Continuing the Trend.

Hello again. Sorry I have not posted in a little while; work has kept me busy lately.

Let me start of with yesterday's record-breaking day with the Dow. The DJIA soared up over 935 points in a single day! While we are down for the year, yesterday's surge in the Dow ranks as the highest-ever single-day point gain in history, and the 5th highest percent gain ever. The Dow hasn't had a gain of this level percentage wise (the more important value) since the 1930's rebound following the Great Depression.

Perhaps more interestingly, the market today was somewhat stabilized; the Dow ended off by about 75 points.

I'm tired of people thinking this is the end of the world.

Capitalism flourishes (when left alone) in times like these. Yes, there are people who have lost significant amounts of money and others who have lost their jobs. But unless we allow businesses what they need to get the economy rolling again, it won't turn around very fast. Also, any broker worth his weight should have done a reasonable job at making the pain of this downturn minimal.

My plan for fixing the economy at this point goes like this:

• Eliminate the capital gains tax. That's right. Get it outta here. If investors (primarily individuals) see that they have the opportunity to earn money tax-free, money will pour into the market so fast that the Dow could be back up to 14,000 by Christmas. This would also significantly relieve the anxiety and uncertainty felt by retirees and pension managers.
  
• Give big breaks to employers. If you cut down on the amount of money they have to pay out, they'll have more money to hire people. Unemployment will fall. This includes small business owners (A.K.A the Rich people) making over $250,000 a year. Just remember, even though these people make over $250K a year, that doesn't mean they take home NEARLY that amount.
• Provide incentives for businesses who can to hire unskilled labor -- people without college degrees, legal immigrants, teenagers, etc. A construction firm may need an engineer with a Ph.D to design a building, but they don't need a college graduate to hold up a stop sign or dig a ditch.

It's time for people in this country to realize that in order to have something, you have to EARN it. I've earned my family, house, three cars and flat-screen TV. I don't rely on the government to hand me welfare checks or food stamps, even back when I could have qualified for them. A big part of that is because I have not ever stretched myself too thin.

Finally, in a time like this, I think we should have a limit to what is distributed through welfare and entitlement programs. People should have money for being unemployed? Fine. They will no longer get a blank check. They will receive a check with pre-approved items that can be purchased at pre-approved stores. Welfare should not buy beer and stereo equipment.

-Craig

What's the Rallying Point?!

It looks as though the stock market has no idea what to do. It seems to be meandering the proverbial road like a drunken cataract patient who has taken too many meds. Mark my words, tomorrow, CNN's top story will be how the Dow is plummeting again, as lawmakers neglect to pass a bill yet another day.

It has come to my attention that most people think the end of the world is just around the corner.

In 1987, the Dow Jones shed over 24% of its value in a single day. By the end of the week, stocks were off by over 30%. That would be roughly equivalent to roughly 3000 points off of the current value by today's standards. Remember to focus on the idea, not the words conveyed in articles in the media. While the 778 points lost on Monday equated to the worst one-day points loss, it was not even close to the top percentage loss ever. Let's keep in mind, as well, that oil is still low, Gold has somewhat stabilized, and today investors bought as much of the battered stocks from yesterday as they possibly could.

Now is a GREAT time to buy in the stock market.

The Economy's Future and a New Car.

Greetings again!

It seems we are adrift in a sea of bad economic news these days. The Dow is now a better roller-coaster than the Steel Phantom of mid-90's Pittsburgh, PA fame. It seems like everyone has ceased to trust their bank and the media is reporting on every little slip-up and problem in the financial community. Money isn't around and people need to tighten up their belts.

Or so they want you to believe. I applied for a car loan this weekend and got the lowest rate I've ever gotten on my own (except for dealer incentives and the like). I traded our Honda Accord for a Ford Expedition to pull double-duty as my wife's vehicle and our new tow/camping vehicle.

In short, I'm not worried about the economy.

The media would have you believe that the bailout was all said and done until McCain showed up last week. The actual truth was that Harry Reid announced it's failure and blamed McCain before McCain even got to Washington. Think about that.

There is a very simple solution to this problem, one that could involve LOTS of revenue for the government in the next 10-20 years. And it would still bail out the mortgage industry for the time being:

1. Complete the buyout of our major financial institutions. Do NOT give the treasury a blank check. The terms of this buyout need to be very specific.
2. Eliminate all Adjustable Rate Mortgages. ARM's got us into this, because people have proven that most cannot be trusted with money.
3. Everyone living in these homes that have been foreclosed (that caused this mess to begin with) will not have to leave their homes. If they choose, they will become renters, because that's what they should have been to begin with. In the coming years, if they begin to earn more money, they can purchase a home they can afford. However, no government benevolence here; if you're late on your rent, you will be evicted. Income begins to flow in on this plan to offset the initial cost.
4. In a couple years, after the market has become entirely stable following this debacle, begin to slowly reintroduce these houses to the market at auction. Citizens will be able to buy their first home, or homeowners will be able to purchase 2 or 3 homes with renters already occupying them for 75-80% (I predict) of their fair market value. The government gains a significant amount of money (perhaps along the order of $1-1.5 trillion).
5. In the meantime, eliminate Capital Gains tax and Corporate taxes to boost investment and lower production costs. When people know they're not going to pay taxes on investments, trust me, they will FIND money to invest.

Of course, if you tell Congress this plan could make a lot of money for the government, they will eagerly seize the opportunity to go ahead and spend the "potential profit" now, then neglect to ever enact the plan to its fullest potential later. We'll end up with expensive government housing that will become decrepit and our deficit will quadruple.

Yeah, that sounds more normal...
-Craig

McCain's Cars.

McCain's Cars
This weekend, the national media (read: CNN) took up a story about how John McCain owns 13 cars while Barack Obama only owns a Ford Escape Hybrid. The story zeros in on the fact that many of McCain's cars are foreign-produced cars (after, they claim, he said he only buys American cars). If you read between the lines, you'll see that only two of his cars are foreign: a VW and a Honda. The story goes on to fish a comment from Ron Gettlefinger, president of the United Auto Worker's Union. Said Ron, "McCain is not being truthful with Americans and undermining autoworkers."

First, let's examine Gettlefinger's comments. Notice the story neglects to mention the eleven other cars McCain owns, and what brands those cars are. Depending on the model of Honda, there stands a good chance that it, too, may be made in the U.S. Importing the VW from Germany gave a few thousand dollars in tarriffs to the U.S. government (at a time when Joe Biden says paying taxes is patriotic), and made some car salesman somewhere a few bucks to feed his family (after he too paid taxes -- on his commission).

Not to mention that more Americans buy foreign passenger cars than American-made cars nowadays anyways. The Toyota Camry is our best-selling passenger car (the F-150 is still the best selling vehicle and pickup). Many foreign automobile manufacturers are utilizing plants they have built in the U.S.:

• Honda: East Liberty, OH; Lincoln, AL; Marysville, OH
• Nissan: Smyrna, TN; Decherd, TN; Canton, MS
• Toyota: Huntsville, AL; Georgetown, KY; Princeton, IN; San Antonio, TX; Buffalo, WV
• BMW: Spartanburg, SC
• Mercedes: Vance, AL
• VW: New Stanton, PA (closed); Chattanooga, TN (to open 2011)

This is just a partial list of foreign automaker's plants in the U.S. I can just about guarantee that where Mr. Gettlefinger's problem lies is with the labor force with most foreign auto manufacturers. Many do not allow union labor because of the stranglehold it places on the auto manufacturer. For those who do not believe me, look at how close Ford and GM have come to bankruptcy; GM has had to pay over $6 billion in pension and healthcare benefits to employees who aren't even working anymore. Ford's stock has gone from nearly $50 a share in the late 90's to about $5.40 a share today. Their 52-week high hasn't even broken $10.00.

This stranglehold isn't without consequence for both sides, either. While I cannot verify this claim, I would be willing to bet that employees for foreign auto manufacturers in the U.S. earn a higher wage than employees for Detroit brands. With so much additional debt due to the UAW and retirees, Detroit will be playing catch-up for a long time to come. As a result, their price will remain higher for lower-quality interiors and average fuel economy. Perhaps we need a Reagan-esque purging of autoworkers... (I say this as I drive a Jeep manufacturered in OH and with a union-member father-in-law who agrees with me).

In short: It really doesn't matter what manufacturer you buy a car from. You're going to give some American somewhere a little extra in his or her pocket. The beauty of living in this country is you have a choice to drive whatever you want.

Second, let's remove ourselves from the union side of this argument and think about the logical side of the article. John McCain has several houses and over a dozen cars. That's the kind of person I want to decide about our future. Think about it: in a time of financial crisis for the rest of the country, McCain is able to hold down several mortgages and car loans. I would much rather have someone I know is financially stable and can prove such as my President.

Let's face it. It's always easy to bash those who have more than you as bourgeois-decadent. Mostly because we'd all love to have their problems of deciding which new car to buy, or what color to paint their third house. I personally wish I could own another house (I'd rent it), and I would buy another home if I had the money. But some people actually believe those with more should be punished for their success.

They're called Democrats.

-Craig

P.S. I own three vehicles, a jetski and a camper. One of my cars is Japanese, a second has an Italian-built engine, the third has no emissions equipment and gets 10 mpg, and the jetski was made in Canada. I must go and repent my sins now.

The Atom Smasher and Market Woes (Pt. II).

Hadron Collider
After years of developing, months of anticipation and hundreds of doomsday theorists, the atom smasher was unveiled without so much as a hiccup. The idea is that we can uncover the so-called "God particle" by smashing two atoms into one another - in other words, create a mini "Big Bang."

While I believe in a lot of science's findings, I do not believe the Universe became something out of nothing by colliding particles. I'm not saying that everything came into being 4000 years ago either, but if the scientific community is looking for the "God particle," the middle of a 17-mile tube is not where they need to be looking.

Quite frankly, I don't know what to believe as far as how this Hadron Collider will affect humanity. On one hand, I'm sure we'll make leaps-and-bounds in the scientific world that the rest of us will be completely unaffected by; perhaps a couple physics formulas will change for us in high school. On the other, I wonder if by colliding particles if we could create a massive black hole that would begin sucking people down -- starting with the people who decided to mess with the fabric of our being to begin with. A big part of me wonders if God intentionally made something in this device malfunction this week -- as if to say "hey, perhaps you should leave life's great mysteries up to me." But we all know that science is never satisfied...

All I'm trying to say is that perhaps this allocation of billions of world dollars and years of man power could have probably been directed toward a much more beneficial pursuit (like curing cancer or combating HIV).

Market Woes
Just a quick note on this one, as I'm tired of writing about the ignorance of the government about how supply and demand works. Yes, the stock market is back where it was at the beginning of the week, and yes, oil is still reasonable. However, the bailout of financial institutions up to this day looks like it's going to cost $700 billion... that's more than 1-1/2 times the cost of the Iraq war. And the Democrats say Republicans waste money...

Governor Sarah Palin, The Market, and Suicide Bombers.

Sarah Palin
Sarah Palin is a remarkable woman. She really defines class in a political official. She has shown time and again that she simply won't dignify many of the attempted attacks on her character with a response. Those that she does respond to, she does with a quick wit and a measured response. I applaud her for giving the press little to latch on to.

That said, the probe into her firing of her Public Safety Commissioner is reckless and unjustified. The background suggest that Palin was on the warpath to terminate the job of her brother in law, an Alaska state trooper. Following what has been described as "an acriminous divorce," the media would have you believe that Sarah wanted to destroy this man's professional life, and instructed her PSC to fire her former brother-in-law.

Let's ignore Sarah's right to innocense until proven guilty. Let's ignore her side of the story completely. You must still explain how she was not within her power to terminate an appointed official left over from the previous administration. The whole thing is reminiscant of the attempted scandal over the firings of various US Dept. of Justice Attorneys left over from Clinton's administration. Nevermind that Clinton fired all of the same attorneys left from George H. W. Bush's administration. Where was the outrage over those firings?

At any rate, Sarah is ignoring requests for her and her staff to testify concerning the firings. Do not forget that she has the right to do this, as granted by the checks and balances of our government through our Constitution. Executive branch officials do not have to appear or respond to subpeonas from Legislative branch officials. It's called executive privilege.

So I encourage you to challenge the tone of what you read regarding such incidents. Sometimes media outlets simply report on what they want you to hear.

The Market
Yesterday, I responded to the recent downturn in our various stock markets. Today, the Dow shed another 450 points, or roughly 4%. So total, we're down about 7% for the week. That's a pretty significant drop. This is mostly a response from the US government's inability to stay out of the free market. Every time a financial institution is in risk of going under, the government thinks lately that it is responsible for helping that institution. At least, as of late, that is.

The government is setting a precedent for this kind of action lately. Do you know what is going to happen? You and I are going to see one of two things within the next 10 years:

• Taxes are going to absolutely skyrocket. I don't mean Bill Clinton levels, I mean 50% and above for average-income households. Those of you wishing for universal healthcare will be challenged with first overcoming an absolute mountain of government spending before you could even begin to form a program. I won't even get into arguing why universal healthcare is bad for everyone. Social Security and formerly tax-free or tax-deferred ways of saving money will now be heavily taxed or completely eliminated.
  
• The United States will see another total catastrophic financial meltdown. However, with the amount of our debt that is spread abroad along with the fact that many have invested in global markets means that the Great Depression will seem like a mild recession.

I may seem like a crazy person for thinking this, but this is how things will pan out if we continue to blindly accept the government buying up our financial institutions and companys. With skyrocketing tax percentages, businesses will almost universally move abroad (or, in the case of smaller companys, simply shut their doors), and unemployment will skyrocket.

Most of our esteemed members of Congress will have no idea how to fix it.

Suicide Bombers
Today, a group of suspected Al-Qaeda members attacked the U.S. Embassy in Yemen. The current death toll is at 16, but I wouldn't be surprised if that rises by tomorrow. Thankfully, no American personnel were harmed in the attack, but 6 brave Yemeni police officers lost their lives. Four civilians were also killed in the attack.

Here's a message to Al-Qaeda: if you're trying to get the rest of the civilized world to side with you in destroying the Western World, you should probably put up a better fight than to just slaughter those around you.

You can read about it here.

-Craig

Stock Market Woes.

If you're an all-around music lover (as am I), here's a song on the note of energy:

http://www.youtube.com/watch?v=b6QSvSei5ho

It's the music from the Chevron "Human Energy" series of commercials. It's remarkably relaxing. Proper credit goes to Paul Leonard-Morgan for his wonderful composition.

There is a lot of truth to be had in those commercials, regardless if they're coming from a "big oil" company.

On to the issue at hand. We're in an apparent "crisis" with the stock market right now. People are panicking because the stock market lost a substantial percentage yesterday. It has already been decreed by some high-profile people that another "Great Depression" is right around the corner. The signs are there, but not the ones they would like you to pay attention to.

Barack Obama would have you believe that because unemployment is admittedly up to 6.1%, and the Dow Jones yesterday lost a staggering 504 points, that we are on the brink of another Depression. Sorry, Mr. Obama, but you are wrong yet again.

The Great Depression was caused by massive over-investment and underconsumption brought about by the roaring 20's. The world was recovering financially from World War I, and could not handle any significant economic downturn. Since the economic outlook was very positive at this time, no one could believe that stocks (such as US Steel) were overinflated. Once this bubble popped, the spirialing effects of a significant recession began. Britain had returned to a Gold Standard, but chose to abide by Gold prices from just before WWI began. The frightening idea that banks could shut down overnight (and that depositors would lose their money before they could close their accounts) caused many to run to the bank and withdraw everything they had. In short, there simply was not enough money to sustain the economy.

Coupled with this was the fact that much of the money invested in the stock market was borrowed money. This can be related to last year's downturn of the real estate market. Investors loaned (in some cases) over 50% of a given stock's value to their clients. At this time, there was more money in loans than currency in circulation. Finally, the Dust Bowl of the day, unemployment hovering above 25%, and the significant devaluation of worldwide currencies led to the events that unfolded throughout the 1930's.

Consider this: in the less-talked-about crash of 1987, the Dow Jones shed a staggering 22.6%. This was a much larger one-day percentage loss than in the downturn before the Great Depression. In a day when the total DJIA was at 2,247, it lost 508 points in one day. Two days later, the market saw the largest one-day gain since 1932. By December 31st of that year, the markets ended up in the green for Calander year 1987, up by 42 points (about 3%)

(Take a breath, that's a few numbers to take in.)

Monday saw a loss of 504 points from a market with an average over 11,000.

Something far worse than 6.1% unemployment and a mere 4.4% off the top of the stock market is needed to begin a depression. Something that would cost the taxpayers billions in unneeded spending. Something like, the federal takeover of several finnancial institutions....

Wait, that's already happening.

Investors are panicking because the Government is interrupting the role of the free market. The burdeon of these collapsing companies is falling on you and me. And by doing this in the first place with some aging institutions, they have set the precident for future bail-outs at the smallest sign of trouble. Personally, I would rather weather the short-term downfall of the market in exchange for a much less regulated free-market in the future. After all, I do have a daughter and a stepson to think about...

-Craig

PS, the Dow gained nearly 2% back today. Told you not to worry ;-)