Friday, March 30, 2007

Have We Got A Deal for You!

The folks at Say Anything Blog point out the absolute disaster that is New York state healthcare policy and how Hillary wants to bring it to a home state near you. They've pretty much got it nailed, but I thought I'd add a little perspective, wot with me being a denizen of the liberal paradise that is the Empire State and all.

Donny Baseball is 36 and self-employed. There's me, the (ravishing) non-working Mrs. Baseball and the three small Baseball tykes. Everybody is healthy. To get the Baseball clan covered in NY by a mainstream provider like Oxford or Aetna would cost me a minimum of $2,500/mo. for a crappy plan. If I want some flexibility to use my doctors and if I want enough coverage for a hospitalization or some other goodies, I'm looking at $4,000/mo. and up. So that's somewhere between $30,000 and $48,000 annually that is essentially wasted if nobody gets seriously sick (actually that money reduces about $2,500 of expenses that we would incur anyway to about $600, so if everyone is healthy we really only waste somewhere between $28K-46K). That is alot of dough. Sure, someone could get sick, but if we go five years without health problems, we've pissed away $140,000 to $230,000. In contrast I can insure my life for $2 million over that same five years for $2500 in toto. That's $1.40 per day to insure for death, but $76 per day to insure for appendicitis or a hernia or a broken leg. How about getting a high deductible plan that just covers me if I get hit by a bus? Nope. Not available in New York state. So the choice is between accepting a high probability that a large sum of money will be wasted or accept a low probability of large healthcare expenses.

So what do you do if you can't afford upwards of $40,000 or just can't stomach the fact that it is vastly more likely that the money will have been wasted? You self-insure and hope. I sock away as much after-tax dinero as I can and hope that nobody gets seriously sick. And I count myself among the proverbial "uninsured" and shake my head in amazement at the misguided, do-gooding geniuses that have put tens of thousands of people like me in this position with moronic concepts such as "guaranteed issue" and "community rating". That's life here in New York. Wanna buy in America?

Protectionist Urge Overtakes Bush Administration...Bullet to Enter Foot Shortly

My worst fears for the stock market are coming true. It looks like a steep uphill battle to maintain the 2003 dividend and capital gain tax cuts and now it looks like the Bush administration is inexplicably going back into protectionist mode. If this is some calculated political plot to help out some vulnerable Sausage Factory Workers or otherwise tee up some loyalty for 2008, then it is DUMB DUMB DUMB. Protectionism will kill the economic momentum of the last few years. I fingered it previously as the biggest threat our economy faces. It is so maddening to see more protectionism come out of the Bush administration. Where is Paulson on this?

Sadly, the Dems want the economy to hit the skids. It will seal their win in 2008 and they don't care if real people suffer real economic pain in the bargain. The economy and the stock market are the Republicans biggest advantage at this point. For Bush to contribute to putting the clamps on the economy with this gambit is ineptitude of the highest order.

Thursday, March 29, 2007

Africa: There Is a Limit to How Much Murder, Rapaciousness and Misery We Will Tolerate...Maybe

You've reached tin pot dictator Hall of Fame status when your peer, neighboring tin pot dictators convene a pow wow to figure out what to do about you.

Still, a multiple choice question. The outcome of the Southern African Development Commuity's "emergency summit" on Zimbabwe will result in:

a) A strong condemnation of Robert Mugabe and coordinated action and assistance to transition Zimbabwe to a post-Mugabe, democratically elected regime (bucking up and solving their own problems);
b) A call for international financial commitments to stem the economic dislocation afflicting Zimbabwe (asking for money);
c) Solidarity with Zimbabwe against lingering colonialist/imperialist forces wreaking havoc on Zimbabwe (blaming whitey);
d) A bland statement in support of human rights and an empty commitment to enhancing human rights in Zimbabwe (talk talk just like at the UN).

UPDATE: Sorry, I should have given you option e) b and c (blame whitey AND ask for money).

UPPDATE: And the answer appears to be something between c and d.

Like the Pope's Hell, The UAW's Pickle is Real

I said that the UAW feels a deep sense of dread in its bones that what happened to the steel industry will happen to them. Well, no longer need that fear emanate from their collective gut, it is now on paper in black and white for their eyes to behold.

Naturally this is the first offer in what will be a negotiation process, but it does represent a kernel of a radical, convulsive end of the status quo for the Big Three. There is still enormous room for maneuvering here, but Cerberus & Co. could walk away, forcing the ball into GM's hands to save Delphi. Although unlikely, GM could in turn take a pass on saving Delphi's bacon. The UAW would then have to decide if it really wants to strike as a bankrupt Delphi rips up its labor agreements, thereby spreading the pain upstream to the big OEMs. Given that things are so bad for Ford, GM and Chrysler, a strike at Delphi could make things for the OEMs so bad that they would be more inclined to initiate radical surgery on themselves. At some point, a scorched earth strategy has only marginal costs. I think a Delphi strike gets the Big Three to that point.

The UAW has a terrible hand here. The world has changed and they need to recognize that the status quo does not entail a future for them, and they need to sign on for a future, the best future they can negotiate, like the steelworkers did.

Denier Or Maverick? Naturally It Depends.

Believe me, I am absolutely not in Don Luskin's employ or anything like that, it is just that he has really good stuff today. This is a must read.

Income Inequality Is Still the Bane of the Elite

Don Luskin points out the latest salvo fired by class warrior David Cay Johnston at the NYTimes. Luskin correctly dissects the complete lack of balance in the presentation of the data and the resulting interpretation. (In fact, it was Luskin's blog that inspired me to focus this blog, in part, on the me-too shenanigans at Bloomberg News.)

But back to Johnston. Let me offer up an alternate view by someone at least as credible/worthy as Saez/Piketty or the CBPP guy, 2006 Nobel laureate Edmund Phelps:

"I am not ready to condemn an economy on the evidence of inequality, especially where the poor are constantly doing better."

More here, here, and here.

On a related note, I can't believe those silly, ridiculous Haitians who landed on our shores the other day after sailing here in a rickety sloop. I mean, don't they know that we have income inequality in America!

Wednesday, March 28, 2007

Blinder Dons the Blinders

The WSJ reports on a prominent economist who says he supports free trade when, the article makes clear, he in fact does not. Alan Blinder seems to think that Paduchans have a special right to work and avoid poverty that Peruvians do not.

UPDATE: I don't know how this went uncommented upon at the big economics blogs yesterday, but sure enough...

Tuesday, March 27, 2007

World's Fifth Biggest Steel Co. May Not List In US

Despite news like this, our regulators and legislators still think Sarbanes-Oxley was good legislation. Let's just admit it was a screw up, a giant "Not Open for Business" sign and undo the damage.

Chalk One Up for Airbus

Airbus scored a very nice and important order for the A350XWB, its competitive answer to Boeing's 787 Dreamliner. Good for them. Now the question is can they deliver it on time?

UPDATE: A reader, who has a fine blog, rightly points to this, revealing that what lies behind any milestone for the A350 is a government subsidy. It should go without saying that I take state involvement to be a given. We are well beyond that, Airbus could not do what it does without massive state support. That said, handouts alone won't be enough for Airbus to compete with Boeing, it still has to identify what type of planes people want to fly on and thus airlines want to buy. And then it has to build them. In the case of the A380, it is still not obvious that they have even gotten those tasks right, and a government check can't help them with those aspects. With the A350, at least, it seems that the risk that they will build a plane that nobody wants is low. The main risk is that the continued internal turmoil and/or just the sheer volume and complexity entailed in launching two major programs, the A380 and A350, somewhat simultaneously will trip them up again and they won't be able to deliver the planes on time.

Friday, March 23, 2007

Subprime Mortgage Crisis Sealed Off

Bloomberg has a good "Special Report" on the Subprime Mortgage Crisis here. The first of its five reports details something that is not getting talked about enough - how hedge funds and newer features of the capital markets are inoculating the risk of a systemic financial crisis emanting from an isolated crisis in a troubled sector. In fact, the MSM is all over the theme of increased risk in the financial system due to the proliferation of hedge funds, those nasty secretive partnerships for the rich only. The conventional wisdom is that because many of these hedge funds are large, trade rather aggressively, and nobody knows quite what they are doing, they pose a risk to the financial system. Nobody ever says how they pose a risk, just that those salient characteristics - big, aggressive, opaque - simply have to be bad. Those adjectives are good enough for the media and for our politicians to mount the stump in opposition.

Truth is that, in at least two instances now, these large pools of capital have acted as buffers keeping specific financial crises contained within their own worlds. As the Bloomberg Special Reports chronicles, numerous large hedge funds have swooped in to take busted subprime assets off of the troubled lenders, acting as a valuable extra source of liquidity and providing a price floor for the assets, which in the past might not have found a buyer at any price making the crisis much worse. Something similar happened when Amaranth Advisors blew up over its natural gas trades. Plentiful capital was available and willing to take the busted trades, preventing a liquidity crisis that could hopscotch around to other sectors. In both these instances both the strategies and the structure that hedge funds represent are innovations to the markets that have added degrees of flexibility and layers of depth to the markets that previously weren't there. There is a strong case to be made that the proliferation of hedge funds, or hedge fund-like operators, makes the capital markets less prone to systemic risk than in the past. If indeed the case, this is a development that the media and the political establishment should welcome, as it means all those cuddly goods of American life - the "little guy" and "nest eggs" and "hard-working Americans" - are better insulated from financial catastrophe. At least of the variety that is no fault of his or her own, as opposed to that which is brought upon themselves through their own greed and imprudence.

UPDATE: Apparently, though, it's been sealed off in Califiornia.

Thursday, March 22, 2007

Race To Demagogue the Subprime Meltdown

The politicians are now stepping overthemselves to the get to the front of the line to demagogue the subprime lending reckoning that is unfolding in the capital markets. Typical of the annoying rhetoric is this from, go figure, Sausage Factory Worker Christopher Dodd: ``Our nation's financial regulators were supposed to be the cops on the beat, protecting hard-working Americans from unscrupulous financial actors".

Maybe. Surely there were some bad actors among the lenders involved, but they're not sitting on a beach earning 20%. Many are bankrupt and many will soon be. The stocks of these companies have been decimated and the wave of lawsuits is gathering out at sea but will surely reach land in short order. In other words, the dumb decision (maybe even the unsavory purposeful ensnarement) to lend of money to those unable to handle it, is meeting its comeuppance.

But what of the other side of the ledger, the borrower? What of their culpability? You will hear no condemnations from the politicians of the rampant greed that fueled the more speculative real estate markets. From 2002 to 2005, we had the real estate equivilent of the prototype stock bubble where hairdressers and janitors are playing the market. The guy who keeps my townhouse development's boiler running was a mini-real estate lord with 11 properties, all probably levered over 95%. Was he just a closeted entrepreneur kept out of the game for too long? Did people who make $1800/month really think that the world had changed and that a loan of $800,000 was now perfectly sensible whereas previously it was an imposibility? No, there was a mania, fueled by people's greed and abetted by speculative lenders. These lenders were irresponsible in lending their capital, just as borrowers were irresponsible in taking on too much debt and doing insanely stupid things like choosing ARM loans when rates had no place else to go but up.

Credit counseling is pervasive in this country, provided by non-profits and all manner of community groups and 'empowerment' gurus. There is no reason why any person in a position to borrow a large sum of money shouldn't know what level of debt they can handle. So why did this happen? Greed. And whatever Christopher Dodd and the Great Sausage Factory do to address it ex post facto, it will happen again (it might even be happening now, seen any commercials touting gold and other metals as an investment...?).

Seems to me that both sides got exactly the outcome that was most likely as sad as the results are. The system worked.

Tuesday, March 20, 2007

Too Busy Being Green, The Final Chapter

Well, looks like BP's pudding is cooked. BP will be getting out its checkbook in short order to pony up for what will certainly be a number of wrongful death, environmental damage, and sundry other charges that they will surely have to make recompense for.

As Lord Browne pranced around the globe pretending that British Petroleum wasn't an oil company and as they ran those insufferable commercials, what they weren't, in truth, was a responsible company. People are dead, the environment has been fouled and an industry striving to demonstrate its considerable technological prowess and lauadable safety record has been set back years at the worst possible time.

Guys like Browne and the ossified do-nothings on the Board of Directors at BP are the types of capitalists that make this capitalist cringe. They give a bad name to all and set back the greater notion of liberty grounded in free enterprise.

Bloody idiots. Your bad days ahead are well-deserved.

Part I here, Part II here, Part III here.

Monday, March 19, 2007

Good for France

It is scary that they had to amend six thousand laws to reduce the barriers to entrepreneurialism, but good news is good news.

Cheers to the A380

Well, the Airbus A380 flew into JFK today on its maiden voyage across the Atlantic. I'm sure it was a site to behold and I wish I was there to see it. I'm sure it is a majestic plane, but I am not sure that majesty was the best use of Europeans' tax dollars. I hope the market embraces the A380 and it proves to be a commercial success to operate, but that is far from a guarantee. We might well have yet another elephantine monument to vein politicians on our hands, but for now I will raise a glass to this plane. Unfortunately the fate of the A380 depends, to a great degree, on the price of oil.

Friday, March 16, 2007

The Indignity of Globalization

First the British auto... sorry motorcar industry, now comes this. I can hear the howls all the way on this side of the Atlantic..."Haitch-Pee, made by the bloody Dutch!!"

The Red Devils are next boys! We're moving them to Miami!!

We Have a Word for That...Two Words Even

I have previously shown how both Canada and Japan have attempted to kill their stock markets, and thus the wealth and retirement savings of their citizens. China is now consciously trying to damp down its stock market. Well, how do you do it? No hemming and hawing, the Chinese know that it is obvious - higher taxes on capital. Likewise the way to see economic prosperity blossom is to lower taxes. The experience of certain eastern European countries and, above all, Ireland makes this patently obvious (Ireland was the poster child of economic backwardness for centuries until, guess what, taxes went down [n.b. virtuous consequence of economic prosperity is that Irish sports teams are kicking the tar out of those who have long dominated them]). See also this. So why on Earth would we want to do such a clearly destructive thing such as let the 2003 dividend and capital gains tax cuts expire? Billions of dollars of everyday Americans' wealth will be destroyed. It is no less than shooting ourselves in the foot, totally beyond question that it will hurt us. What do you call doing something that you know will hurt? Stupid. Or masochistic.

Coke and Global Development

This is a great post over at Powerline talking about the things that the Coca-Cola Company is doing to bring access to clean, potable water to impoverished regions. This ties together two topics I posted on a while back. The first addresses the crazy notion that clean, potable water is a natural state of affairs and that we waste water here in the US. The second addresses the silly notion - proven even more silly after reading the McKay article - that Coca-Cola Company isn't a "socially responsible" company.

I Love Animals, They're Delicious

I can't believe I missed it! I had no idea what yesterday was and I had veggie lasagna! I feel so very low. No worries though, I can still join in on the spirit belatedly. I think we have some steaks and some lamb chops in the ole Baseball family Tonight We Grill!!

Whoops, it's a Friday in Lent. SATURDAY we Grill!!!

Leisure Inequality

I wanted to blog on this item the other day but was too busy and now everyone has beaten me to it. I guess it is good that we have academic economists to really study this and report back to us what we already know, just to avoid the rare case where our observations would lead us to an impression that is not reflective of the prevailing reality. Nonetheless, James Taranto wryly mocks that this assertion is a revelation by stating "Maybe Because a Lot of Them Don't Have Jobs?" It's true, alot of people who make up "the poor" don't work or work very little and so have more time on their hands. Conversely, alot of people who make up "the rich" are not aristocratic heirs but hardworking entrepreneurs who work tirelessly to make their businesses a success. They do whatever it takes to build the business that often bears their name. They are everything from CEO to maintenance crew, and if work needs to get done late at night or on the weekend, they do it because success will not wait. Thus they have less leisure time. You may know some of these individuals. Or, if you want this explained in a different way, this is how an academic economist would describe it.

Thursday, March 15, 2007

Canadian Newsflash: Pol Pot Was Cruel to Animals

One of the unfortunate consequences of having investments up in Canada is that I feel I have to read the dreadful Canadian newspapers. Everyday the National Post and the Globe and Mail have become part of my ritual. I might as well pour hot coffee on my lap every morning. Today is just a small example. Check out the G&M's headline of its top item, and the lead in...

"Suspected 9/11 mastermind Khalid Sheikh Mohammed confessed to the beheading of American journalist Daniel Pearl and was central to 30 other attacks and plots in the United States and worldwide that killed thousands of victims, said a revised transcript released Thursday by the U.S. military."

KSM beheaded Daniel Pearl. That's terrible to be sure. But didn't he do something else? Didn't he admit to something a little more ambitious? And wouldn't admitting to such merit the removal of the label "suspected"?

Alas, it seems that KSM admitted to these acts under torture. No doubt he was forced to read the National Post and Globe & Mail morning, noon and night. A man will confess to anything under such circumstances.

Wednesday, March 14, 2007

Chrysler's Gordian Knot

Doron Levin is a great auto industry columnist, working for Bloomberg. In this column he speculates about the fate of Chrysler. Naturally he covers the private equity behemoths hovering over the limping carmaker. This is a very big story and the UAW ought to take note. Private equity capital represents the ultimate dose of reality for the unions the unions has ever seen. Courtesy of Wilbur Ross's reconstituting of long dead steel industry assets, we saw an inkling of the bargain that private equity capital will offer the hollowed-out shell of any US industry brought low through union dominance and intransigence. By the time Wilbur showed up thousands of steelmaking jobs had disappeared as US companies failed to compete given their high wage scales. He told the unions that he would bring back about half of the jobs that went away at half the old wages, and more flexible work rules, or he would bring back zero jobs at the old wages. The UAW isn't at that point yet but it will be. Its current choice is a continuously shrinking amount of jobs at today's wages and perks or a stable to growing base of jobs at market (greatly reduced) wages and perks. A few years of continued intransigence and the UAW will be in the exact spot as the Steelworkers were. It's certain pain now or uncertain, but likely larger, pain later. Not a good choice, but it is reality. Unless Chrysler finds a strategic buyer, which is unlikely, the UAW is looking at Cerberus, Blackstone or something of that ilk holding Wilbur Ross's playbook and calling the shots. Or they could choose slow death. It won't be the first time.

UPDATE: And the unions know it. They know it down in their bones. They have perfected the art of pushing around management and shareholders for decades, why would they trade in that group of folks for less accomodating folk? Unfortunately, last time I checked, the guys on the factory floor don't get to decide if, when or to whom to sell the least here in the US...for now at least.

Tuesday, March 13, 2007

Cart Before Horse? Yes, Guilty As Charged.

Larry Kudlow asks the all-important, obvious (so obvious that everyone missed it) question. Here I have been bending my deductive sail over healthcare policy and yet not one of the potential candidates from the one major political party that ostensibly doesn't loathe American capitalism has made a strong commitment to preserving the dividend and capital gains tax cuts and/or seeking additional pro-growth tax cuts. That's like me asking, "Do you truly love my daughter?" before I get around to "Do you have a criminal record and/or a history of mental illness?"

So who will grab the mantle? Who will say, "As President I will live by the words of the late Milton Friedman when he said 'I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible.' "

Global Financial Rescue Mission Is Slow Going

Who ever said we don't follow-up on a theme here at NBfPB...? Awhile back I noted that the world was fortunate enough to have the International Monetary Fund take on the task of saving us from certain financial collapse. Alas, I am sorry to report that after "two rounds of multi-lateral consultations with senior finance ministry and central bank officials..." nothing has been achieved. I know, I know. I am as shocked and disappointed as you are. At least Stephen Roach will go back to being grumpy again.

If the macroeconomy were a Dilbert cartoon, the IMF would be the dopey guy from 'corporate' with 'dotted line reporting' who shows up at your business unit's annual strategy planning meeting and won't shut up.

The good news in all of this is that the IMF has moved from tangibly destructive to ineffective. That is progress in my book.

I'm OK. You're OK. Is John Doerr OK?

I guess it's inevitable. When you get wildly successful and you age, you say dumb things. Don't get me wrong, I still want to be wildly successful, so when I inevitably start saying things like "I'm scared...I don't think we're gonna make it," throw a football at my head or remove me to my 6,000 square foot safe house or just plain ignore me and let me enjoy my untold wealth and dementia in private.

Russia Duns Iran?

Somebody please make sense of this one for me, and don't tell me that Russia just wants its money. My take is that they are contributing dutifully to the 'international community's' desires of smacking Iran around but without coming off like Chimpy's poodle and their treasured self-image of Russian manliness preserved. They do as they are told but save face, win-win. Why else would they stop selling nukes to Iran? I mean aside from oil and some commodity metals, the entire Russian economy consists of selling bad things to bad people. Oh wait, it just hit me. They want to blackmail the Iranians! You've done half the work already, so your customer is locked in to you as a supplier, so can shake them down for more loot. That would definitely be more in keeping with Russia's style. Never mind.

Monday, March 12, 2007

A Sporting St. Paddy's Day

You want some real March Madness? How about the prospect of Ireland winning the 6 Nations Cup (that would be in Rugby for the unknowing) on St. Paddy's Day! It's far from a sure thing but if the Boys in Green beat Italy and Scotland beat France, it'll be Irish rugby's first championship in 22 years. Also, I believe Ireland could take the Cup if they beat Italy by a large margin and France and England only squeak by their respective opponents. For those fans of Irish rugby on this side of the pond, the action gets going at 8:30 am. Guinness for breakfast anyone?

Boeing Scores Some Nice Work

Boeing bags a nice chunk of orders, including 10 cargo 747-8s from a Russian company. Despite the fact that the Russian state has bought 5% of Airbus's parent and Putin & Co. are desirous of getting a piece of the patronage pie that is Airbus, they couldn't bring themselves to order the cargo version of the A380. Oh wait, there is no cargo version of the A380.

Thursday, March 08, 2007

Jersey Hoops a Political Football

New Jersey is home to 3 of the top 11 high school basketball teams in the country (incidentally, all small, inner-city, Catholic schools) and #2 met #11 in a state championship game the other night. Alas, the mayor of Jersey City, home to #2 St. Anthony's, got in hot water for attending the game rather than a community meeting about local crime. I think this is too harsh, the game will only be played once and the crime problem will still be there tomorrow!

The Pulitzer Prize for Saying "It Snowed"

It's good to know you can still scale to the heights of the journalistic profession by reporting on the weather. The Pulitzer nominations are in.

Breaking News
1. The Oregonian - Lost Family
2. The Denver Post - Blizzards

I'm sure the D Post did some cutting edge journalism to nab this nomination, but c'mon...The Weather Channel sends guys like Jim Cantori out into 100 mph winds during hurricanes. That is hard-nosed reporting.

The Left Loves a Whistleblower, Until It Doesn't

The Left loves a whistleblower. Or at least it loves an Enron whistleblower or a Bush Administration whistleblower. Not so clear that they'll love a theocratic, Islamic terrorist-supporting, holocaust-denying, nuclear weapon-seeking regime whistleblower.

Walter Reed's Greater Significance

Sometimes a story breaks that on its surface appears quite simple, but upon further review it would appear to have much deeper import. Such a story is the apparent scandal of subpar care and conditions at Walter Reed Medical Center. Quite rightly, many are pointing to this as what government run healthcare looks like and what we would all be in store for under an increasingly government controlled healthcare system. All this comes as the 2008 presidential candidates are behind the scense putting pencil to paper and devising their policy planks. Right now it is just showtime, but soon these individuals will have to present actual governing philosophies and policy prescriptions to the nation.

As all 10 of my readers know, I blog alot about healthcare policy and you don't have to be a genius to see that healthcare will be one of the biggest issues in the 2008 presidential campaign. On the Democrat side there is no policy menu, all candidates are clearly advocates of increasing the government role in heathcare provision. It is almost safe to say that if any of these candidates were freed from the constraints of our government's system of checks and balances, they would pursue 100% nationalized heathcare. On the Republican side, the policy menu at this point is...well, not apparent. So observers are forced to speculate. What would Rudy's healthcare policy look like? Who knows? Black Box City. McCain? Enigma as well. McCain's ties to Phil Gramm and economist Kevin Hassett may lead one to believe that his healthcare policy would be non-interventionist to free-market based. Further adding to the confusion is that McCain is both a spending hawk yet a behavior nanny. He wants to tell you what to do, but he doesn't like spending government money to do it. The only Republican candidate where speculation may yield some clue is Mitt Romney, although even here there is some paradoxical information to sort through based on his policy legacy in Massachusetts and his recent statements and actions. As previously noted, Romney has hired two economists who have advocated a free-market, reformist healthcare policy. Furthermore, he has directly walked back from his RomneyCare legislation in Massachusetts. It looks like the retreating continues apace.

If heathcare policy is still a tabula rasa for the major candidates' official policy planks, the Walter Reed story couldn't be breaking at a better time. Let's hope that the story influences the debate and the direction the candidates take in the campaign.

CAVEAT that in a better world I would not have to include: "No, I am not happy that our injured servicemen and woman are receiving inadequate care. I think the situation is to our shame. It's is just that I am trying to look beyond the given circumstances to the policy implications."

Pink Foreign Newspaper: Latins Are Sheep

I am in shock over the sheer stupidity and condescension of an assessment, carried in a pink foreign newspaper (sub req'd), of how President Bush's trip to Latin America is likely to be received. Here's the lead in...

"Back in 2001, many Latin Americans harboured hopes that George W. Bush would give greater priority to a “backyard” that the US had often taken for granted. After all, the newly elected president was a former governor of Texas, a state bordering Mexico, he spoke a bit of Spanish and the “cowboy summit” at the ranch of Vicente Fox, then his Mexican counterpart, was the occasion for Mr Bush’s first official foreign visit. “Some look south and see problems. Not me; I look south and see opportunities and potential,” he had said on the eve of that meeting.
Then came the attacks of September 11 and more pressing concerns. The administration’s apparent indifference to Argentina’s financial collapse later that year, its bungled response a few months to a Venezuelan coup and, above all, its invasion of Iraq made Mr Bush a deeply unpopular figure in the region. "

Got that? Because the US was forced by events to address its own pressing issues and because its policy in Iraq (which, after checking my map, I see is NOT anywhere near South America) is unpopular, South Americans have no alternative but to ignore Bush's economic policy message and be swayed by political messages from the hyper-populist to the downright Socialist. Nope, no responsibility for their own fate. No onus on them to sort out what economic policies hold promise for them and what policies are a danger to their freedom and well-being. No. Rather, George W. Bush has abandoned them to the tender mercies of Chavismo.

Like I said, unless it can be proven that Chavez stole both the referendum and the recent election, I have no sympathy. Venezuelans are getting exactly the government they asked for. Ditto the Argentines, Bolivians and Ecuadoreans. When will Latin Americans take responsibility for themselves? Perhaps when condescending gringos and Europeans stop treating them like children and denying their will and ability to forge their own way in this world.

Oxley Doesn't Want to Go Down In History Like Hawley

Scant solace this. The force of rationality just may have won the battle to get everyone to admit this was a disaster and then do something about it, but all those donations to Democrats by hedge funds and private equity sure will help give the effort some extra juice.

(HT: Instapundit)

Tuesday, March 06, 2007

Germany - Supply Side Laboratory

Here is a beautifully crafted supply-side experiment courtesy of the Germans. Brian Wesbury explains how the Germans pulled economic activity from 2007 to 2006 and is pushing economic activity from 2007 to 2008, engineering a little supply-side pothole for their economy in 2007. Here is the basic logic:

"German tax rates were scheduled to move higher on Jan. 1, 2007, many companies and individuals simply shifted income and spending forward into lower-tax 2006. Those who did so were able to avoid a 3 percent hike in the VAT tax, to 19 percent, as well as a 3 percent hike in the top marginal income- tax rate to 45 percent."


"In 2008, the German government plans to reduce corporate-tax rates from roughly 40 percent to 30 percent. This will create a strong incentive for corporations of all sizes to push income and profits from 2007 into 2008."

So check back in early 2009 to get the complete lab results.

Jobs That Don't Pay Enough

- Chinese Coal Miner

- Russian Journalist

Not To Be Outdone by Hillary, McCain Waxes Chavista

First it was Hillary doing her best Hugo Chavez impression with the confiscation of oil company profits rhetoric. Now is it John McCain's turn? While John McCain's mandatory service probably won't entail a gun to the head, and Chavez's just might, that shouldn't salve the affront to your sense of liberty. If this is a policy plank of his, he's sunk, although I suspect he is sunk already.

Airbus Soap Opera

Workers go on strike over restructuring plans. Politicians contemplate a new round of tinkering.

Monday, March 05, 2007

More DeSoto, Less Sachs

Austin Bay thinks economist Hernando DeSoto's ideas would be a big help in Iraq. He's not the first blogger to say that the ideas of the underappreciated DeSoto hold enormous potential for the world's underdeveloped and struggling economies. Come to think of it, given the paltry results of Hollywood-style initiatives that fund Jeff Sachs-type initiatives, we ought to giving DeSoto-style projects much more of a chance.

More Dispatches From Peak Oildom

Over at The Oil Drum there are some fancy graphs within this post that commenters are desperate to get the world to look at, ostensibly because they represent stunning proof of the Saudi Arabian strain of Peak Oil. Longtime readers know that I am skeptical of the Peak Oil theory, or at least skeptical of the false logical link from declining to production to the popular talking point that "we are running out of oil." (Notice all the graphs in the post have only a few recent years data. Do they want us to take this seriously? Trends from 2004 to now? C'mon, this is laughable.)

Anyway, as a counterpoint to the extreme pessimism over Saudi production, I had lunch recently with a leading oil and gas industry investor who had just returned from Saudi. His view was that Saudi had gotten off easy for decades, doing very easy pumping without having to employ the most advanced technologies to get their crude out of the ground, but that this was changing. Saudi is going to have to suck it up and begin to employ the oil service sector to a healthy degree as they move from the decades-long 'low hanging fruit' era to the modern era. That application of new technology should have enormous consequences on Saudi's probable reserves calculation and future production.

Peak Oilers love to demand that we think through the consequences of declining oil production without even offering the option of actively encouraging more production and arresting the decline in production that is well within our capability to do so. We can't produce oil of we don't drill for oil. We are not limited by 'what is out there', we are limited only by our desire/ability to find, extract and refine sources of energy. The policy response should be more drilling (in addition to energy diversity initiatives, let unfettered hydrocarbon technology compete freely with non-hydrocarbons).

Gateway to my previous Peak Oil posts here.

UPDATE: Check this out, too. TigerHawk's conclusion sounds alot like this: "Peak Oil is a second cousin of global warming. It shares a declinist perspective and it exists to heap scorn on the endeavors of humankind."

Sunday, March 04, 2007

SuperHank Counsels Rationality

SuperHank rebuts the caterwauling protectionists. Everyday it becomes more evident how crucial it is, and how fortunate we are, to have a man of Paulson's stature as Treasury Secretary.

Friday, March 02, 2007

Cynical Pro-Union Votes

10 of the 13 Republican defections on the Union Intimidation Endorsement Act that recently passed the Lower Chamber of the Great Sausage Factory are from the union-choked quadumvirate of New York, New Jersey, Pennsylvania and Connecticut. That would be floundering NJ, depopulating New York, falling Pennsylvania, and listless Connecticut. Outside of the financial sector, the best thing that can be said of these states' economies is that at least they are not Michigan.

To be fair, these were free votes. The bill has no shot of becoming law soon and these pols could cast their votes and look good to the unions at home with very little political damage, unless the Chamber of Commerce types have long memories.

Thursday, March 01, 2007

Stock Market Jitters? Yawn.

OK, so I feel compelled to comment on the recent few days in the market, although in truth I think it merits a big yawn. I try to ignore "the market" as much as possible and focus on individual companies and specific investments. Obsessing too much over the market environment can lead you astray and cause you to take your eye off the ball. That said, you cannot ignore the macro picture totally. More than at any time in my short lifetime, the market is Warren Buffett's proverbial voting machine rather than a weighing machine. Oceans of capital have moved from more staid mutual funds to the hyper-kinetic trading universe of hedge funds who measure their success on a month to month basis. Many of these guys cannot ride out a storm, so they exit positions at the drop of a hat. The resulting volatility is scary but, in my opinion, it doesn't much constitute a reliable message about the health of the market, the state of the economy, or the investment landscape.

Some of the things that gave people the heebie-jeebies this week were a pretty lame basis for a market meltdown. Greenspan talking possible recession? Please. Anybody with a brain knows that AG was talking expansively, saying a recession is possible in the sense that it is not impossible. Check out Caroline Baum's take for more on this. Durable goods? Again, lame. It's a highly volatile measure and one month's data conveys almost nothing of meaning. On another day (that wasn't bookended with China and Greenspan) that same durable goods report could have been seen as good news as it might be another piece of evidence for the Fed's bias to tilt toward easing. China? Who cares. China is a speculative market. Speculative markets take hits, often big hits. It says nothing about the vast and varied asset class that is US equities or global blue chip equities.

What are the big things that market participants should be worried about. Kudlow hinted at it today in the WSJ - the policy cycle. I am not so much a believer in the business cycle as I am in the policy cycle. Bad policy squelches economic dynamism and is what can really kill a rally like what we've been enjoying for 3+ years now. The three biggest bad policy risks that are lurking out there today are 1) higher taxes on capital, namely the repeal (failure to extend, really) of the dividend and capital gains tax cuts, and secondarily, the failure to make the death tax repeal permanent; 2) protectionism, principally the prospect of tariffs enacted against foreign goods, particularly Chinese goods, over some phony notion of "fair trade" 3) continued government interference and regulation in enterprise - from misguided energy policy formented by global warming hysteria to failure to reverse Sarbanes-Oxley to imitating any number of silly and destructive European economic policies (like this one, for example). Finally there are a number of policy proposals that are circling around the halls of the Great Sausage Factory that are being enthusiastically embraced by big business, but don't let the business endorsement fool you into thinking these policies will be good for the economy in general. They will be good for those big businesses and bad for entrepreneurs that are the source of dynamism and resiliency in our economy. Universal healthcare and carbon emission caps come to mind. Big businesses are embracing these notions because the burdens will fall most heavily on their smaller, more nimble competitors. Politicians gerrymander and do everyhting to strengthen imcumbency, big businesses lobby and advocate that which would hamstring competitive upstarts. So, be very nervous over developments like this.

All that said I am relatively optimistic about the market because 1) I think a presidential veto is the backstop to any significantly higher taxes, we have at least until 2009 to worry about that; 2) Big money hedge funds and private equity guys bought off the Democrats prior to last November. Hedgies need the market to continue doing well, and, more importantly, so does the private equity industry. All these LBOs and going dark transactions and what not have to be refoisted back onto the public again at some point. A healthy stock market that is fertile ground for IPOs and M&A activity has to exist or all that private equity capital can't exit. So not only do I think that the Great Sausage Factory will do no harm, it might even help the investment climate. For starters, I think the private equity guys will demand of their bought and paid-for politicos that they reform Sarbanes-Oxley. They might even demand that companies be relieved of the burdens of providing healthcare.

And lastly, we have SuperHank.

UPDATE: Here is a differing viewpoint.

Airbus A380 Downward Spiral Continues

A few days ago I speculated that Airbus gave UPS a way out of their orders for the cargo version of the A380 because they needed the fuselages for a passenger carrier. It was either that or doing the extra work for just UPS, as the only remaining cargo customer, would add costs and complicate the production line, and that is what Airbus is claiming. Whatever the case, the cargo version of the A380 is officially on the back burner for now. This is a terrible blow as the cargo market is an important market segment to have a hold on as a buffer against a difficult passenger carrier market.

UPDATE (thanks to a reader for the reminder): UPS cancelled the order. The only question now is will it take 777s or the 747-8?