Archive for the ‘Politics’ Category

Back To The Drawing Board…


Timothy Geithner, our new Treasury Secretary, is starting off his tenure with a routine we’ve seen before:

Via Bloomberg:

Geithner also said, in written responses to questions from Senate Finance Committee members, that there are “no current plans” to request more financial-bailout funds. He played down any need to nationalize U.S. banks, without specifically ruling out the option.

We’ve seen what can happen when public officials come out and deceive the public; Hank Paulson & Co. (deliberately or not) downplayed the severity of our credit crisis and maintained that our trouble was sheltered in the realm of Subprime-Mortgages…regardless of whether people believed him (many did not), the important thing is that once his thesis was broken, we embarked into an age of volatility and bank runs (Lehman Brothers and Bear Stearns specifically, although not in the traditional sense). The markets realized his oppinions weren’t accurate, which tarnished Paulson’s authority and limited his credibility going forward.

Many people choose to study history so we don’t repeat mistakes of the past; in this context, the mistake is decieving the public. Thankfully Barack Obama abides by this philosophy (as evidenced by his inauguration speech) since he hasn’t come in with an attitude that he needs to be America’s cheerleader (much like Erin Callan did for Lehman Brothers).

Hopefully Tim Geithner has the sense not to go down the same slippery path like so many before him, or we could be in for a long ride.


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The highest tax bracket, or families who earn $2.87+ million a year, would experience a 11.5% increase on a 35% marginal rate of taxation, or an overall tax rate of 40.25%. McCain would bring it down to 33.46%.

I think Obama’s plan reflects intelligence (and a bit of populism), because:

  1. He’s not reducing government tax receipts as much as McCain, which will not exacerbate our deficit.
  2. He’s providing a tax break to the part of America which has the greatest propensity to spend money (which is good for the consumer spending component of GDP), and increasing taxation on the people who are more inclined to save the next dollar they earn. The “fair vs. unfair” argument, for the time being, will be neglected…I think that is a sign of a good leader.
  3. Ultra-free market enthusiasts argue for low rates of taxation with the mindset being that the consumer can better allocate money through free enterprise better than a government ever could; by lowering taxes on the working class, Obama is promoting entrepreneurship and private investment, and funding it with the taxes of the super-upper class, who have already achieved these goals – which is a bit like communism if you ask me…

Here’s how the rates of taxation look today:

Year 2008 income brackets and tax rates

Marginal Tax Rate Single Married Filing Jointly or Qualified Widow(er) Married Filing Separately Head of Household
10% $0 – $8,025 $0 – $16,050 $0 – $8,025 $0 – $11,450
15% $8,026 – $32,550 $16,051 – $65,100 $8,026 – $32,550 $11,451 – $43,650
25% $32,551 – $78,850 $65,101 – $131,450 $32,551 – $65,725 $43,651 – $112,650
28% $78,851 – $164,550 $131,451 – $200,300 $65,726 – $100,150 $112,651 – $182,400
33% $164,551 – $357,700 $200,301 – $357,700 $100,151 – $178,850 $182,401 – $357,700
35% $357,701+ $357,701+ $178,851+ $357,701+

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There seems to be a clear favorite here, but the basket of participants isn’t exactly diverse:

A total of 142 responded, of whom 46% identified themselves as Democrats, 10% as Republicans and 44% as neither. This skewed party breakdown may reflect academia’s Democratic tilt, or possibly Democrats’ greater propensity to respond.

Regardless of party affiliation, our respondents generally agree the economy is in bad shape, that the election is important to the course of economic policy and that the housing and financial crisis is the most critical economic issue facing America.

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Sheer Brilliance

I’ve purposely avoided making fun of Sarah Palin with the fear of being labeled a chauvinist, but this interview with Katie Couric was too good (or bad) to pass up…I’m a little late to the party, as this was shot 2 weeks ago.

Matt Damon also has funny things to say about Palin:

I totally agree; this was a total marketing ploy by the McCain campaign, and the consequences have begun to overshadow any perceived positive she initially brought to the table; she weakens the ticket through every interview (not that McCain is holding up to his end of the bargain either).

They also get to carry the baggage of the incumbent, as if they didn’t have enough already (both very easily stereotyped, McCain’s sole strength being that he knows how to conduct a war we can no longer afford, and Palin not having an apparent strength).

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August 30th:

Forget an introduction, I’ll just get right into it:

Now that some of the confusion has begun to settle as to why McCain picked the governor of Alaska as his running mate, the strategy behind his move is becoming clearer. That’s not to say it will work, in fact I think it will fail due to some false presumptions he is making about the American people. Even conservative media like FOX cannot help but point out the flaws in this decision.

She’s not Hilary Clinton: She’s against abortion, and is uncharismatic in my opinion (maybe its that Minnesota-like accent which is putting me off). It’s also pretty discouraging that McCain feels the need to differentiate himself by taking someone as his VP, who on her own, would not be prepared to run this country should he die in office (not an unlikely scenario at his age).

Finally, I think a big reason he chose Palin, is that it will be easier for McCain to fulfill his agenda of offshore drilling in Alaska with the face of the target state in his cabinet.

Both candidates have opted to forgo taking a VP of true qualification, only to pick someone who they think achieves a better public image from a marketing standpoint. And that is what this election has come to. They are marketing themselves to the lowest common denominator, operating under the assumption that the majority of Americans would be too stupid to acknowledge a good candidate if they saw one. Maybe if McCain & Obama weren’t under a microscope for the past 2 years, they wouldn’t have to sacrifice a more viable ticket to cover their weaknesses which have become much too clear. It’s as if each of them has had to select their “better halves”, because neither of them is qualified to run this country on their own.

For a Nation that places such emphasis on talent, we sure seem pretty short of it in government.

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“They must not fail,” McCain said during a campaign stop in Belleville, Michigan, today. Fannie Mae and Freddie Mac “are vital to Americans’ ability to own their own homes,”

– Bloomberg

Thanks John, for that very thought provoking bit of information…I guess the fact that you’ve acknowledged the financial crisis is a quantum leap from your continual gibberish about the war though. God knows you’ll need Mitt Romney as your vice president if that’s the most you can say about America’s current economic condition, especially if Barack Obama elects New York Mayor Bloomberg as his running mate. (That may be wishful thinking on my part, but I don’t know of another potential candidate who is more qualified in making decisions regarding our economy).

The markets, in addition to the current craziness, should get even more interesting once the election season comes around. While I think the financial issues will temper by November, the most obvious vulnerability lies within the national defense sector (Lockheed-Martin, L-3 Communications) because should Obama emerge as the favorite, he would end the war in Iraq (or so he says).

I will delve further into these issues in a later post, I’m getting a little busy.

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This is just getting ridiculous:

Freddie Mac, Fannie Mae Plunge on Capital Concerns.”

Freddie Mac fell as much as 29 percent and Fannie Mae dropped as much as 26 percent, reaching their lowest price in 13 years, after Lehman Brothers Holdings Inc. analysts said in a report today that an accounting change may force them to raise a combined $75 billion in capital.”

These guys aren’tgoing to have enough of a market cap to get out of this mess. Lehman Brothers has dealt with headlines like this, saying that people have delibrately made slanderous, predatory remarks toward Lehman because they were short the stock.

That may have been bogus, and this could be too, but analysts cannot go around generating obscene reports like this; its simply irresponsible. They are subjecting us to some serious problems as a country, because they are hastening the process by which the Government would have to come in with a bailout plan. Granted they do say some things of validity (like how Citi was going to cut their dividend) but many of their remarks become self-fulfilling prophecies. Who could be sure that oil would be at $142.00/barrel hadn’t that Morgan Stanley analyst prognosticated that oil would be at $150 by July 4th? They’re almost NEVER correct concerning an earnings call, but we keep seeing unfounded remarks pop up in the media…

Seeing as we cannot control the nature of what analysts do (after all, objectivity and intelligence are some of the qualities required in their job specifications) Maybe it would be helpful to see what the government will be able to do.

Bailouts are instruments of last resort. We are a capitalist nation founded on free markets, and we typically stick to that slogan. That said, the government has financed several bailouts in its time; Bear Stearns, Long Term Capital Management, and Continental Illinois National Bank to name a couple. The last instance occurred during a time of crisis (Mexico’s default, high oil, and tight credit) one in which the government did not have much ammunition.

That’s good news, because there are a bundle of similarities between then and now:

As the Chart makes very clear, the war in Iraq is costing us quite a deal of money. Seeing as much of our fiscal policy has been shot by a stimulus package and tax cuts on capital gains, it would be quite difficult to organize any major bailout…unless we could cut an expense (hint hint).

Our next president will need to have personal accountability, a brain which hasn’t been eroded by serious drugs, and moral responsibility. He will need to come in and accept that the war was a monumental mistake, and focus whatever financial resources we have, internally. Laissez Faire will not get us out of this debacle.

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