2009,  told me he didn't know what a gold swap was, when I asked him. Got that? The top economic advisor to the Treasury Secretary tells me he doesn't know what a gold swap is! 
These guys so fear gold ( a money they can't control) that they will do, or say anything, to deny its significance. Meanwhile behind closed doors, they do everything they can to bailout their crony bank buddies that are short gold.
Read the rest of Douglas' analysis here.


The Social Security System that Alan Greenspan "Saved"...

will require most of the following, according to NYT:
Among the proposals circulating is one from Representative John Boehner of Ohio, the House Republican leader, who recently suggested raising the retirement age to 70 for people at least 20 years from retirement.

Other options include increasing Social Security payroll taxes, subjecting more income to the tax, reducing initial benefit payments or cutting cost-of-living increases (which would affect current retirees).
If Bernie Madoff could change the withdrawal rules and tax 'the people' to save his funds, he would still be in business.

If there was just in America, Alan Greenspan would be sharing a cell with Madoff.

The Current Federal Debt Situation

Federal debt is expected tp hit 62% of GDP at end of 2010

That’s up from 36% at end of 2007

The only other time it exceeded 50% was during WWII


The Recession's Impact on Credit Ratings

As of April, 25% of Americans had fallen into the least-creditworthy category, garnering a rating of less than 600 from FICO, the main arbiter of consumer credit in the U.S. That compares to only 15% before the recession, according to data compiled by Deutsche Bank.
The Declinning Credit Ratings

Friday, July 30, 2010

ECRI Weekly Index Down Again

The Economic Cycle Research Institute released their latest readings for their proprietary Weekly Leading Index. Following the data coming out of Consumer Metrics Institute, this is my favorite macro report.

 For the week ending July 23, 2010, ECRI WLI growth fell to minus 10.7 percent from minus 10.5 percent a week ago.

It Was MUCH, MUCH WORSE: BEA Revises Downward 2007, 2008, 2009 GDP Data

Most focus from the latest Bureau of Economic Analysis GDP data will be on the current slowed GDP number of 2.4%, but what is of further significance is that the BEA revised downward data for 2007, 2008 and 2009.

As Rick Davis at Consumer Metrics points out:
Apparently the "Great Recession" has been worse than our government has previously reported. And the recovery's brightest moment, Q4 2009, has been revised down from 5.6% to 5.0%. Similarly Q3 2009 dropped from 2.2% to 1.6%. And so on. The bottom of the recession was shifted back one quarter, with Q4 2008 now reported to have contracted at a -6.8% rate, revised down from the previously reported -5.4% rate. Most quarters of 2007, 2008 and 2009 have been revised down substantially, shifting the recession shown in the chart above back in time.
Again, this supports the thesis that economic data collected by the government is done in a very antiquated fashion. If they are still "revising" data from 2007, then what value can be put in current numbers (especially given the extremely limited value of GDP numbers in the first place).

Keep in mind that, while these revisions are going on, Rick Davis at Consumer Metrics Institute is measuring consumer durable goods activity in real time. Consumer durable goods is a much more important data piece than overall GDP since it is a very good indication of where the economy is relative to the business cycle (Climbing consumer durables indicates strong central bank manipulation of the economy, i.e. heavy money printing. Declining durable goods tends to indicate an economy adjusting away from a manipulated money printing "boom" period). This is all much more valuable and timely data for businesses and investors than the government data, and you get it in real time.

So where does CMI put things right now? Here's Davis again:

Our Daily Growth Index has dropped to new recent lows, and it is now contracting at a -3.4% rate.

The Double Dipping Data

Consumer sentiment numbers are out this morning, as well as the GDP. These are not my favorite data points, but the second leg of the recession is picking up steam and even these faulty indicators are picking up distress noise.

Consumer sentiment plunged in July to its lowest level in 9 months. The survey's July reading on the overall index on consumer sentiment dropped to 67.8 from 76.0 in June.

Gross domestic product expanded at  slowed a 2.4 percent annual rate,according to the Commerce Department, after an upwardly revised 3.7 percent growth pace in the January-March quarter. The GDP number mixes apples with oranges. The Commerce Dept uses outdated methods of collecting data. So when you have this number slowing it is likely that apples AND oranges sectors are declining and that it has been going on for some time.

Elizabeth Warren Watch

Marketwatch reports:
An increasing number of Washington observers see improving odds that Elizabeth Warren will become the head of the important new Consumer Financial Protection Bureau, surviving mixed feelings from the Obama administration and determined opposition from bank lobbyists and Republicans.
Senator Richard Shelby has the correct take on Warren. He told Bloomberg TV:
I would hope she's not confirmable. I would not support Warren. She's the guru dealing with behavioral science, trying to change everything. This is a power grab. Whoever has that job has awesome power over our economy.
During the height of the financial crisis, she wanted to nationalize the big banks. She is as interventionist as it comes and doesn't understand basic economics, starting with the price system and supply and demand. She's one dangerous woman.

Now there are some murmurs that President Obama may make her a recess appointment, which would me she could serve as the head of CFPB for about a year and a half before any confirmation would be required.

Thursday, July 29, 2010

Another Economist Confused about Monetary Policy

Fears over a double-dip recession for the global economy are waning, but investors should be more worried about ultra-loose policy from the Federal Reserve, according to Joachim Fels, the co-head of economics at Morgan Stanley, reports CNBC.

Fels said he believes the Fed needs to end its very loose monetary stance sooner rather than later.

Like many others, Fels doesn't get that low interest rates do not necessarily mean a loose monetary policy.  I repeat again, with the interest being paid by the Fed on excess reserves (0.25%) higher than the Fed funds rate, huge amounts of funds will simply sit on the sidelines at the Fed and not enter the system. That amount continues near an astounding trillion dollars.

Bottom line: There is no loose monetary policy, at present.

Taylor Rips Blinder and Zander

And I mean rips.

Alan Blinder and Mark Zandi put together a paper attempting to justify Keynesian interventions in the economy. The paper is so flawed that I seriously doubt an economics grad student would get any grade higher than a C on the paper.

Here's  John Taylor, the Mary and Robert Raymond Professor of Economics at Stanford University and the George P. Schultz Senior Fellow in Economics at the Hoover Institution, with his take on the Blinder-Zandi paper.

Yesterday the New York Times published an article about simulations of the effects of fiscal stimulus packages and financial interventions using an old Keynesian model. The simulations were reported in an unpublished working paper by Alan Blinder and Mark Zandi. I offered a short quote for the article saying simply that the reported results were completely different from my own empirical work on the policy responses to the crisis.

I have now had a chance to read the paper and have more to say. First, I do not think the paper tells us anything about the impact of these policies. It simply runs the policies through a model (Zandi’s model) and reports what the model says would happen. It does not look at what actually happened, and it does not look at other models, only Zandi’s own model. I have explained the defects with this type of exercise many times, most recently in testimony at a July 1, 2010 House Budget Committee hearing where Zandi also appeared. I showed that the results are entirely dependent on the model: old Keynesian models (such as Zandi’s model) show large effects and new Keynesian models show small effects. So there is nothing new in the fiscal stimulus part of this paper.

Second, I looked at how they assessed the impact of the financial market interventions. Again they do not directly assess the interventions. They just simulate the model with and without the interventions. They say that they have equations in the model which include the financial interventions as variables, but they do not report the size or significance of the coefficients or how they obtained them.

Third, the working paper makes no mention of previously published papers in the literature which get different results. It is rather standard in research to provide a literature review and to explain why the results are different from previous published papers. For the record there are different results in papers by John Cogan, Volcker Wieland, Tobias Cwik and me in the Journal of Economic Dynamics and Control, by John Williams and me in the American Economic Journal; Macroeconomics, or by me published by the Bank of Canada or the St. Louis Fed

Finally, when I read the paper I discovered in an appendix that Blinder and Zandi find that policy was not as good as the model shows and was in fact quite poor when one does a more comprehensive evaluation. They say in Appendix A that “Poor policymaking prior to TARP helped turn a serious but seemingly controllable financial crisis into an out-of-control panic. Policymakers’ uneven treatment of troubled institutions (e.g., saving Bear Stearns but letting Lehman fail) created confusion about the rules of the game and uncertainty among shareholders, who dumped their stock, and creditors, who demanded more collateral to provide liquidity to financial institutions.” I completely agree with this statement, but how can one then argue that policy intervnetions worked, when, in fact, viewed in their entirety they caused the problem?

Orszag Heckled

Outgoing White House budget director Peter Orszag was heckled this morning after giving a speech at the Brookings Institution. Notice at the end of the clip how the CNBC anchors become apologists for Orszag. No discussion at all as to whether the heckler has a point.

During a previous speech, Orszag said the plan for ObamaCare was "throwing stuff against the wall and seeing what sticks."

Jobless Claims Dip Because....

Initial jobless claims declined by 11,000 to 457,000 last week, but that followed a big rise the previous period, signaling little improvement in the job market.

Most significantly, according to the Labor Department's report , the number of continuing claims -- those drawn by workers for more than one week in the week ended July 17 -- increased by 81,000 to 4,565,000 from the preceding week's revised level of 4,484,000.

The largest decrease in claims occurred in New York, which saw claims fall by 19,552 in the week ended July 17 due to fewer layoffs in the transportation and service sectors. Other states with large decreases included Indiana, Michigan, Pennsylvania and Florida.

The largest increase in claims for the week ended July 17 occurred in California, which saw claims rise by 19,809 due to layoffs in the service sector. Other states with large increases included South Carolina, North Carolina, Illinois and Tennessee.

California Declares State Of Emergency Over Finances

California Governor Arnold Schwarzenegger declared a state of emergency over the state's finances on Wednesday, raising pressure on lawmakers to negotiate a state budget that is more than a month overdue and will need to close a $19 billion shortfall, reports Reuters.

The deficit is 22 percent of the $85 billion general fund budget the governor signed last July for the fiscal year that ended in June.

In the declaration, Schwarzenegger ordered three days off without pay per month beginning in August for tens of thousands of state employees to preserve the state's cash to pay its debt, and for essential services.

"Without a budget in place that addresses our $19 billion budget deficit, every day of delay brings California closer to a fiscal meltdown," Schwarzenegger said in a statement.

Schwarzenegger's declaration noted State Controller John Chiang has said he could be forced to issue IOUs as early as next month because of the budget impasse.

Keep in mind that they are pretty much just playing here. That's the way it will be until muni-bond markets weaken and it becomes impossible to finance state debt even with a budget in place. The muni-bond market is the key to how bad things get.

The Latest Surprise in the Dodd-Frank Financial "Reform" Bill

The SEC is now exempt from Freedom of Information Act requests..

"It appears the media covering the fight over the financial reform bill overlooked that clause in the law until the SEC contacted Fox Business to tell the news network it will not get a response to a request for information filed this spring," reports Raw Story.

Overlooking the clause is not a surprise. No one read the entire bill. Each paragraph was put in the bill for very special purposes, only those who put the paragraphs in the bill, understood the ramifications of the paragraphs. 

The relevant clause in the new law states that the SEC "shall not be compelled to disclose records or information" if that information was obtained for the purposes of "surveillance, risk assessments, or other regulatory and oversight activities." Fox Business described that as amounting to "almost every action by the agency."

Rob Reuteman, president of the SABEW, said in a statement Wednesday that his organization's membership was "appalled" by the change to the law, which "appears to roll back 43 years of transparency in government under the Freedom of Information Act."

Thanks to freedom-of-information requests, "we now know that the SEC itself botched investigations of Bernie Madoff, who fleeced investors of tens of billions of dollars and now sits in prison," Reuteman said. "The SEC has been forced to institute internal reforms as a result of its own investigative shortcomings that came to light. ... But under the provisions in this new law, the SEC no longer has to comply with such requests for information."

According to RS, Reuteman said that the SEC has argued that it needs to be exempt from FOIA requests because it will be easier to obtain documents needed to prosecute financial criminals.

"Don't fall for that line of reasoning," Reuteman said. "Government agencies have always been able to censor the documents they are forced to release, in order to withhold such sensitive information."

And so there you have it, the ultimate in hypocrisy. The agency, that regularly files charges against corporations that fail to disclose material facts, snuck into the Finance "Reform" Bill regulations that will allow it to hide material facts about its own operations.

ALERT: Deflation, Deflation

Falling prices are a good thing and are nothing to fear. They benefit consumers, and savvy firms know how to compete in a falling price market.

The latest example is here.

SF Fed Director of Research Doesn't Understand Monetary Economics

During a speech in Portland, Oregon, John Williams, the San Francisco Federal Reserve’s executive vice president and director of research said:
“..monetary policy remains highly supportive of recovery” and “interest rates are extraordinarily low.”
This is clearly an indication that Williams doesn't know what is going on around him.

It doesn't matter how low rates in general are, IF THE RATE PAID BY THE FED ON EXCESS RESERVES exceeds other rates, banks are, in general, going to keep huge amounts of funds on deposit with the Federal Reserve as excess reserves. This  is why over there is a trillion dollars in excess reserves not in the system.

Thus from Williams' perspective that monetary policy should be "supportive", he is absolutely clueless. He is really talking about a trillion dollars that is not in the system, just sitting on the sidelines as excess reserves.But to him this is somehow a "highly supportive" monetary policy.

On unemployment, Williams said:
Unemployment will come down with agonizing slowness.I expect unemployment to end 2010 at about its current level of 9 1/2%. Once growth picks up to a more robust pace, the unemployment rate should gradually decline, but only to about 8 1/2% by the end of next year.
How forecasters come up with these mechanistic forecasts on such things as unemployment is a mystery. If the Fed did lower the interest on excess reserves so that banks pumped that money into the system, the unemployment rate would drop dramatically because of the inflationary boost in wage rates it would cause.

Here again, though, Williams doesn't understand what the Fed is actually doing and the role of  Big government in the mess. With slowed money growth (a good thing, it is causing a a readjustment in the structure of the economy away from the sectors that benefit from manipulated money pumping.), this unemployment would be over quickly, if the Fed did not pay people not to work via unemployment payments. The one further hitch in the current environment is that the economy is becoming extremely over-regulated, which makes it very difficult for firms to make new hires, not knowing the cost of the new hires, e.g., not knowing what the healthcare expense of a new hires will be. But there is nothing that has to be "agonizing" about a drop in the unemployment rate, if the government switched from policies that promote unemployment.

Geithner's Thursday: Launching Regulatory Financial Hell

On Thursday afternoon, Treasury Secretary Geithner will meet with the heads of the agencies that will contribute "expertise and talent" to the new Consumer Financial Protection Bureau established under the Wall Street Reform and Consumer Protection Act.

The meeting will serve to formally begin an ongoing process of interagency collaboration around the stand-up of the Bureau, including discussions regarding the consolidation of regulatory responsibilities and staff to improve coordination and efficiency in consumer protection.

Meeting attendees will include Federal Reserve Chairman Ben S. Bernanke, Federal Reserve Governor Elizabeth Duke, FDIC Chairman Sheila Bair, FTC Chairman Jon Leibowitz, HUD Secretary Shaun J. Donovan, NCUA Chairman Debbie Matz, Comptroller of the Currency John C. Dugan, and OTS Acting Director John E. Bowman. OMB Director Peter Orszag also will attend

Soros Puts Up Clinton's During Chelsea's Wedding

Soros never misses an angle. Politico reports:
Another area manse rumored to be serving the family over the weekend will be Glenburn, where the Clintons are said to be staying over the weekend. Glenburn is the Rhinebeck home of Eric and Andrea Colombel. Andrea Colombel is the daughter of billionaire financier and longtime Clinton supporter George Soros.

Charlie Rangel Introduces Universal National Services Act

It's really time for this crook to go. Here's the bill:

HR 5741 IH


2d Session

H. R. 5741

To require all persons in the United States between the ages of 18 and 42 to perform national service, either as a member of the uniformed services or in civilian service in furtherance of the national defense and homeland security, to authorize the induction of persons in the uniformed services during wartime to meet end-strength requirements of the uniformed services, and for other purposes.


July 15, 2010

Mr. RANGEL introduced the following bill; which was referred to the Committee on Armed Services
Here are some of the characters that donate to keep t Rangel in office, while he cheats on his income taxes and is able to mysteriously buy (funding source unknown) Caribbean property (Via Washington Examiner):
Joseph Dowley, representing the Institute of International Bankers;

Justin Gray, representing taxpayer-owned GM;

Alan Wheat, representing Sanofi-Aventis and Roche;

Akin Gump lobbyists Robert Leonard and Jayne Fitzgerald, who represent Boeing, Bechtel, General Electric and Aetna.

Lobbyists from Patton Boggs, the Podesta Group and Ernst & Young have also funded Rangel.

C PACs giving to Rangel this year include:

the National Bankers Association,


New York Life,


Lockheed Martin.

Lobbying firm PACs funding Rangel's include:

Baker & Hostetler;

McKenna, Long & Aldridge; Holland & Knight;

and O'Melveny & Myers

Steve Forbes Endorses Peter Schiff for U.S. Senate

Steve Forbes on Wednesday endorsed Peter Schiff's bid for U.S. Senate in Connecticut.

"I have known Peter Schiff for several years. He has a deep knowledge of finance and economics," said Forbes. "He had long warned of the troubles we now face. As your citizen-Senator he will be a fierce fighter for cutting spending, cutting taxes and repealing Obamacare."

"Steve Forbes understands the massive strains the American economy is under, and to have his backing and trust means a great deal to me," said Schiff. "We need to restore free-market principles, get government out of the way and put people back to work. Steve's understanding of my vision, coupled with his backing, will help me get to Washington to make sure we grow the economy, not the government."

Linda McMahon, the former chief executive of World Wrestling Entertainment who said that she's willing to spend $50 million of her own money to win Connecticut's U.S. Senate race, continues to vastly outspend Schiff.

According to her latest FEC filing, covering the period from April 1 through June 30, McMahon put another $5.5 million into her campaign, bringing her total personal investment to $21.5 million — or more than seven times the amount Schiff has raised during the entire campaign.

A Quinnipiac Poll, released on Friday, of likely Republican voters in the August 10 primary showed McMahon with a commanding 39-point lead over Schiff.

Wednesday, July 28, 2010

One Month LIBOR Rate at 0.31563%

Michael Dunton, Senior Vice President, Finance, at Mt McKinley Bank writes:
Wow, LIBOR is pointing down.  Low rates + no quality loan demand + Obama assault on free enterprise + endless unemployment benefits = Depression

George Steinbrenner's First Class Tax Moves Against the Estate Tax

Not only did George Steinbrenner die in the best year possible from an estate tax perspective, since there is no estate tax this year, but he plotted a move so that if Congress attempts to retroactively institute one for this year, he will be years ahead of Congress.

NyPo has the details:

Where there's a will, there's a way -- to keep George Steinbrenner's millions all in the family.

In his last will and testament, a copy of which was obtained by The Post yesterday, the legendary Yankee owner went to great lengths to keep the taxman at bay.

The Boss' will stipulates that an undisclosed portion of his estimated $1.1 billion sports, shipping and racehorse-breeding fortune will go into a trust for his widow, Joan, 74.

And it assigns Steinbrenner's lawyer, Robert Banker, to decide whether that trust pays federal estate tax for this year, or not until after Joan Steinbrenner dies.

DODGER BALL: George Steinbrenner's will stipulates that a trust set up for his wife, Joan, can defer a decision on when to pay federal estate taxes.
 Although there currently is no federal estate tax for 2010, that could change if Congress acts to close the loophole and enacts such a tax retroactively, putting Steinbrenner's estate on the hook for $500 million or more. But under the law, Banker would have nine months from Steinbrenner's July 13 death to decide if the estate should pay estimated estate tax for a 2010 filing -- or at the rate in effect whenever Joan dies. Banker can take another six months before deciding to make that move permanent. "That would give him maximum flexibility to deal with the estate tax," said Peter Valente, a top estate lawyer at the Blank Rome firm. "They have a lot of time to deal with this." Valente said that because Banker will not have to decide until after Congress acts -- or fails to act -- on the estate-tax question, he will have a clearer picture of what each scenario would cost The Boss' estate.

If Congress never acts to close that loophole, then there would be no estate tax ever owed by Joan or any of the other beneficiaries

Further Indications of Expanding Federal Government

In June, among metro areas with populations over one million, Washington, D.C. and the surrounding suburbs had the lowest unemployment rate at 6.4%. Las Vegas had the highest at 14.5%.

The overall highest unemployment rate of the  372 metropolitan areas reported on by the BLS was in El Centro, Calif., where the jobless rate hit 27.6%. Yuma, Ariz. was the second highest at 26.4%.

Bismarck, N.D., had the lowest unemployment rate in June, 3.8%.

In June, the national average was  9.5%.

Geithner to Speak at NYU's Stern School of Business

The Department of the Treasury today announced that Secretary Tim Geithner will deliver remarks on the "next steps for financial reform" on Monday, August 2, 2010 at New York University’s Stern School of Business.

On the heels of enactment of the Wall Street Reform and Consumer Protection Act, Geithner will lay out "the path forward and the core principles guiding the implementation" of the reforms.

After his remarks, the Secretary will engage in a question and answer session with the audience.

Geithner's speech will be at 4:00 PM EDT at:

NYU Stern School of Business

Kaufman Management Center

The Gardner Commons

44-50 West Fourth Street

New York City

Durable Goods Orders Down 1%

New orders for manufactured durable goods in June decreased $2.0 billion or 1.0 percent to $190.5 billion, the U.S. Census Bureau announced today. This was the
second consecutive monthly decrease and followed a 0.8 percent May decrease. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new
orders decreased 0.7 percent.

Shipments of computers and electronic parts were down 4.1%. Shipments of communications equipment were down 6.2%. New orders for nondefense aircraft and parts plunged 25.6%. New orders for defense aircraft and parts was up 6.5%. In the battle of guns and butter, guns are obviously winning.

Sumner Redstone's One Man Stimulus Program

Yesterday, reports surfaced that Viacom chairman Sumner Redstone gave the bi-curious lead singer of the all  girl-band the Electric Barbarellas, Heather Naylor, some of his own company stock as a personal gift.

Reportedly, Sumner also put pressure on Viacom-owned  MTV to create a reality-show following the group's attempt to break into the music business. The show is currently in development despite the objection of MTV executives, who felt the band lacked talent.

Naylor, btw, immediately sold Redstone's gift of stock for roughly $157,000, according to a filing with the Securities and Exchange Commission.

This wasn't the only step in Redstone's hiring binge. Today reports are surfacing that Redstone apparently gave Rohini Singh a gift of 2,522 shares of Class B Viacom stock that she sold in March for just under $77,000,

The 87-year-old billionaire also forced Showtime, CBS's pay-TV division, to put Singh, who is, according to NyPo, apparently unqualified, on the company's payroll.

Rohini Singh
Rohini Singh, No longer an unemployment statistic

Sources told The Daily Beast that Singh, a veteran of the LA club scene, was hired last summer in the publicity office of Showtime at the direction of Redstone himself -- much to the chagrin of network employees, who were in the midst of a hiring freeze, the website reported.

Redstone ordered Showtime execs to give Singh free rein to pick the job she wanted because of the billionaire's "personal relationship" with her, a former CBS insider told The Daily Beast. Showtime executives “at first tried to find something industrious for her to do,” the source said, adding that after a rotation in casting, programming, and other departments within the network, Singh landed in publicity, in part because her best asset is her ability to party.

If this keeps up, the sluggish unemployment picture will be over in no time.

BOE’s Miles: Further Asset Purchases May Be Warranted “at Some Point in the Future”

They know the ship is teetering.

'Hair of the Dog' Economics Won't Work

Bill Anderson writes:
I had no idea that Ezra Klein is a brilliant economist, but apparently he agrees with Paul Krugman, so he needs no more qualifications. Granted, he had his flash of brilliance more than a year after Krugman's epiphany, but nonetheless he still is brilliant.

Klein's "insight" is that the government did not spend enough money this past year. Krugman, on the other hand, said last year that the "stimulus" was not generous enough and would fail to stem the economic downturn...

So, for lack of an extra $400 billion, all we got was this lousy depression...

So, if I am to interpret this stuff correctly, had Obama had Tim Geithner sell just another $400 billion of Treasuries to the world, the economy would have gained "traction" (Krugman's favorite term) and we would be bouncing toward recovery as we speak.

Sorry, folks, that dog won't hunt. The problem was not that we spent too little; the problem was that the government refuses to understand that credit-fed booms are unsustainable and that this Keynesian "hair of the dog" strategy (in which we don't take just a little whiskey, but drink an entire case) is doomed to failure.

Ironically, in the name of "avoiding the mistakes of the 1930s," our government is taking us down the same path that Hoover and FDR took us. Happy Unemployment, America.

Dr. Boom Turns Almost Bearish

How bad are things getting?

Perennial Bull, Mark J. Perry, notes some negative economic numbers:

There have been some signs of a slowdown in the strength of the economic expansion in May and June (including the Richmond and Chicago Fed releases today on manufacturing activity in those regions), and the trucking tonnage index decrease in June probably helps to confirm that.  But we should also keep in mind that manufacturing has been leading the economic recovery, and some uneven "starts and stops" in the economic recovery are to be expected.  

Barney Frank Turns Into a Drama Congressman

The Frank of the Dodd-Frank Bill was dissed over a ferry fare, and didn't like it. It was all drama. NyPo has the details:

Massachusetts Congressman Barney Frank caused a scene when he demanded a $1 senior discount on his ferry fare to Fire Island's popular gay haunt, The Pines, last Friday. Frank was turned down by ticket clerks at the dock in Sayville because he didn't have the required Suffolk County Senior Citizens ID. A witness reports, "Frank made such a drama over the senior rate that I contemplated offering him the dollar to cool down the situation." Frank made news last year when he was spotted looking uncomfortable around a bevy of topless, well-built men at the Pines Annual Ascension Beach Party. Frank's spokesperson confirmed to Page Six that his partner, James Ready, asked the ticket office for a regular ticket for himself and a senior ticket for Frank, "but was turned down because Frank didn't have a resident ID."
It should be noted that this cheapskate in personal life has never seen a Congressional spending bill he hasn't liked as long as  he could force taxpayers to pay for it.

Outlook for Steel Not So Strong

Steel makers painted a gloomy picture for the short-term prospects of the industry on Tuesday, saying global prices had fallen and industrial demand was not recovering as quickly as expected, reports Reuters.

 The United States Steel Corporation said it was seeing slower order rates and the AK Steel Holding Corporation said it was cutting production capacity to match weak demand from big steel buyers like the automobile and construction industries, according to Reuters.

Elizabeth Warren Watch

With Wall Street and Congressional Republicans trying to scuttle the possible nomination of Elizabeth Warren as the director of the powerful new Consumer Financial Protection Bureau, there's growing speculation that the White House will announce its choice for the post in August, after Congress has adjourned for its summer recess, reports CNBC's Albert Bozzo.

The thinking is that with fewer Congressmen in Washington, there will be fewer Congressmen to bad mouth the Obama announcement.

Tuesday, July 27, 2010

Western Mercantilists Take Their Show on the Road

By Joseph Nelson

Evidently, western garment manufacturers, under protest from workers and with the help of local labor unions, have pressured the government of Bangladesh to raise the minimum wage for garment workers.

Not content with fleecing the populations of their respective homelands, western mercantilists have taken their show on the road. In an attempt to stifle competition from entrepreneurs in the developing world, western garment manufacturers have conspired with labor unions and government officials to raise the minimum wage for workers in Bangladesh.

As the BBC reports, “following allegations they were using exploitative labour in the country's factories, some Western companies earlier this year asked the Bangladeshi government to raise the minimum wage for its workers.”

This begs the question, “if you are a garment manufacturer concerned about your worker's pay, why not raise the hourly wage yourself?” The answer: a bright Bangladeshi entrepreneur might come in and undercut my prices. Like mercantilists economic laws of supply and demand are not bound by borders. Unfortunately, these new minimum wage laws will stunt competition, raise unemployment among those whose marginal revenue is less than the new wage and increase prices for consumers. The benefits, of course, will be for a few western companies and the local labor unions.  Disappointing news from an already struggling country.

Joseph Nelson is studying for his MBA at NYU's Stern  School of Business.

What's Really Going On in the Economy: It's Worse than the 'Great Recession' of 2008

Consumer Metrics Institute is out with their latest numbers. It isn't pretty. As I have pointed out, CMI data is real time and light years ahead of the data put out by the government, it should be taken seriously as the best indicator of what is going on in the economy in terms of demand for capital goods in the consumer sector. Here's their latest:
Since last week our Daily Growth Index has weakened further, surpassing a year-over-year contraction rate of 3%. This daily measurement of on-line consumer demand for discretionary durable goods has now dropped to the lowest level it has recorded since late November 2008.

► The current contraction in consumer demand for discretionary durable goods has now extended for more than 6 months.

► The day to day level of the year-over-year contraction is now worse than a similar reading of the 'Great Recession' of 2008 was after 6 months. [Although the 2008 Recession did dip lower, it was recovering at this point in time due to Bernanke's money printing in late 2008 into early 2009-RW]

► Although this contraction has not yet reached the extreme contraction rates that were seen during 2008, after 6 months it has not yet formed a bottom. Furthermore, it is now likely to last longer than the 2008 event.
What's going on here can be understood in terms of Austrian Business Cycle Theory. The first leg of the downturn was reversed as a result of extremely aggressive Fed printing between late 2008 and early 2009. That money printing started to manipulate the economy higher in a distorted manner back into the capital goods sector.

The current second leg is the result of the money slowdown that began in early 2009. It isn't as "deep" because of the liquidations that occurred in the first leg of the downturn, e.g., a house in this short a time period doesn't go through foreclosure twice. The second leg is mostly about completely new liquidations that are occurring because of the propping up the Fed did with their brief late-2008, early 2009 printing.

Housing Numbers Not as Exciting as the Headlines Look

The 10-City Case-Shiller Home Price Composite Index increased in May by 5.4% and the 20-City Composite Index increased by 4.6% compared to May 2009. MSM will blast these numbers without context.

According to David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, here's what's really going on:
While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery. Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The two Composites have improved between 5 and 6% since then, but this is no better than the improvement they had registered as of October 2009. The last seven months have basically been flat...The May 2010 data for 15 of the 20 MSAs and the two Composites show an improvement in annual returns compared to April’s report. With the month-over-month data, while 19 of the 20 MSAs and the two Composites were positive, we are in a strong seasonal period for home prices, so that was largely expected. In addition, there may still be some residual impact from the homebuyers’ tax credit, since they affect any purchase that closes through June 30th 2010. We need to watch where the housing markets will go after these temporary stimuli go away. June’s existing and new home sales and housing starts data do not show much real improvement in those statistics either. It still looks possible that the housing market might bounce along the bottom for the foreseeable future

The Boston Red Sox Beat Out the Yankees to be the First Billion Dollar Club...

Based on market transactions.

Marketwatch explains:
The Boston Red Sox may have beaten the New York Yankees to the punch to become the first billion-dollar baseball club in history.

The remarkable valuation was apparently placed on the Sox -- and their cable arm, New England Sports Network -- in a transaction earlier this year. We learned financial terms last week.

The New York Times Co., a minority owner in the Sox, reported Thursday that it had booked a $9.1 million gain selling shares to Boston-based venture capitalist Henry McCance earlier this year.

It released no other financial terms, and declined to comment for this column.

However we know that the Times made the profit selling 50 of its 750 units in New England Sports Ventures, parent company of the Sox and their cable TV channel.

We also know that the Times paid $5 million for those 50 units eight years ago, when it paid $75 million for 750 units.

A $9.1 million profit on a $5 million purchase implies a $14.1 million sale. The shares sold amounted to 1.2% of the Sox. By that math, the total value of the club would be $1.2 billion...

Rob Tillis, managing partner of Inner Circle Sports, a firm specializing in sports finance, says the deal may actually understate the value of the Sox. An investor taking a controlling interest would typically pay a premium, he says. The $1.2 billion figure, he says, "is a low number."...

The Yankees will surely be worth even more than this if George Steinbrenner's heirs decide to sell. Forbes magazine puts the value of the Yankees at $1.6 billion. Rob Tillis suggests it may be higher. But there has been no transaction as yet...

Gold Down Nearly 2%

Gold futures are down nearly 2% and trading at three-month lows.

Gold for August delivery lost $21.80, or 1.8%, to $1,161.20 an ounce on the New York Mercantile Exchange. A close around these levels would be gold's lowest in three months and mark a decrease of nearly 8% from the record high of $1,258.30 set June 18.

The only way to understand this is that when the Fed isn't printing money (and they aren't currently printing very much)there is no new money to bid gold up. This will likely reverse at sometime when the Fed starts buying up government debt, but short-term the trend for gold appears to be down.

How Hot is Rand Paul?

Jeb Bush wants to rub shoulders with him.

Bush planned to attend a fundraiser for Paul's U.S. Senate campaign in Louisville on Monday, reports AP.

Naturally, Democrats and WaPo are outraged that Bush would do such a thing.

If Regulators Say Trade Through a Central Exchange...

Goldman Sachs starts a central exchange.

Is it me, or does it just seem that whatever the rules or regulations, Goldman comes out on top and pretty much ends up running the show?

Regulators are preparing rules that will require the majority of privately traded derivatives be cleared through central counterparties.

Goldman Sachs announced today the launch of its Derivatives Clearing Services (DCS) business. The DCS will provide clients with a comprehensive global OTC clearing service for interest rates, credit, foreign exchange, equities and commodities, says Goldman.

“In partnership with our clients, regulators and multiple clearing venues, we are committed to improving market structure for derivatives,” said Michael Dawley, Managing Director and Co-Head of Futures and DCS, Goldman Sachs. “The DCS offering provides our clients with a host of value-added services and multi-product expertise to successfully navigate this dynamically changing environment.”

According to a press release,Goldman Sachs said it recognizes that clients will be faced with new reporting, connectivity, and regulatory requirements. The firm is committed to investing in innovative solutions to help clients address these changes.

“The move to central clearing for OTC derivatives is a significant turning point in the marketplace," said Jack McCabe, Managing Director and Co-Head of Futures and DCS at Goldman Sachs. “Our strong trading franchise, coupled with our market leading futures and prime brokerage services, enables us to provide our clients with the foundation they need to adapt to these important industry developments." 

The Inflation Witch

IndiaRealTime reports:
India’s common man now has a song to protest against rising prices. And everyone wants a piece of it.

Peepli Live, a film by Aamir Khan Productions, has a track titled “Mehangayi Daayan” (the inflation witch.) It speaks about how the ordinary man has been hurt by rising prices...

The traditional song in Peepli Live is sung by the village musicians of Badwai in the central Indian state of Madhya Pradesh who normally make music during festive or ritual occasions.

The lyrics: “Sakhi saiyyan toh khoob hi kamaat hai/Mehangayi daayan khaye jaat hai/Har mahina uchle petrol, diesel ka uchla hai role…”

(My husband earns a lot, but the second wife inflation is eating it all up, prices of petrol and diesel are rising every month…)

Inflation in the U.S. is relatively tame right now, but that is unlikely to last long term. IndiaRealTime reports on the U.S. inflation song sitting in wait:

If you are not a Bollywood junkie, here’s a song by the American blues guitarist and singer B.B. King,

“Hey Mr. President

All your congressmen, too

You got me frustrated

And I don’t know what to do

I’m trying to make a living

I can’t save a cent

It takes all of my money

Just to eat and pay my rent

I got the blues

Got those inflation blues”

Shiller: I Expect Double-Dip Recession

Robert Shiller, Yale econ prof and co-developer of Standard and Poor's S&P/Case-Shiller home price indexes, told Reuters Insider he does not know where home prices may be headed, but believes the economy may be on a precarious path.

"For me a double-dip is another recession before we've healed from this recession ... The probability of that kind of double-dip is more than 50 percent," Shiller said. "I actually expect it." 

I do not consider Shiller a strong economic forecaster nor strong on economic theory. However, because of the home price indexes he puts together, he sees whats in front of him. And given his double-dip talk, what he sees in front of him can't be very good.

Apple Pounds Blackberry (Maybe)

Here's an example of how statistics can deceive.

The iPhone is putting heavy under pressure on Blackberry sales, supposedly, according to a Reuters report appearing in NYT.

Blackberry's share of the U.S. smartphone market fell to 41% in the first quarter of 2010 from 55% the previous year.

This, however, could be one of those misleading stats. There may be new buyers of the iPhone who never had a smartphone before. Thus, Blackberry may be holding its own in smartphone sales in terms of absolute sales, and a new type of buyer has entered the market for iPhones.

The Reuters/NYT story does not provide enough data (absolute sales data) to make a informed conclusion. Beware misleading statistics.

Naturally, Harvard Business Review is running the misleading stats.

IRS Clarification on 1099 Forms for Gold and Silver Coins

The requirement tucked inside the Healthcare Bill that requires gold coin dealers to file 1099 forms on anyone buying or selling coins with a value of over $600, apparently goes way beyond just coins.

The provision also applies for any other goods worth over $600 bought or sold by businesses of all sizes, charities and other tax-exempt organizations, and government entities.

But, the IRS has already issued one clarification given the uproar. Purchases made by credit cards and debit cards will not have to be reported.

Obviously, the provision is about attempting to track cash flows (particularly from gold and silver sales).

Indeed, according to the National Taxpayer Advocate (a taxpayer "advocate" department within the IRS), "the new information reporting requirements are likely intended to detect unreported income or gross proceeds."

Bottom line: More than anything, the provision is about getting the names and Tax ID's of those buying and selling gold and silver coins.

Are Regulators Attempting to Kill Off the Money Market Mutual Fund Industry?

Both the SEC and the President’s Working Group on Financial Markets (the Plunge Protection Team) are considering whether Money Market Funds should be forced away from their stable $1.00 value method of maintaining money market share prices. A move by regulators forcing money market funds away from the maintenance of the $1.00 price would cause huge hiccups in the  industry and perhaps result in the end of the industry. At a minimum, it would cause huge withdrawals.

That regulators are suddenly focusing on these funds and at the core element of their appeal is curious. Are the insider banks behind the idea in the hope that the money will flow to them? Does the government expect more of the money to flow into Treasury Bills (then already does0? Whatever is behind this focus, there is no legitimate reason behind an attempt at such a regulation.

At Crane’s Money Fund Symposium, Paul Schott Stevens, President and CEO of the Investment Company Institute spoke about the problems that a move away from $1.00 pricing would mean: market funds remain firmly opposed to proposals that would force them to abandon their stable per-share value. And we are not alone in that stance. America’s businesses, along with state and local governments, are rallying in opposition to any suggestion that regulators would force money market funds off their stable $1.00 net asset value.

The idea of floating these funds’ value is likely to be discussed in the President’s Working Group report, whenever it may be issued. And it’s still in the air at the SEC, which is contemplating a “round two” rulemaking to address any lingering issues in money market funds and Rule 2a-7.

Proponents of the floating NAV see this idea as a home run – a way to solve any problems of systemic risk that might somehow arise from money market funds with one swing of the bat.

We think it’s more of a foul ball.

Forcing money market funds to float their NAV will not eliminate the chances of investor runs. Nor will it reduce risks to the financial system in a severe liquidity crisis. What it will do is destroy money market funds as we know them – imposing severe dislocations on America’s households, businesses, and governments, and disrupting the American economy.

At ICI, we have been making this case to anyone who will listen, and urging users of money market funds and issuers in the money markets to speak out. And I’m pleased to report that they are responding.

In the last several weeks, groups representing state and local governments have come out squarely in opposition to forcing money market funds to float. The National Association of State Treasurers; the Government Finance Officers Association; and the National Association of State Auditors, Comptrollers, and Treasurers – all have voiced their support for the ability of funds to operate with a stable NAV.

The SEC’s own Investor Advisory Committee has before it a resolution, strongly backed by one of its subcommittees, that calls upon the Commission to preserve the stable NAV as a core feature of money market funds.

And America’s businesses are also mobilizing. Just last week, four of the leading organizations in corporate finance joined in a letter to Treasury Secretary Timothy Geithner urging him to reject the notion of abandoning the stable NAV. The letter was signed by the National Association of Corporate Treasurers; the Association for Financial Professionals; Financial Executives International; and the U.S. Chamber of Commerce.

They note that floating these funds will drive away investors, and the resulting drain of assets will [QUOTE] “severely impair the ability of companies to raise capital in the U.S. and undermine efforts to strengthen the American economy.”

More than 40 companies – many of them household names – have signed on to this letter or others urging the President’s Working Group to drop the idea of floating NAVs.

These organizations and others have emphasized that it is vital to preserve the essential, defining characteristic of money market funds – because they all recognize the highly important role that these funds play in our markets and our economy...

A retail investor expects that $1 put into a money market fund will count for $1 when writing a check or making a withdrawal. If money market funds cannot provide that, retail investors will have no alternative but to use bank accounts – by no means an ideal substitute.

Institutional investors already have many alternatives. But they stick with money market funds in large part because a floating-value fund would mean constant accounting and tax headaches. In such funds, investors must track realized or unrealized capital gains and losses in their position and conduct detailed record keeping when there are changes in the value of their money market fund investments.

So if regulators forced money market funds to abandon their stable $1.00 value, institutional investors would leave. As one institutional investor has told us, “If a money market fund is not dollar-in, dollar-out, you won’t have my dollar.” Indeed, many institutions are required by law or by investment policy to keep cash in stable-value accounts...

In short, forcing money market funds to float their values would kill these funds as we know them – without reducing systemic risk. In fact, it seems highly likely that the world would be a riskier place for investors, for issuers, and for the markets.

At the same time, the flow of hundreds of billions of dollars that money market funds supply to various sectors of the economy would be severely disrupted. Short-term financing that is vitally important to businesses would be at risk...

A Full Public Schedule for Geithner on Tuesday

On Tuesday morning, Treasury Secretary Geithner will attend the President's Economic Daily Briefing at the White House.

Later in the morning, the Secretary will attend the President’s meeting with Speaker Nancy Pelosi, Senator Harry Reid, Senator Mitch McConnell, Congressman John Boehner, and Congressman Steny Hoyer at the White House.
In the afternoon, the Secretary will meet with members of the Congressional Asian Pacific American Caucus.

Later, the Secretary will meet one-on one with the President at the White House.

Later, the Secretary will meet with the President at the White House

Pelosi Spoke at Netroots Nation Event

ShopFloor is reporting that House Speaker Nancy Pelosi spoke at the Netroots Nation conference held in Las Vegas, over the weekend.

Eralier I reported that an entire cast of interventionists atteneded the event including, Elizabeth Warren , Center for Community Change Executive Director Deepak Bhargava, Green for All’s Phaedra Ellis-Lamkins, National People’s Action Executive Director George Goehl and AFL-CIO President Richard Trumka.

Pelosi would obviously fit right in with this crew.

Monday, July 26, 2010

Elizabeth Warren: Was She Confused or Intentionally Misleading?

Todd Zywicki catches Elizabeth Warren in a mathematically incorrect argument. Megan McCardle writes:

Does it matter if we have a regulator who can use data consistently?  A lot of commenters seem angry that I would suggest it might.  As for me, I don't know which is worse:  the notion that Elizabeth Warren understood what she was doing, or the notion that she didn't.

The Truth About Healthcare in Sweden

Hans Palmstierna emails:

It's quite marvellous what living in a socialist society does to your perception and moral. When I read your recent post on the coming cuts to UK healthcare, my spontaneous thought was :

"Doesn't seem to bad. I've heard of worse here at home. "

Having lived my entire life in a public healthcare system, I guess I am not fully able to grasp what it would mean to actually be able to rely on getting the healthcare necessary, if and when you need it. Healthcare in Sweden is good, assuming you get it. Everyone knows that to get it you have to be a large enough pain in the behind of bureucrats, doctors, hospital staff and/or anyone else that might help you in your quest for care just to make you go away. Just as an example, we have lots of people dying while they wait for surgery. Old people generally don't get really risky treatments (hip replacements? dont think so). The thing that frightens me the most is that I just shrug and say "whats new?". I recall a history of a woman who hurt her neck and had a constant headache for three or four years, until she finally went to another country where they performed a simple surgery that kept the bones in her neck stable. She paid something like a years salary for this - but if it weren't for foreign healthcare she would have had a head-ache for the rest of her life. Why? The surgery wasn't standardized in Sweden, considered too risky, and bureucrats therefore kept standing in her way.

I guess it will be harder for those of you who have actually had real healthcare - I just make sure not to get sick, mostly....

Things We are Learning About the HealthCare and Financial "Reform" Bills

As details are disclosed on these massive bills, I will update this list.

The Healthcare Bill:

*You will be required to pay personal income taxes on the employer's contribution to your health insurance. (More details here.)

*Requires gold coin dealers to fill out 1099 forms (to be sent to the IRS) on any gold coin purchases or sales over $601(More details here)
*Coverage for the previously uninsured will be "paid" in part by a reduction in healthcare payments to the elderly and disabled.(More details here)

The Financial "Reform" Bill

*New Minimums on What You Can Charge on a Credit Card (More details here)

*The SEC is exempt from the Freedom of Information Act as a result of a clause in the Dodd-Frank Bill (More details here)

*Contains a provision that requires companies buying gold and other minerals to submit an annual report outlining what they are doing to ensure their minerals are "conflict-free." (More details here)

*Raises the maximum FDIC deposit insurance amount to $250,000 (More details here)

* Section 1205 is a provision titled "Low-cost alternatives to payday loans" in which the government outlines its plans for establishing what is essentially a payday loan advance business (More details here)

On Being One Step Ahead of Totalitarianism

By Simon Black 

By the late summer of 1939, Hitler's forces had absorbed Austria and Czechoslovakia into his growing empire, and Germany's military was massed at the Polish border clearly preparing for invasion.

In an astonishing display of perhaps the greatest complacency in the history of the modern world, however, Polish people sat lazing about their lakes, beaches, and riverbanks worrying about more pressing matters-- like how to beat the summer heat.

In September of that year, German troops easily vanquished the Polish army, and Krakow became the colonial seat of the occupying forces. Almost immediately, under the direction of the German SS, anyone who posed a threat was rounded up and imprisoned. This included over 180 Polish university professors and many businessmen.

Krakow, of course, is also very close to two of the main concentration camps used during the German occupation, nearby Oswiecim (Auschwitz) and Plaszow.

The worst part is that, even after the war was over, Poland merely swapped fascism for Stalinism. Overall, the country was shrouded in brutal totalitarian control for half a century; undoubtedly, the Nazi invasion of Poland set off a chain of events that would forever affect the lives of all Poles.

It's true that no one had a crystal ball back then... but it would certainly stand to reason that with Hitler knocking at your door, you would probably want to have an escape plan. Even more prudently, perhaps to have already executed it.

Many Poles did just that; they spent the preceding seasons liquidating assets, stocking up on gold, and getting their travel documents in order.  By the time Hitler came to town, many of the smart ones were already gone.

My guess is that the ones who left were probably ridiculed by their peers as "crazy", or "fringe", or "out of touch", or my personal favorite, "unpatriotic." It's as if they had a solemn national duty to stay, get roped up and waste away in a concentration camp for the 'greater good' of Poland.

For those who escaped before the war, many of them went on to build new lives in places like the United States, Brazil, and Argentina.  They prioritized freedom and opportunity, and they went to the best places that were safest for themselves and their families.

I've met a businessman here (I'll call him "Jarek") who I think has the best story to sum this up; when Jarek's father was just a boy in Krakow, the family saw the warning signs and decided to leave town. This was 1938.

Jarek's grandfather owned a successful bakery at the time, yet he felt that he would rather start over somewhere else than risk the safety of his family by living in a police state. They sold everything-- the house, livestock, and business... and everyone else thought they were crazy.

Within six months, the family was in Curitiba, Brazil; Jarek's grandfather soon established a new bakery that eventually became a thriving business. Jarek's father grew up in Curitiba and integrated into the local culture, yet he maintained his roots since there were many other Poles who followed them there.

30-years later, the face of Brazil started to change. By the mid-1960s, the whole of Latin America was becoming a military dictatorship.  Once again, the family decided to get out while they could and head towards better opportunity; they sold the business, liquidated their assets, and this time headed towards the United States.

Jarek was just a baby when the family made this move. He grew up in a Polish neighborhood of Chicago, spoke Polish at home, and married a Polish girl from his neighborhood.

He was working as a young real estate professional in the Chicago suburbs when the Berlin Wall fell, at which point he began making more frequent trips to Poland to visit his family's homeland.

Read the rest here.

The ObamaCare Screwing of the Elderly and Disabled Begins

The current system of healthcare where government and businesses are major providers of healthcare "insurance" is a system that started as a result of wage controls during World War II. Before that individuals took care of their own health care. Employers attempting to get around wage controls offered to pay for employee health insurance.

From that start, the cut was made between individuals taking care of their own healthcare needs, and it slowly developed into the current sustem.

The current system is a mess and we should really revert back to individuals taking care of their own health care and insurance. That said, there are many people, especially the elderly, who planned for their old age with the idea that government would provide for their healthcare. The belief that government is going to provide for them is now being proved to be just another government lie. Like  home ownership and the education system, the structure of the healthcare system is collapsing---all three sectors have heavy government involvement.

In what appears to be an attempt to buy votes, ObamaCare is shifting funds allocated for healthcare away from the elderly toward the young. Specifically the young who, for whatever reason, have chosen not to obtain health care on their own, but who certainly are in a much better position to earn the money for healthcare, then the elderly.

Here's WSJ on what is going on:

Across the country, dozens of private insurers that run....Medicare plans are preparing to pare dental, vision and certain prescription-drug coverage starting next year, according to consultants who have helped them assemble annual bids.

Although some planned cuts might not materialize given Congress's history of tabling unpopular measures, the law represents the tip of a broader change. Most Americans know the overhaul is designed to cover the uninsured, a decades-long goal of Democrats. But it also represents a change in how the government spreads its social safety net underneath Americans. Already, it's creating tensions that are a harbinger of debates to come.

Since the creation of Social Security and Medicare, younger workers have funded programs for the elderly. It's a compact in which workers paid for retirees with the understanding that they'd be looked after by the generation behind them.

The health overhaul diverges by tapping a program for the elderly to help provide insurance to 32 million Americans of younger generations. Nearly half the funding for the law is supposed to come from paying lower fees to hospitals, insurers and other health-care providers that participate in Medicare, the federal insurance program for Americans age 65 and older, as well as younger disabled people.

The 44 million Americans on Medicare won't see changes to their guaranteed benefits under the law. But of those, 11.3 million on Medicare Advantage plans, a public-private hybrid ... are likely to begin seeing extra benefits go away as soon as next year. Medicare Advantage cuts are slated to pay for 15% of the health-care law's tab...

"I'm sure that some of those additional benefits have been nice," Nancy-Ann DeParle, who runs the White House's Office of Health Reform, says of Medicare Advantage plans. "But I think what we have to look at here is what's fair and what's important for the strength of the Medicare program long term."...

John Gorman, a consultant who helped insurers prepare bids, says his clients are planning to raise non-essential emergency room co-pays to $500 from $200. They're pushing enrollees toward generic drugs and charging more for optometrist visits...

Humana, which administers Medicare Advantage plans to 1.75 million seniors, is trying to pare 15% of its overall costs, in part to offset lower expected government payments.

"There's no question that either premiums go up or either benefits go down over the long term," said Michael B. McCallister, Humana's president and CEO. "Everything is on the table.
Remember, this is just the beginning. With greater government involvement in healthcare, price signals will be distorted. Instead of individuals making decisions about their own healthcare, the decisions will ultimately be made by the lobbyists who are best able to capture health regulators. Think in terms of more useless H1N1 vaccines, versus medical innovation like the technological innovation that comes out of Silicon Valley.

With payments being made on useless products and near useless products, the payments to the elderly and disabled will continue to shrink, as will the services to the young. Think long-lines,waiting lists and poorer quality treatment.

Frightening Healthcare Rationing on Its Way to the UK

The UK's National Health Service has drawn up secret plans for sweeping cuts to services, with restrictions on the most basic treatments for the sick and injured, the UK's Telegraph reports.

Patients’ groups have described the measures as “astonishingly brutal”, says the Telegraph.

The Telegraph reports the following horrifying details:

* Restrictions on some of the most basic and common operations, including hip and knee replacements, cataract surgery and orthodontic procedures.

* Plans to cut hundreds of thousands of pounds from budgets for the terminally ill, with dying cancer patients to be told to manage their own symptoms if their condition worsens at evenings or weekends.

* The closure of nursing homes for the elderly.

* A reduction in acute hospital beds, including those for the mentally ill, with targets to discourage GPs from sending patients to hospitals and reduce the number of people using accident and emergency departments.

* Tighter rationing of NHS funding for IVF treatment, and for surgery for obesity.

* Thousands of job losses at NHS hospitals, including 500 staff to go at a trust where cancer patients recently suffered delays in diagnosis and treatment because of staff shortages.

* Cost-cutting programmes in paediatric and maternity services, care of the elderly and services that provide respite breaks to long-term carers.

The Sunday Telegraph found the details of hundreds of cuts buried in obscure appendices to lengthy policy and strategy documents published by trusts. In most cases, local communities appear to be unaware of the plans
Think of this as a preview as to what will happen under Obamacare. Micromanaging something as huge as the healthcare system is simply an impossibility that will ultimately fail. Micro-managers kill off incentives for people to work, distort price structures and kill off innovation. Further, new capital needed to keep such a huge sector of the economy operating, and expanding, is sucked off by the politically powerful. This is why shortages and cuts in services develop. It's Economics 101. Anyone who fails to respect Econ 101 suffers from what Hayek called, "The Fatal Conceit", i.e., thinking the economy, or huge parts of it, can be micromanaged. Not going to happen, successfully.

Stocks that Oligarchs Buffett and Soros both Own

A Brief review of the companies with ownership of each investor, via

Nalco Holding Company (NLC)
Warren Buffett owns 9,000,000 shares of NLC, valued as $219 million as of Mar. 31, 2010, which accounts for 0.43% of his equity portfolio. George Soros owns 8,800 shares of NLC, valued as $0 million as of Mar. 31, 2010, which accounts for 0% of his equity portfolio.

During the past century, Nalco Holding Company has grown from a fledgling water treatment business to a provider of integrated water treatment and process improvement services, chemicals and equipment programs for industrial and institutional applications. Nalco Holding Company has a market cap of $3.37 billion; its shares were traded at around $24.4 with a P/E ratio of 26.1 and P/S ratio of 0.8. The dividend yield of Nalco Holding Company stocks is 0.6%. Nalco Holding Company had an annual average earning growth of 4.5% over the past 5 years.

Comcast Corp. Special (CMCSK)
Warren Buffett owns 12,000,000 shares of CMCSK, valued as $216 million as of Mar. 31, 2010, which accounts for 0.42% of his equity portfolio. George Soros owns 66,100 shares of CMCSK, valued as $1 million as of Mar. 31, 2010, which accounts for 0.02% of his equity portfolio.

Comcast Corporation is principally involved in the development, management and operation of broadband cable networks, and in the provision of electronic commerce and programming content. Comcast Corp. Special has a market cap of $52.7 billion; its shares were traded at around $18.23 with a P/E ratio of 15.1 and P/S ratio of 1.5. The dividend yield of Comcast Corp. Special stocks is 2.1%. Comcast Corp. Special had an annual average earning growth of 14.9% over the past 10 years.

IngersollRand Company Ltd. (IR)
Warren Buffett owns 5,636,600 shares of IR, valued as $197 million as of Mar. 31, 2010, which accounts for 0.39% of his equity portfolio. George Soros owns 76,400 shares of IR, valued as $3 million as of Mar. 31, 2010, which accounts for 0.04% of his equity portfolio.

Ingersoll Rand Company is one of the providers of security and safety, climate control, industrial productivity and infrastructure products. Ingersollrand Company Ltd. has a market cap of $12 billion; its shares were traded at around $37.29 with a P/E ratio of 20.3 and P/S ratio of 0.9. The dividend yield of Ingersollrand Company Ltd. stocks is 0.8%.

CarMax Inc. (KMX)
Warren Buffett owns 7,725,900 shares of KMX, valued as $194 million as of Mar. 31, 2010, which accounts for 0.38% of his equity portfolio. George Soros owns 59,900 shares of KMX, valued as $2 million as of Mar. 31, 2010, which accounts for 0.02% of his equity portfolio.

CarMax Group is a subsidiary of Circuit City Stores, Inc. Carmax Inc. has a market cap of $4.69 billion; its shares were traded at around $20.99 with a P/E ratio of 14 and P/S ratio of 0.6. Carmax Inc. had an annual average earning growth of 18.7% over the past 5 years.

Lowe's Companies Inc. (LOW)
Warren Buffett owns 6,500,000 shares of LOW, valued as $158 million as of Mar. 31, 2010, which accounts for 0.31% of his equity portfolio. George Soros owns 47,600 shares of LOW, valued as $1 million as of Mar. 31, 2010, which accounts for 0.02% of his equity portfolio.

Lowe's Companies Inc. is a retailer of home improvement products in the world, with specific emphasis on retail do-it-yourself and commercial business customers. Lowe's Companies Inc. has a market cap of $30.17 billion; its shares were traded at around $21.11 with a P/E ratio of 16.8 and P/S ratio of 0.6. The dividend yield of Lowe's Companies Inc. stocks is 1.7%. Lowe's Companies Inc. had an annual average earning growth of 11.8% over the past 10 years.

General Electric Company (GE)
Warren Buffett owns 7,777,900 shares of GE, valued as $142 million as of Mar. 31, 2010, which accounts for 0.28% of his equity portfolio. George Soros owns 12,502 shares of GE, valued as $0 million as of Mar. 31, 2010, which accounts for 0% of his equity portfolio.

General Electric is one of the largest and most diversified industrial corporations in the world. General Electric Company has a market cap of $167.73 billion; its shares were traded at around $15.71 with a P/E ratio of 14.4 and P/S ratio of 1. The dividend yield of General Electric Company stocks is 2.4%. General Electric Company had an annual average earning growth of 14.1% over the past 10 years. GuruFocus rated General Electric Company the business predictability rank of 4-star.

Elizabeth Warren's Weekend

Elizabeth Warren, who doesn't understand basic economics but is a front runner to be named head of the new Consumer Finance Protection Bureau, spent the weekend impressing people with her lack of economic knowledge, in the 100 plus degree weather of Las Vegas.

She was a panelist at something called Netroots Nation.

With her on the panel was Democratic Rep. Alan Grayson, Center for Community Change Executive Director Deepak Bhargava, Green for All’s Phaedra Ellis-Lamkins and National People’s Action Executive Director George Goehl.

The keynote speaker for the event was AFL-CIO President Richard Trumka. During his keynote Trumka outlined the need for the the nation to invest in infrastructure, implement fair trade policies, change our tax policies and fix broken labor laws.

Since this is Trumka speaking, infrastructure investment means hiring union members for make work projects, "fair trade" policy means preventing the import of any products where overseas labor is cheaper than union labor, changing tax policies means raising taxes on non-union workers so that "infrastructure investments" can be made for union projects, and "broken" labor laws means even higher minimum wages and other laws that limit competition for union workers.

If the name George Goehl sounds familiar, it's because I ran across him about a year ago when I infiltrated a meeting that included him and the president of Acorn, Steve Kest.

So this gives you a flavor for the type of crowd Warren hangs out with.

President Obama spoke to the group by video/

First Review of the Goldman Sachs Documentary Is Out

The Goldman Sachs documentary isn't completed yet, but Bess Levin has already come out with a review: "The very serious odds are the thing is going to suck..."

This is her thinking:

Goldman is making a documentary about itself. Here’s why we really shouldn’t give rat’s ass: because Goldman is “paying for the film, has editorial control and is overseeing the project through its marketing department.” Also, it will only be distributed to employees, as a sort of pick me up of sorts, that Lloyd can watch when he’s feeling a bit melancholy or in the event of another really bad day. The bank has hired a real filmmaker, Ric Burns, to make the thing, which is kind of like asking the Coen Brothers to tape your son’s Bar Mitzvah. So, the very serious odds are the thing is going to suck, if you were looking for any sort of drama, intrigue, conflict or humor. But. As one guy told the Journal, it is quite strange for Burns to take on this project.

What Are German Banks Hiding?

Many German banks have not followed through on an agreement made by the governments of EU countries to publish full individual details by bank of the sovereign debt holdings of the banks, as part of the European bank stress tests that were released Friday, according to an interview with a top regulator published by FT.

“We agreed with all supervisory authorities and with the banks in the exercise that there would be a bank-by-bank disclosure of sovereign risks,” Arnoud Vossen, secretary-general of the Committee of European anking Supervisors (CEBS), the pan-European bank regulator, told FT.

On Friday, CEBS published the results of the stress tests, showing that only seven of the 91 EU banks tested failed to maintain adequate capital. They will have to raise additional capital.

The relatively few banks that failed the test, and the small amount of the capital shortfall, were well below market expectations, leading many analysts to criticize the test as insufficiently stringent.

Six of the 14 German banks tested — Deutsche Bank, Postbank, Hypo Real Estate, mutual groups DZ and WGZ, and Landesbank Berlin did not publish detailed accounts of their sovereign debt holdings, although Postbank released some information Sunday. All but one other European bank tested — Greece’s ATEbank, which failed the test — disclosed its sovereign debt holdings.

The failure to disclose suggests that the German banks have something to hide and risks further undermining the credibility of the whole stress test exercise.

German officials claim local law prohibited them from forcing the banks to publish such details.

Government Grabs Huge Gold Coin Find Discovered by Family of a Widow

A cache of gold coins was discovered in Sathyamangalam, a municipality in the Erode district in the Indian state of Tamil Naduby.

At least 744 coins, weighing about 300 grams, were found.

The coins are believed to date back to the Vijayanagar Empire period and may be over 500 years old.

The granddaughters of Maadhi Veerayya, a tribal widow in Kottamalam discovered the initial coins. According to the times of India,noticed broken shards of an earthen pot in the bushes. When they rummaged deeper, they found coins smaller than 25 paise coins. Immediately, they called their grandmother, who dug deeper and found more coins. As they tried to quietly stash away the coins, curious neighbours gathered. And a frantic treasure hunt began. By afternoon, nine tribal families in the village collected over 700 coins and hid them in their houses.

The village administrative officer got wind of the discovery. He showed up, as did the police. They launched a drive to "recover" the coins. "We have so far recovered 744 coins," tahsildar K Shanmugham told TOI. The police are probing if more coins have been stealthily hidden away.

The coins are made of 18 carat gold and said to have been in circulation during the rule of the Vijayanagar kingdom between 14th and 16th centuries. The coins have an image of a tiger on a fluttering flag on one side and on the flip side, a picture of a mangalasutra'.

"It is said these coins may belong to the pre-Krishnadevaraya period, perhaps during the reign of his immediate predecessor Veeranarasimha Raya," a revenue official said, according to TOI. The coins have been handed over to the Erode district collector, R Sudalaimuthu. Curators from the government museum in Erode will examine the coins and present a report to the government.