Archive for January, 2009

Wall St Journal – A 40 year Wish List – An Obamination? Scary to me!

Posted in Investment on January 29, 2009 by nedgrace
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You won’t believe what’s in that stimulus bill.

“Never let a serious crisis go to waste. What I mean by that is it’s an opportunity to do things you couldn’t do before.”

So said White House Chief of Staff Rahm Emanuel in November, and Democrats in Congress are certainly taking his advice to heart. The 647-page, $825 billion House legislation is being sold as an economic “stimulus,” but now that Democrats have finally released the details we understand Rahm’s point much better. This is a political wonder that manages to spend money on just about every pent-up Democratic proposal of the last 40 years.

We’ve looked it over, and even we can’t quite believe it. There’s $1 billion for Amtrak, the federal railroad that hasn’t turned a profit in 40 years; $2 billion for child-care subsidies; $50 million for that great engine of job creation, the National Endowment for the Arts; $400 million for global-warming research and another $2.4 billion for carbon-capture demonstration projects. There’s even $650 million on top of the billions already doled out to pay for digital TV conversion coupons.

In selling the plan, President Obama has said this bill will make “dramatic investments to revive our flagging economy.” Well, you be the judge. Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There’s another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.

Add the roughly $20 billion for business tax cuts, and by our estimate only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus. And even many of these projects aren’t likely to help the economy immediately. As Peter Orszag, the President’s new budget director, told Congress a year ago, “even those [public works] that are ‘on the shelf’ generally cannot be undertaken quickly enough to provide timely stimulus to the economy.”

[Review & Outlook]

Most of the rest of this project spending will go to such things as renewable energy funding ($8 billion) or mass transit ($6 billion) that have a low or negative return on investment. Most urban transit systems are so badly managed that their fares cover less than half of their costs. However, the people who operate these systems belong to public-employee unions that are campaign contributors to . . . guess which party?

Here’s another lu-lu: Congress wants to spend $600 million more for the federal government to buy new cars. Uncle Sam already spends $3 billion a year on its fleet of 600,000 vehicles. Congress also wants to spend $7 billion for modernizing federal buildings and facilities. The Smithsonian is targeted to receive $150 million; we love the Smithsonian, too, but this is a job creator?

Another “stimulus” secret is that some $252 billion is for income-transfer payments — that is, not investments that arguably help everyone, but cash or benefits to individuals for doing nothing at all. There’s $81 billion for Medicaid, $36 billion for expanded unemployment benefits, $20 billion for food stamps, and $83 billion for the earned income credit for people who don’t pay income tax. While some of that may be justified to help poorer Americans ride out the recession, they aren’t job creators.

As for the promise of accountability, some $54 billion will go to federal programs that the Office of Management and Budget or the Government Accountability Office have already criticized as “ineffective” or unable to pass basic financial audits. These include the Economic Development Administration, the Small Business Administration, the 10 federal job training programs, and many more.

Oh, and don’t forget education, which would get $66 billion more. That’s more than the entire Education Department spent a mere 10 years ago and is on top of the doubling under President Bush. Some $6 billion of this will subsidize university building projects. If you think the intention here is to help kids learn, the House declares on page 257 that “No recipient . . . shall use such funds to provide financial assistance to students to attend private elementary or secondary schools.” Horrors: Some money might go to nonunion teachers.

The larger fiscal issue here is whether this spending bonanza will become part of the annual “budget baseline” that Congress uses as the new floor when calculating how much to increase spending the following year, and into the future. Democrats insist that it will not. But it’s hard — no, impossible — to believe that Congress will cut spending next year on any of these programs from their new, higher levels. The likelihood is that this allegedly emergency spending will become a permanent addition to federal outlays — increasing pressure for tax increases in the bargain. Any Blue Dog Democrat who votes for this ought to turn in his “deficit hawk” credentials.

This is supposed to be a new era of bipartisanship, but this bill was written based on the wish list of every living — or dead — Democratic interest group. As Speaker Nancy Pelosi put it, “We won the election. We wrote the bill.” So they did. Republicans should let them take all of the credit.

 

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Is Oil’s Future sustainable?

Posted in Investment on January 28, 2009 by nedgrace

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Click here for his January 2009 presentation to the Dallas Committee on Foreign Relations

Matthew Simmons is Chairman and Chief Executive Officer of Simmons & Company International, a specialized energy investment banking firm.  The firm has completed over 500 investment banking projects for its worldwide energy clients at a combined dollar value of approximately $100 billion.

Mr Simmons graduated cum laude from the University of Utah and received an MBA with Distinction from Harvard Business School.

President of the “Dr Doom” Club speaks from Davos this AM

Posted in Investment on January 28, 2009 by nedgrace

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Click here for Nouriel Roubini’s interview this AM from Davos

Thanks to CNBC. He is the President/CEO of the Dr Doom Club 🙂

Nouriel has been very right in his early predictions of this economic mess. I always listen attentively to Nouriel, Jeremy Grantham, Meredith Whitney and David Rosenberg – the smart ones in my view!

Why I am still bearish on the market and our economic prospects?

Posted in Investment on January 28, 2009 by nedgrace

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The market is rallying this morning on the Obama administration floating the idea of a “bad bank” to buy the bad assets from our major banks.

Earlier in January I posted about why I am bearish on the stock market, despite a big rally at the time. We have certainly come back to the barn as I had predicted, so to speak.

Here are my current thoughts, and again I hope I am wrong as it’s not much fun being Dr Doom, except perhaps on Halloween:

  • Job losses continue unabated – see my post earlier today on job losses announced since the election. Unemployment will reach double digits.
  • Corporate earnings estimates continue to be slashed – Goldman is now down to $55 for the S&P 500
  • Real estate prices continue deflating – Case Schiller just showed a 3 month annualized drop of 22.3%. Mortgage applications fell 38% last week despite record low interest rates
  • The “bad bank” scenario just masks that most major US banks are insolvent – we still have more problems coming too with credit card consumer debt and commercial real estate defaults
  • The “bad bank” transfers the losses from bank’s foolish lending from shareholders to the US taxpayers.
  • A Protectionism threat is growing – Treasury Secretary Geithner’s inflammatory comments on China are scary – the last Depression in this country became “Great” due to protectionism
  • Consumer confidence fell again down to 37.7 in January. Consumer balance sheets are now down in net worth 20%-50% due to real estate and investment losses
  • Price to S&P normalized 10 year earnings is still at 14x – trough has been 6-7 three times since 1915
  • Huge debt deleveraging needs to continue – excesses in one direction typically lead to excesses in the opposite direction
  • Deflation of almost everything continues as supply overwhelms demand – think about it – real estate, autos, commodities, etc. What isn’t going down is a better question to ask?
  • Reality – from 2002 to 2007, 40% of corporate profits came from various financial activities. Household debt to income and assets went to unprecedented levels
  • We have a very real price to pay for the classic long period of leveraged prosperity
  • Increased consumer savings will exacerbate the problem of defation, as they cut back on purchases
  • I believe we will see S&P 600 before we see S&P 1000
  • At best we are in a “Repression”, but more likely a Depression.

And finally, don’t believe ANYONE  100% who tells you that they really know and understand the outcome of this mess – no one on earth has ever gone through a global downturn in a global economy like we are experiencing!!

U.S. Companies Cut 519,895 Jobs Since Election – Bloomberg

Posted in Investment on January 28, 2009 by nedgrace
By Rodney Yap

Jan. 27 (Bloomberg) — U.S. companies have announced more than 519,895 job cuts since the Election Day victory by Barack Obama, who has proposed a plan to create as many as 4 million jobs to boost the economy.

Following is a list of dismissals announced since Nov. 1, based on information compiled by Bloomberg News and Challenger, Gray & Christmas, the Chicago-based executive search firm. Only companies with 500 or more job cuts are included in the table.

DATE     COMPANY                                         CUTS
==============================================================
Nov-08   Citigroup                                      75,000#
Dec-08   Merrill Lynch (Bank of America Merger)         35,000
Jan-09   Circuit City                                   34,000
Jan-09   Caterpillar                                    20,000
Jan-09   Pfizer                                         19,000
Nov-08   Lehman Brothers                                16,000
Dec-08   KB Toys                                        15,000
Nov-08   DHL Express                                    14,900
Jan-09   Alcoa                                          13,500
Dec-08   AT&T                                           12,000
Dec-08   Dow Chemical Co. (contractors & full time)     11,000
Jan-09   General Electric (GE Capital)                  11,000*
Dec-08   JPMorgan Chase (Washington Mutual)              9,200
Jan-09   Sprint/Nextel                                   8,000
Nov-08   Circuit City Stores                             7,305
Jan-09   Home Depot                                      7,000
Nov-08   Sun Microsystems                                6,000
Jan-09   Eaton                                           5,200
Jan-09   Intel                                           5,000
Jan-09   Microsoft                                       5,000
Jan-09   Schlumberger                                    5,000
Dec-08   Federal-Mogul                                   4,600
Jan-09   Boeing                                          4,500
Nov-08   ArvinMeritor                                    4,000
Jan-09   Hertz                                           4,000
Jan-09   Motorola                                        4,000
Dec-08   Wyndham Hotel Group                             4,000
Jan-09   Avery Dennison                                  3,600@
Jan-09   Corning                                         3,500
Dec-08   Omnicom Group                                   3,500
Dec-08   United States Steel                             3,500
Dec-08   Bristol-Myers Squibb Co (wound-care unit)       3,400
Jan-09   Texas Instruments                               3,400
Jan-09   Xerox                                           3,400
Nov-08   Pepsi Bottling Group                            3,150
Dec-08   Ryder Systems                                   3,100
Nov-08   Lehman Brothers (Barclays)                      3,000
Nov-08   First American                                  2,950
Jan-09   IBM                                             2,800
Dec-08   DuPont                                          2,500
Dec-08   Tyco Electronics                                2,500
Dec-08   Western Digital                                 2,500
Jan-09   EMC                                             2,400
Nov-08   Freescale Semiconductor                         2,400
Dec-08   Avis Budget Group                               2,200
Jan-09   Cooper Industries                               2,200
Dec-08   Newell Rubbermaid                               2,200
Dec-08   Office Depot                                    2,200
Jan-09   Textron                                         2,200
Jan-09   Freightliner                                    2,100
Jan-09   Cessna Aircraft                                 2,000
Jan-09   Delta                                           2,000
Dec-08   General Motors                                  2,000
Nov-08   General Motors (salaried workers)               2,000
Jan-09   MeadWestvaco                                    2,000
Dec-08   Stanley Works                                   2,000
Dec-08   Viasystems Group                                2,000
Dec-08   Air Transport Services Group (ABX Freight Unit) 1,900
Jan-09   Bank of America                                 1,900
Jan-09   Clear Channel Communications                    1,850
Dec-08   3M                                              1,800
Nov-08   Applied Materials                               1,800
Nov-08   Bank of New York Mellon                         1,800
Dec-08   Belden                                          1,800
Dec-08   State Street                                    1,800
Dec-08   Danaher                                         1,700
Nov-08   Fidelity National Investments                   1,600
Dec-08   Pentair                                         1,600
Nov-08   Washington Mutual (Pleasanton Campus)           1,600
Jan-09   Freeport-McMoran                                1,550
Jan-09   Baker Hughes                                    1,500
Dec-08   Kemet                                           1,500
Dec-08   ON Semiconductor                                1,500
Jan-09   WellPoint                                       1,500
Dec-08   Con-Way                                         1,450
Dec-08   Cooper Tire & Rubber                            1,400
Dec-08   Furniture Brands International                  1,400
Dec-08   InBev (Anheuser-Busch)                          1,400
Jan-09   Williams-Sonoma                                 1,400
Dec-08   Air Products & Chemicals                        1,300
Jan-09   ConocoPhillips                                  1,300
Nov-08   Morgan Stanley                                  1,300
Dec-08   Unisys                                          1,300
Nov-08   Fidelity Investments                            1,288
Nov-08   ArvinMeritor (hourly & salaried)                1,250
Jan-09   Compass Bank                                    1,200
Jan-09   Kennametal                                      1,200
Jan-09   Huntsman                                        1,175
Dec-08   Hutchinson Technology                           1,125
Jan-09   Advanced Micro Devices                          1,100
Dec-08   Fairchild Semiconductor                         1,100
Jan-09   Harley-Davidson                                 1,100
Nov-08   HSBC North America Holdings (Investment Bank)   1,100
Jan-09   Rio Tinto Alcan                                 1,100
Jan-09   Saks                                            1,100
Dec-08   Aetna                                           1,000
Dec-08   Alcatel-Lucent (management jobs)                1,000
Jan-09   Alltel                                          1,000
Jan-09   Ashland                                         1,000
Jan-09   Bose                                            1,000
Jan-09   Ecolab                                          1,000
Jan-09   Electronic Arts                                 1,000
Dec-08   Electronic Arts                                 1,000
Dec-08   Genworth Financial                              1,000
Nov-08   GlaxoSmithKline (US sales)                      1,000
Nov-08   Mattel                                          1,000
Nov-08   Neptune Orient Lines                            1,000
Dec-08   Sovereign Bancorp                               1,000
Jan-09   UAL Corp (United Airlines)                      1,000
Jan-09   Walgreens                                       1,000
Nov-08   USG                                               900
Nov-08   La-Z-Boy                                          850
Dec-08   Viacom                                            850
Jan-09   Barnes Group                                      800
Jan-09   Cummins                                           800
Jan-09   Suntech Power                                     800
Jan-09   Time Warner (Warner Bros.)                        800
Dec-08   Sonoco Products                                   700
Jan-09   Deere                                             692
Dec-08   U.S. Steel                                        677
Nov-08   Lam Research                                      600
Jan-09   Seagate                                           600
Dec-08   Principal Financial                               550
Jan-09   Bridgestone                                       543
Jan-09   Lincoln National                                  540
Dec-08   Agilent Tech                                      500
Nov-08   Hartford Financial Services                       500
Dec-08   Las Vegas Sands                                   500
================================================================
Total                                                    519,895
================================================================
Source: Challenger, Gray & Christmas, Inc. and Bloomberg

# -- Combined total for the year.

* -- May cut 7,500-11,000 this year.

@ -- Estimated 10 percent of workforce.

To contact the reporter on this story: Rodney Yap in Los Angeles at ryap@bloomberg.net.

Last Updated: January 27, 2009 13:08 EST

Taliban Geese Training Flight indicates bin Laden may be involved

Posted in Personal Life on January 24, 2009 by nedgrace

Officials have now uncovered this stunning photograph of a Taliban fighter conducting a training flight with his Taliban geese, likely in preparation for an attack on US Air Flight 1549.  

taliban-goose-trainers

The pilot has blocked his face but he is likely a suspected terrorist living in Montreal Canada known as Omar Maresh Mohammed bin Laden, a cousin of  Osama bin Laden.

geese1

 They are now suspected to be involved in the goose attack on US Air Flight 1549 that caused the aircraft to ditch into the Hudson River last week.


Canada Taliban Goose Questioned Today in NYC by Investigators

Posted in Personal Life on January 22, 2009 by nedgrace

investigators1
Investigators have determined that the suspected terrorist Canada geese aka Taliban Geese that allegedly brought down US Air Flight 1549 likely crossed the border from Canada into Vermont back in late December, and that they did not land as required at Burlington, Vermont(BTV) in order to check in with US Customs & Immigration.

This goose pictured below, Mullah Mohammed Omar was questioned at length in NYC yesterday and was particularly incensed at the allegations. He was released on a $10 million bond, was required to wear an ankle bracelet and surrender his visa.
canada-goose
(photo by Robert Lawton)