Dollars Well Spent

It seems to me that we're not learning much from our failed wars. In Vietnam, we slogged on and on, increasing troop strength time and time again in an attempt to win the hearts and minds of the peasants. In the end, aside from dramatically increasing war casualties on both sides, it did little to change the outcome. The war finally ended when we told the propped up local government and military to take over the battle. As soon as we left, the local government and military were quickly overrun.

In Iraq, we've built up our troops and expenditures in concert with the bleaker and bleaker situation. It was only after we changed strategy last year that things are now looking somewhat better. What was the change? It was a decision to pay off the very groups that had been attacking us. They agreed it was more profitable to support us than fight us. The result, called the "Sunni Awakening", should have been called the "Sunni Bribe".

Now the focus has shifted to Afghanistan. We've heard this story before. The military is asking for an increasing number of troops on the ground as the situation worsens. If President Obama agrees to this, he will be repeating errors previously made in Vietnam and Iraq.

Instead, he should change the strategy to overwhelm the population with dollars not troops. There are approximately 30 million people in Afghanistan . The average Afghan makes under $200 per year. If we simply paid each person $1000 in cash, it's likely that they would rapidly decide that they no longer were supporters of the Taliban, Al Qaeda, or whomever we think we're fighting in Afghanistan. Instead, I'd bet that they will gladly say that they're Westerners, Capitalists, Yankee Fans or whatever else we want them to be called. This would cost about $30 billion. Yes, this is a huge amount; but it's peanuts compared to the $440 billion we've spent there so far, and even less when compared to the estimates of over $1 trillion most analysts are predicting we'll spend before declaring we're leaving.

If this doesn't work in ending the Afghan war, then we should reinstate the military draft. Within months, the war would be over as the potential draftees and their supporters mimic the demonstrations that led to our departure from Vietnam.

A Clunker of a Program

Have you gotten your $4500 Cash for Clunkers rebate from the government yet? I bet you haven't.

Why?

Because you probably didn't buy a gas guzzler that qualifies. So how does it make you feel to know that you and the rest of your fellow taxpayers are subsidizing people who made the bad decision to buy one of those Clunkers. If you're like me, you think it's a blatant rip off.

Some of the defenders of this program tout the improved national fleet mileage and resulting reduction in gasoline and green house gas emissions. But even under the most optimistic assumptions, the impact is truly negligible, about the same as what the U.S. burns every 22 seconds. And this is at a cost to the taxpayers that is about seven times what "Cap and Trade" carbon permits trade for in Europe.

Proponents of this giveaway also cite the great public response to the program which is jump-starting the sales of new cars.

Sure. People will gladly accept a $4500 gift.

Auto sales that were postponed while this program was being debated and those which were planned for the future are being consummated now, making it pretty likely that sales will drop once the program expires. Additionally, there are a bunch of negative effects. One, for example, is the impact it's having on the car repair and aftermarket parts industries, which are being badly hurt by the decision to scrap the clunker cars instead of repairing them.

This program is just one more example of the government picking winners and losers. While advocates of more government intervention tout how programs like this and other "stimulants" are enhancing the economy, to me it's just the government distorting the free enterprise system.

Whether it's Cash for Clunkers, subsidies for underwater mortgage holders or any of the other government interventions implemented recently, the negative impacts often outweigh the positives.

Also, let's be real. There's no free lunch. Somebody has to pay for all this massive spending. That somebody is us, our grandchildren, or even better, now that I think about it, China.

Alphabet Soup Spells Blah

I'm getting lost. There's old programs like the FDIC insurance program to protect bank depositors. There's the new Obama Stimulus Package. And then there's TARP, TALF, EIEIO (no, wait, that's a song from kindergarten), along with seemingly dozens of other new catchy-named programs emanating from the nation's capital. All are intended to reverse the economy from its current downward death spiral.

 

Yesterday, Warren Buffett was pontificating on CNBC that the economy had "fallen off a cliff" but would eventually recover. Well, duh ... yeah, even Jimmy Buffett could have said that.

 

There's universal agreement that the stock market is a leading economic indicator. It almost always starts its recovery six months prior to economic upturns. So the question that I would have liked Warren to answer is "When will the recovery take place?". Once we know that magic date, a monkey could throw darts at the stock market listings and pick winners, just as long as he tosses those darts six months earlier.

 

An old stock market adage is: "They don't ring a bell at the bottom (or top)". This is really too bad; it would make things a whole lot easier. As I write this, the stock market has just rallied for the first time in weeks. Is this the bottom or just a "dead cat bounce"? Who knows? Check back in several years and we'll be able to figure it out.

 

So what's the average investor to do? Just listen to the experts and when you think that enough of them agree on a common course of action, immediately do the opposite.

 

Failing that sure-fire piece of advice, it seems to me that the Obama Administration and Congress can help jump-start the economy and the stock market with one simple action above all others. Reduce or eliminate the taxes on dividends and long term capital gains. This single action will pump huge amounts of cash into start-ups and the stock market, revitalizing the economy and creating jobs.  Obama is scaring the bejesus out of potential investors worldwide because he's talking about raising these taxes instead of lowering them.

 

One other thing. It might be a good idea to hold gold or some other hard assets in your portfolio. While I know that the current concern is deflation, at some point, the massive creation of money is going to set off a jumbo-sized round of inflation.

 

No! I don't have any idea when that magic date will occur. I sure wish I did.

 

The Logic of War

What's happened to wars? Genghis Khan, Alexander the Great and Attila the Hun wouldn't recognize today's version at all. It used to be that if you won, you looted the country, enslaved its people and renamed cities. No questions asked. That was the way war was. It was simple and straightforward. War was a logical (although very brutal) method of settling disputes and/or increasing a country's power and wealth. An added bonus was that it also served as a pretty effective method of increasing the pool of potential brides for the victors.

 

No more. Starting somewhere around World War I, wars became much more complicated endeavors. Instead of the pure simplicity of being a conqueror, the winner suddenly was faced with the prospect of taking care of the losers and rebuilding what they had just destroyed. Wars actually cost the victor power and wealth. What a loony concept!

 

After World War II, the U.S. celebrated its victory by creating the Marshall Plan, under which it spent a fortune building up Germany and the rest of Western Europe so they could compete with the U.S. Similar support was given to Japan. This activity was a fabulous success, as denoted by the loss of the American car manufacturing industry among its other achievemnents. Some might quibble that rebuilding Western Europe and Japan was necessary to fend off the Russians from taking over, but it still seems crazy that the winner would pay the losers.

 

As I write this, the U.S. is fighting wars in Iraq and Afghanistan, while the Israelis are devastating the Gaza Strip. In none of these three conflicts will the likely victor win anything as simple as land and slaves.

 

The U.S.eradicated the Saddam dictatorship and now just wants to get the heck out of Iraq after spending 7 years, several thousand American lives and more than $600 billion first destroying and then trying to rebuild the place. The initial assault and its follow-on insurgency, along with a civil war among the entirely insane Islamic Sunni and Shia, has killed tens of thousands of Iraqis and generally turned most of the rest of the world against the U.S..

 

In Afghanistan, the U.S. is trying to erase the nutty Taliban, probably leaving a bunch of warlords to rule in its place. Given Afghanistan's history of swallowing up the British and then the Soviets, the U.S. will be lucky to extract itself from there anytime soon. How much it will cost in lives and treasure is anyone's guess; but no matter what the cost and how badly the Taliban are crushed, the odds are pretty high that Afghanistan will slide back into the 12th century rather than become the 51st U.S. state.

 

In Gaza, the Israelis are beating the pulp out of the insane Hamas zealots. The Israelis say they just want Hamas to stop firing rockets at them. They haven't yet publicly said that they want to totally eliminate Hamas, but that's what they really desire. The Israelis will probably not fully achieve either objective once they're forced by the rest of the world (but mostly the U.S.) to settle for one more in a seemingly never-ending number of cease fire agreements. Actually, a simple cease fire in Gaza may be the best outcome for the Israelis. If the Iranians, who are funding Hamas, also free Hezbollah to attack from Lebanon, the costs could escalate to really ominous levels.

 

All in all, war made a whole lot more sense in the old days. Winners won and losers lost. Nothing more, nothing less.

 

Money For Nothing - Part 3

I've ranted about "money for nothing" several times before. If, by chance, you missed it, or you just want the sheer joy of experiencing it again, you can read it here, here and here. But last week, it actually was literally true: The U.S. government auctioned $32 billion in four-week T-bills at 0% interest Tuesday, the lowest auction rate ever. In the after-market, the price rose, and people bought T-bills at a negative rate of interest, apparently extraordinarily gleeful to lock in their losses.

 

This insanity is a result of the fear that investors have of taking any risk at all. For nothing is seen to be safer than T-bills, which will be repaid in their entirety with new, crisp, freshly printed, dollar bills. If the government needs some more dollar bills, it simply prints more of them. No limit. No questions.  Pretty clever, eh? (as our Northern neighbors might say).

 

Well, all this leaves me completely baffled. Normally when a government runs its currency printing presses overtime, the inflation rate soars and suddenly wheelbarrows are required to haul around all the paper needed to purchase a loaf of bread. But it seems that every country in the world is hyperactively churning out paper money. Nobody's money is worth more than the next. You don't bail out of the dollar for Yen, Euros or Pounds because they're devaluing too. Even the Chinese are printing and spending like mad.

 

So, what does this all mean? Apparently, that there's no limit to the size of the government stimulus (sounds erotic, doesn't it?) programs that suddenly are now possible. Both namby-pamby Democrats and hard-hearted Republicans can hardly contain their excitement.

 

The U.S. has made commitments so far of upwards of $8 trillion in an attempt to halt the economic slide. Is there an upper limit? Beats me. Even the Bush Administration is now saying they are ready to pump untold billions into the moribund US Big Three auto companies before the Obama Administration gets their wack at doling out more of the cash.

 

By the way, Detroit seem to be pretty scared of using the word "bankruptcy". What's all this nonsense about getting the government to negotiate with the "stakeholders to share the pain" so they can avoid bankruptcy? Sharing the pain is just what a bankruptcy judge does in a chapter 11 filing. The difference is that the judge is doing the pain sharing pursuant to the current law, while the government actions being proposed don't pass my smell test for legality at all. They're more akin to simple extortion that's probably unconstitutional anyway (The Fifth Amendment). 

Anyway, back to the topic, in bankruptcy the auto companies continue their day to day operations. They, along with all their employees, don't disappear overnight. It's pure hogwash to say that people won't buy cars if the manufacturer is in bankruptcy. Anyone who has been paying any attention at all to the pleading on bended knee in Washington knows by now that the Big Three are in serious financial doo-doo. 

And, if you'll allow me just one more "by the way," I heard a great line which referred to the $8 billion General Motors paid last year for retirees' and current workers' medical bills. The talking head on CNBC said: "General Motors is a health care company that just happens to make cars."

 

I also recently read an  economist's apparently serious proposal to revive the housing market (remember, this is what the whole mess is about) that struck me as something Lenin would adore. He proposed that the government just buy everyone's existing mortgage and refinance it at a 1% interest rate. The government would also offer new mortgages to new buyers at the same rate. 

While we're at it, how about if the government solved the auto companies' problems by offering auto loans at 1% interest to anyone who had or could obtain a driver's license? Why stop there? How about 1% loans to buy computers and networking gear so Silicon Valley doesn't implode? You get the idea. Since the money is for nothing, nothing is off limits. Just propose it and it happens...money is no object.

 

Palin's Victory Tour

I was all set to write about the wretched economic situation and Detroit's plea for a bailout. Then, out of the blue (or is it red?), up pops Sarah Palin and suddenly I'm right back in Palinmania.

 

Did you catch any of her "victory tour" this week? It seems to have started in her kitchen in beautiful Wasilla. There she was, being  televised to the world, orating in her peculiar vernacular, while simultaneously whipping up a batch of moose stew ( do you "whip up" moose stew?). I bet you thought it would be hard for her to walk and chew gum. Not for our hockey mom. She was as smooth as a fresh sheet of ice. 

Her week continued with interviews on CNN, NBC and Fox, among others. The tour culminated with a rousing speech to the gathered Republican governors in Miami, eager to learn from Palin just how the party would be reassembled into anything that might have any chance of winning a national election again in their lifetimes.

 

Wait a minute! Did I just say that the Republican party didn't win the last election? Oops, yes, that's what happened all right. Obama did win both the popular vote and the electoral college vote. That means McCain and, I assume, Palin, must have lost.

 

Well, then how do you explain Palin taking a victory tour?

 

You can't. Unless your logic flows like Sarah's syntax.

 

Just to remind you, here's an example of "Sarah Speech", as reported by Maureen Dowd last week in the New York Times:

 

"My concern has been the atrocities there in Darfur and the relevance to me with that issue as we spoke about Africa and some of the countries there that were kind of the people succumbing to the dictators and the corruption of some collapsed governments on the continent, the relevance was Alaska’s investment in Darfur with some of our permanent fund dollars."

 

I guess that's clear enough. Even George W. would be proud to have uttered that particular string of words.

 

Re-reading that little ditty, it's easy to see why she has garnered a 98% name recognition among the great unwashed masses. Yes, of course, they like the fact that she's a hard working super-mom; and her looks, ideas and logic are simply captivating. But, most of all, they can't get enough of her folksy way of speaking. Her fans say that they would feel comfortable with her in the White House because she's just like them.

 

As Sarah herself would say, "this should result in a loud shout-out to the country's educators that they'd better get on the ball and plow through those glass doors that may be open just a crack". 

So therein lies the lesson for today:  there's a new day dawning, and it's all about teaching our children to speak with a clarity that every "Real American" (not those wussy Northeastern and West Coast elitists) can understand.

 

Oh, and one more thing. The government would be crazy to throw any money into the coffers of the big three automakers unless it's part of a pre-packaged bankruptcy proceeding in which: the management is replaced; the labor contracts are renegotiated; critical suppliers are paid so they don't go bankrupt; the common shareholders are wiped out; outstanding bonds are converted to common equity; and the government money is injected as preferred stock or senior bonds.

A New Beginning

The presidential election is over. The people have spoken. Obama clearly deserved the win. He had by far the better organized, financed and focused campaign. McCain's, by comparison, was disjointed and reactionary.

Oh, one more thing. Obama got the financial system to freeze up (or is it melt down ?) at exactly the right moment, thereby eradicating McCain's overwhelming strength on national security just weeks before the election.

 

How he pulled that exquisite piece of timing off is a mystery befitting Obama's ever expanding "walk on water" reputation. 

 

Obama's main selling point on why he would be better at solving the economic crisis was that he wasn't a Republican. Since it happened on their watch, it must have been the Republicans who got us into this mess. The voters' logical response was to throw the bums out. McCain's post convention bounce rapidly disappeared and Obama never lagged in the polls again.

 

With his election, the rest of the world appears ready to give America another chance to become good guys again. The fact that he is an African-American certainly demonstrates that Americans are willing to move past the old racial divides. Muslims worldwide, but especially in the Middle East, must have noted that Obama's middle name is Hussein. Africans surely noted that Obama's father came from Kenya. Asians probably noticed that Obama resided for a time with his mother in Indonesia. And Europe undoubtedly has paid attention to Obama's "spread the wealth" taxation and "consult with our friends" proclivities. 

 

So we wish the new president well. He will have his hands full, what with the economic mess, two wars and an eager Democratic congress straining to be unleashed.

One final comment: I will miss watching SNL and Tina Fey as Sarah Palin. It sure is hard to tell them apart. All things must come to an end, and so too must this. Alas. 

Are We Becoming Bluer?

The good ship McCain continued to take on water this week. A potential tide-turning event was the third and final presidential debate on Wednesday. McCain heaved up a "Joe the Plumber" bomb in his latest attempt to change the trajectory of the campaign. This follows his previous failed Hail Mary attempts: choosing Palin as his VP and a temporary suspension of his campaign to rush back to D.C. to rescue the economy. But the focus on the scary economic mess rather than on national security continued to help Obama.

 

According to America's most respected newsman, Jon Stewart, all Obama had to do to win the last debate was refrain from jumping up and saying "Where are all the white women at"? The Chosen One resisted that temptation and thereby maintained his momentum.

 

More bad news for McCain was that a number of Republican luminaries, reading the growing pile of tea leaves, scampered off the ship. George Will, Peggy Noonan, David Brooks and Colin Powell all bailed out.

 

The week did have some positive moments for McCain and Palin. McCain won the hilarious battle of the roasts at the Alfred Smith annual dinner. He looked like the straight talking McCain of yore and was seen having fun for the first time in the last two years.

 

Similarly, Palin finally made her anticipated appearance on Saturday Night Live. The first of the two skits was pretty lame. The second skit, however, was clever. Amy Poehler, who looks like she must be at least 10 months pregnant, rapped out a tune that had Palin swinging in her seat. The Governor came across as a good sport.

 

All the polls say Obama and Biden (remember him?) are gliding to victory. At this point, their strategy should be to just play it safe, not get drawn into any nasty name calling, avoid any memorable gaffes and pray like heck that the Dow doesn't suddenly rise 3000 points.

 

Perhaps the best tactic at this point for McCain/Palin is to jettison all pretenses of serious political talk. They should concede the boring wonkish policy stuff to Obama/Biden. The populace can't really evaluate whose plan is better and will just blame the Republicans for the economic mess since it occurred on their watch.

 

Instead, MCain/Palin should continue to do comedy for the remainder of the campaign. This will pick up the voters who base their decision on whom they want to have a beer with. But even if they lose the election, both McCain and Palin will burnish their resumes and improve their chances for future gigs during the Republican diaspora. They should have lots of juicy material resulting from observing the Democrats' attempts at dealing with the economy.

Perils of Paulson

I bet that most Americans know that Henry Paulson is the Secretary of the Treasury. I also bet that they had no clue who he was two weeks ago. I also guess that most Americans have no idea what the Treasury's role is in our system of government, but I'm pretty sure that they know that Paulson is the man behind the $700 billion government bailout. This is one heck of an expensive cram course in civics for Mr. Average Taxpayer. Even Stanford wouldn't have the cajones to charge this much.

Something like 90% of the population consider Paulson's plan to be a bailout of Wall Street. But, as discussed in the previous post, the cause of the crisis that is gripping the financial system is not just Wall Street's doing. There's plenty of blame to go around. It's now Paulson's job (along with all the political leaders) to sell the plan that has emerged this weekend as a bailout of the nation's economy, not just a bailout for the fat cats on Wall Street. This will not be easy. It's far simpler to scapegoat the unpopular rich guys. Both Obama and McCain did just that in their first debate two days ago.

Paulson's plan was two and one half pages long when he presented it to the President and Congress. After a week of work, the Washington politicos have renamed it the ‘‘Emergency Economic Stabilization Act of 2008’’. It has grown just a bit (by Washington standards) to over 100 pages of legalese gibberish. And it doesn't even cover the details of how the government will determine the price of the toxic assets it will be buying from the private sector.

Congress is set to vote on this bill this week. It appears that both political parties have come to understand the risk of inaction and are likely to pass the proposed legislation on to the White House. I wonder if they'll have the usual signing ceremony. Will Bush sign it using a bunch of pens which he will then hand to the smiling politicians who will be in the signing photo, or will it be done in the dead of night, with no one wanting any part of the whole mess? It should be fun to see which one happens.

As a free market guy, I'm pretty dismayed that the government is doing this. Sure, I like French food, but I don't sure don't like French economics. However, when I see Bush and both political parties agreeing on something smack in the middle of an election campaign, it must be darn necessary. So you can reluctantly count me in. Although it's not like anyone asked you or me.

My Vote Doesn't Count

I'm pretty ticked off. I've spent countless hours reading, analyzing and debating who we should vote for to lead the nation; it's all for naught. I live in California. Thus, my vote to elect the President simply doesn't matter.

What? Well, just check out the campaigns' actions themselves. Have you heard about any candidates tromping through California delivering electrifying speeches, declaring that they are going to change politics as usual in Washington while their opponent is such a clueless yutz? No, you haven't. That's because each party knows that, no matter what they do or say, the vote will be decisively for Obama. The Democrats could have nominated Atilla the Hun and he would carry the state. The same situation applies in other solidly blue states like New York, Oregon, Washington or Illinois.

Similarly, the Republicans could have nominated Karl Marx. He would prevail in the solidly red states like Texas, Oklahoma and the rest of what is fondly called by their residents the heartland, and by the people residing on the East and West Coasts, the dustbowl.

The only states that matter are the battleground states. The cruel fact is that, in this election, the electoral college voting system gives the power to determine the leader of the free world to the good people who have chosen to reside in Ohio, Michigan, Pennsylvania, Virginia and Florida.

I guess I wouldn't be so annoyed about this system if I felt that these residents had the intelligence and deep insights that many of us other blue and red state voters lack. Unfortunately, the mere fact that they don't live in California, where the weather is infinitely better, lends me to believe that they don't possess these admirable traits.

So, I'll continue to have fun following the most interesting presidential election that I can recall, but I'll pine for the right to participate in its outcome. Maybe some day we'll scrap the electoral college system and turn our country into a true democracy in which everyone's vote counts equally.

Is Golf a Sport?

Following up on my post last week: Is Tiger The Best Athlete?, I ran across a great article today by Michael Lewis which questions whether golf is a sport at all.

Just to give you a flavor of his argument, he talks about how Tiger Woods played the US Open on a broken leg. He says, citing those who defend golf as a sport: "A golfer is proving once and for all that our game is a test of deep character and physical courage.

See: Golfers play hurt!

See: You can even get hurt playing golf!!!

Well, you can get hurt playing darts, too. Or hiking. Bowling can be seriously hazardous, if you don't know what you're doing. Play with enough passion and you can even injure yourself in a spirited game of Monopoly. (I once cut my finger grabbing Park Place.)

It's absurd when you get hurt bowling, just as it is absurd when you get hurt playing golf -- or would be if golf assumed its rightful classification among curious outdoor hobbies, on the same mental shelf as scuba diving and tai chi chuan".

If you like, you can read the entire article by clicking here.

Well, this kind of resonates with me. I also wonder about whether synchronized swimming is a sport. How about a whole bunch of other activities that people who don't speak English as a first language play or root for, like bocce ball?

I don't really know what it takes for an activity to be defined as a sport. So, I looked it up. Sports can be defined as "an active diversion requiring physical exertion and competition". Under this definition, I guess that all the activities cited are sports. I'm just not so sure.

Surely, all True Americans would argue that baseball, football and basketball are sports. And all Canadians and at least 20,000 fans in each NHL city in the U.S. would have no problem declaring that hockey is a true sport. But, in the case of basketball and football, those participating in the sport have to be pretty large. In fact, they're not normal humans at all.

I think we should modify the definition of sport to say that it has to be played by normal sized humans to qualify. Professional football and basketball can then be classified as spectacles to be watched for their performance qualities, much like opera or professional wrestling.

I could go on and on with this. I've clearly drifted off of the question that started this entire screed. I just don't know whether golf is a sport in the same way that I think baseball and hockey are sports. If this is the case, I'm further inclined to believe that, in answer to the question I posed last week, Tiger Woods is not the greatest athlete.

Atheists and Agnostics Believe in God

I'm not making this up. According to a new survey from the Pew Forum on Religion and Public Life reported today, one of every five people who identified themselves as atheist and more than half of those who identified as agnostic said they believed in God. You can read about the entire survey by clicking here. Another review of the survey is located on this site.

I'm absolutely stunned. Do 20% of the atheists not know that the definition of atheist is:"one who believes that there is no deity"? Do more than 50% of the agnostics not know that the definition of "agnostic" is: " a person who holds the view that any ultimate reality (as God) is unknown and probably unknowable"?

Either they're incredibly uninformed about their lack of religion or they are just telling the people who call them what they think is politically correct. If it's the latter, then the whole phone survey business may be in substantial doubt.

Usually when the phone rings at dinnertime, it's one of two callers. One, an "affiliate" of some credit card company from which I neglected to opt out of receiving calls. Or, two, it's a political survey asking for my opinions (and usually a contribution to someone's campaign).

If those receiving the calls are like me, they terminate the "affiliate" calls pretty quickly. However, I wonder if people are just too nice to hang up on the friendly people who conduct the surveys. Perhaps they agree to take the survey, but don't always tell the honest truth about sensitive subjects. Religion is certainly one such subject. Others are gay marriage and whether they will vote for a person of color. Both of these topics are of current interest to pollsters. Could polls on both be in error?

Recent exit polls during the Democratic Party presidential primary voting often showed substantial differences from the actual results. It seems to me that the simple answer is that people don't always tell the truth.

By the way, if you'd like to watch a totally politically incorrect answer to the question of religion, I recommend George Carlin's classic routine. Click here to view it. I caution you about his choice of language.