Tuesday, December 15, 2009


THE WALL OF WORRY APPEARS to be flattening? By the numbers, for the week ended Friday, December 11, 2009, the Dow Jones Industrial Average closed at 10,471, up 83 points, or 0.8%. The Standard & Poor’s 500 closed at 1106, essentially flat, and the NASDAQ Composite closed at 2190, down 4 points, or 0.2%.

AOL now stands independent of Time Warner. Should be interesting to see how it fares. Retail sales were up 1.3% in November, the third increase in four months, according to the Commerce Department. Goldman Sachs and other large commercial and investment banks are restructuring compensation and bonus structures. Oh well. This is too little, too late, and is most likely nothing more than posturing.

Apple plans to launch a tablet size computing device in early 2010. While Apple products aren’t taken seriously by many in the business community, their cute, easy to use, consumer driven products have certainly helped their bottom line. United Airlines has ordered 50 new wide-body, long haul jets from Boeing and Airbus.

Consumer credit outstanding fell by $3.5 billion in October, the ninth consecutive monthly decline. According to Vanguard economist Roger Aliago-Diaz, household debt in the U.S. jumped from 80% of personal income in 2000, to 110%, just before the 2008 financial crisis.

According to a recent report from the College Board, tuition increases for 2009-10 averaged 6.5% for public schools and 4.4% for private colleges. Are some colleges pricing themselves out of the market? In the category of random thoughts, I’ve wondered over the last few weeks how I would behave if I were 30 years old, and had personal annual cash flow of $50 million?

On a recent Sunday, 57.5% of the Swiss voted for a constitutional ban on the building of minarets attached to the country’s mosques. This vote appears to be notice to the Muslim community that the Swiss will not allow their culture to be overrun by Muslim philosophy and sharia law, as is happening across much of Europe. According to Tariq Ramadan of Oxford University, as reported by David Aikman, “Over the last two decades, Islam has been connected to so many controversial debates, violence, extremism, freedom of speech, gender discrimination, and forced marriage, to name a few, it is difficult for ordinary citizens to embrace this Muslim presence as a positive factor”.

On the death of Alexander the Great, his kingdom was ruled by the Ptolemy’s and the Seleucid’s, who continued the Hellenization of Alexander’s holdings, including the Near East. In 165 B.C., Judas Maccabeus led a rebel army to victory over the Seleucids, freeing the Jews and establishing the Hasmonean Dynasty. This victory, and the subsequent rededication of the Holy Temple in Jerusalem, is celebrated each year as Hanukkah. In 2009, the eight day celebration began at sundown on Friday, December 11.

Quote of the week:

“A prisoner of war is a man who tries to kill you and fails, then asks you not to kill him.”

                                                                                                 Winston Churchill

Wednesday, December 9, 2009


INCREMENTAL INCREASES have continued to move the equity indices over the last two weeks. By the numbers, for the two weeks ended Friday, December 4, 2009, the Dow Jones Industrial Average closed at 10,388, up 70 points, or 0.7%. The Standard & Poor’s 500 closed at 1106, up 15 points, or 1.4%, and the NASDAQ Composite closed at 2194, up 48 points, or 2.2%.

According to the BLS, just 11,000 jobs were lost in November, bringing unemployment to 10%. Analysts are suggesting that hiring may start sooner than expected. GM’s Fritz Henderson has resigned and Ed Whitacre is standing in for him, for the moment. I guess Fritz wasn’t ready to work for the government, other than paying his taxes. Ford announced it sold about as many vehicles in November 09 as in November 08.

Dubai World has asked for a little help from friends on the $60 billion of debt on its books. Worldwide sovereign debt, according to Moody’s as reported in Forbes, is expected to hit $49.5 trillion by the end of 2009, a 45% increase since 2007. The G7 account for 78% of this debt, which is expected to be 80% of GDP by year-end 2010.

Countries can raise taxes or print money. Voters around the world may reach their limits on taxation. What then, Weimar or Zimbabwe style inflation? If so, how do we maintain purchasing power when we can no longer turn dollars into bread and milk?

Bank of America is prepared to pay back $45 billion in TARP funds. In support of my theory that the government hacks in DC are watching out for their own, first, last, and always, I offer the following, courtesy of David Weidner of Marketwatch. The 2009 Wall Street bonus pool is expected to be $140 billion, compared to the estimated budget deficit of all 50 states for 2010 of $142 billion. The average bonus at Goldman is $550,000, and the median annual US income is $50,740.

Total bailout funds committed to Wall Street and Detroit is $1.1 trillion, whatever that is. Ratio of bailout funds to small business loans provided through the stimulus package is 2933:1. Small businesses are responsible for 64% of the jobs created in the last fifteen years, and the majority of the patents, by a multiple of 13.

In economic news, non-farm productivity was up 8.1% during the third quarter, and labor costs fell 2.5%, both of which are to be expected with fewer employees. Mortgage rates continue their downward drift.

At the recent Policy Forum sponsored by the Federal Reserve Bank of Philadelphia, a paper on “Eight Centuries of Financial Folly” offered the following. Financial crises are protracted affairs – they last longer and recovery is slower than expected. Government efforts to stimulate the economy are not always successful, but always result in increased government debt. Periods of significantly increasing government debt are usually followed by periods of slow economic growth.

What fascinates me is that academics writing white papers actually think this is news. Anyone that pays attention has had the referenced details figured out for years.

If the proposed health care reform becomes law, the IRS will be charged with confirming that individuals have health care coverage, or enforcing the payment of penalties when returns are filed. After listening to stories of those who were persecuted by Eastern Bloc communists, I have visions of brown shirts and black vans. The IRS will also be tasked with collecting fees from large and midsize employers who don’t provide health coverage.

In the meantime, some fifteen thousand delegates, five thousand journalists, and assorted other carpetbaggers are descending on Copenhagen for the Climate Change Summit. According to the UK Telegraph, more than 1200 limousines from around Europe have been pressed into service, five of which are hybrids or electric cars. 140 private jets are expected to drop off their passengers, and park around Europe, due to space limitations at the local airport.

The scarlet ladies union has announced that all 1400 members will be offering their services for free to delegates, giving new meaning to the term “carbon dating”. There is more foolishness in Copenhagen, but that’s enough for one day. It seems that attendees are determined to take farce to an entirely new level.

FINRA, the Financial Industry Regulatory Authority, charged by the SEC with overseeing the activities of the nation’s stockbrokers and their employers, had an operating loss of $696 million in 2008. FINRA was still able to pay thirteen employees $1 million or more in compensation during that time.

Quote of the week:

“Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey His will, to be grateful for His benefits, and humbly to implore His protection and favor; and whereas both Houses of Congress have by their joint Committee requested me to recommend to the people of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God, especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness.

Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the people of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be – That we may then all unite in rendering unto Him our sincere and humble thanks, for His kind care and protection of the people of this Country previous to their becoming a Nation – for the signal and manifold mercies, and the favorable interpositions of His Providence which we experienced…for the great degree of tranquility, union, and plenty, which we have since enjoyed, for the peaceable and rational manner in which we have been enabled to establish constitutions of government for our safety and happiness…for the civil and religious liberty with which we are blessed…and in general for all the great and various favors which He hath been pleased to confer upon us.

And also that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech Him to pardon our national and other transgressions, to enable us all, whether in public or private stations, to perform our duties properly and punctually, to render our national government a blessing to all the people, by constantly being a Government of wise, just and constitutional laws, discreetly and faithfully executed and obeyed, to protect and guide all Sovereigns and Nations, and to bless them with good government, peace, and concord, to promote the knowledge and practice of true religion and virtue…and generally to grant unto all Mankind such a degree of temporal prosperity as He alone knows to be best.

Given under my hand at the City of New York the third day of October in the year of our Lord 1789. "

                                                                                                 George Washington