Fueling Energy Independence

Thomas Friedman shared an opinion in the NY Times today. In his OpEd piece he advocates, strongly and convincingly, for a high federal gasoline tax. Whereas I agree with him, I understand why it will never happen.

The American consumer has a very short attention span, and our political leaders have very little backbone.

We, as a nation, go from frugality when the price of gas is high, to profligacy when it is low. Mr. Friedman points out that in December, trucks and SUVs are outselling cars - the first time in nearly a year that has happened.

It will not be an easy thing to do, but something must be done to break the boom-bust mentality of consumer habits. Otherwise America will remain at the mercy of OPEC and the middle-eastern oil exporters, our foreign policy will remain driven by our need for oil, and our automobile industry will remain paralyzed by the inability to build the vehicle du jour.

One of the main reasons that the Big 3 automakers are in trouble is because during times of low gas prices the consumer demands big gas-guzzling trucks, SUVs and muscle cars. Then when prices ramp up they demand extreme fuel efficiency. The car makers can't retool their factories and their marketing campaigns fast enough to satisfy this capricious demand.

We need to understand that there is a high price to be paid, even when gasoline is cheap. That high price needs to be at the pump - not in bankruptcy court for the automobile industry, not in the lives of our soldiers in trying to defend an indefensible foreign policy motivated by a lust for oil, and not in international political capital.

Once the consumer understands that the days of cheap gas are over, they will adjust their psyche, their habits, and their budgets to accommodate that reality. Then, and only then, can a robust alternative fuel industry become viable. A gasoline tax which permanently fixes the price of gas at $5 a gallon would be a boon for that burgeoning industry, and the revenue generated from the tax could be used to fund research and development for it.

But consumers have a very short memory and our political leaders have very little will.

We accept the verdict of the past until the need for change cries out loudly enough to force upon us a choice between the comforts of further inertia and the irksomeness of action. --Judge Learned Hand

Don't Be Surprised If Bush Fails to Bail Out Auto Makers

When evaluating current events and the public's reaction to them, I seldom take the "common wisdom" as doctrine. The general public has a herd mentality which succumbs to the first reasonable analysis and goes no further to examine the nuances of the issues. The public is not stupid, just overly informed. No one has the time to redo or rethink the analysis that has already been spoon-fed to them by the mainstream media.

For example, the common wisdom is that the Bush administration will bail out the car makers when the congress refused to do so. Indeed, President Bush has said as much. An administration spokesman stated that they will release TARP funds for Detroit's Big Three in the form of a $14-15 billion bridge loan. But I have my doubts that this will actually happen.

Bush may want to be remembered as having helped rescue the automakers from collapse, but would that be the best course for the Republicans? I am almost certain that there must be a powerful Republican lobby persuading Bush behind the scenes, that the best course of action would be to let the Democrats inherit the mess.

The only thing that a Bush application of TARP funds to Detroit would accomplish is making the Democrats job that much easier come January 20th. Call me a cynic, but partisanship being what it is in Washington, I fear that the Republican strategy for getting back in control of the White House and the congress in 2012 is to have the democrats fail miserably on their platform of change.

During the recent campaign, the Democrats foolishly blamed all things bad about America on the Republicans. This, of course, is de rigeur in national politics. But it does little to engender bi-partisan support for solutions. They claimed that they would come into Washington with miracle cures for that which ails the country, and perhaps they will. But are the Republicans going to participate in a reform effort which has the goal of rectifying Republican folly?

Yes, I believe that, behind the scenes, Bush is being instructed to hold back on TARP funds for Detroit. The rationale will be that the TARP money was explicitly for financial institutions, not car manufacturers.

I hope that I'm wrong. We should know, one way or the other, this week.

Please Don't Throw Us In The Briar Patch!

I am having a little bit of difficulty following the Auto Bailout rationale. Why do we want to give the poorly managed, obscenely paid, wasteful, and arrogant companies billions of taxpayer money without any clue as to how it will help them in any meaningful way? Why is it that we shouldn't let them go into Chapter 11 bankruptcy, a program which was designed to help struggling companies relieve their burdens, reorganize, and restructure their business? This is hard to understand.

Yes, I do understand that if even one of these companies went out of business, it would have a very disruptive effect on our already weakened economy. Such an event would surely morph this recession into a depression. I understand that quite well. But what the Big Three, the UAW, and the other wolf-criers either don't understand or don't want to admit, is that bankruptcy does not equal going out of business. Not by a long shot!

The proponents of a bailout are very cynically painting a worst-case scenario when they know full-well that bankruptcy would not even be close to the worst case. Bankruptcy, far from being a dire prospect, holds the promise of viability and a rosy future for any of the three companies that decide they can't stay afloat without some sort of relief. Bankruptcy offers the perfect relief.

Under Chapter 11, the companies would get a reprieve from their creditors. Their overall debt could be reduced dramatically. In addition they could get out from under onerous union contracts, do away with the absurdly profligate union job bank, and renegotiate wages and benefits that are in line with the rest of the industry.

Another ancillary benefit of bankruptcy would be the renegotiation of their dealership contracts. The dealership networks of the US car makers is full of redundancy and waste. Bankruptcy could be the remedy.

The executives of the auto companies also say that bankruptcy would scare off car buyers. This mental sleight-of-hand claims that no one is going to want to buy a car from a bankrupt manufacturer because they wouldn't have any confidence that the company or its dealers would be around to honor the warranty. This argument almost holds water, but then dissolves when you realize that the government could guarantee the warranties, and this much public involvement would be magnitudes cheaper than just throwing billions of dollars at failed business plans and poor management via a bailout.

So if bankruptcy offers so many benefits and protects the taxpayer from unwillingly and unwittingly becoming a partner with the auto companies -- a partner with no voice and no equity or compensation -- why wouldn't the auto executives embrace it rather than decry it as the worst possible medicine?

That's a very good question! Could it have something to do with not wanting to lose power over such a leviathan company and run the risk of having their pay reduced dramatically or terminated altogether? A US car manufacturer emerging from bankruptcy would be a much leaner entity and would undoubtedly have its pay structure totally redesigned. Executive salaries and perks would be greatly reduced. Bonuses might actually have to be earned. Corporate jets and country club memberships might become endangered species.

Yes, a CEO 's job post-bankruptcy would not be nearly as lucrative or pleasant. It is easy to understand why a bailout which allows them to continue on with business-as-usual (at least for a few months, perhaps a year) would be preferable to the reduction in size, salary,and prestige which would probably accompany a bankruptcy. And yet, the chance to start from scratch with much less debt, reasonable wages, and sensible dealer contracts offers a very real promise of profitability and self-sufficiency. Wouldn't that assuage the short-term distress?

I know that bankruptcy would be the best course for the Big Three, and I have to believe the their executives know this, too. If that is the case, then there are two reasons that I can think of that they are dragging their feet on this issue.

Either they are too greedy to want to make the concomitant sacrifices that Chapter 11 would require, or they are clever like a rabbit -- Br'er Rabbit, that is.

Could it be possible that all this kicking a screaming about bankruptcy is just a ruse? Could it be that, knowing that they will still have to live with the UAW and their dealers after bankruptcy, they are pretending not to want it? This tact would surely allow them to maintain a good business relationship with union members, suppliers, and dealers even though they threw them under the wheels of the bankruptcy judgement.

I can hear them now. "Gosh darn it! We didn't want this any more than you did, but the danged congress insisted that we go through Chapter 11. Golly, I'm sorry! What a shame that the congress and the taxpayers are just too selfish to loan us enough to get by! I guess we just have to make the best of it."

Do'th they now protest too much to congress and the public? Are they really saying, "Please! Oh, please! Don't throw us in the bankruptcy patch!"?

I consider this possibility and then I realize that this posture would require a good deal of wisdom and subtlety. Such a clever tactic would entail a fair amount of civic-mindedness, a modicum of humanitarianism, and a dollop of philanthropy.

Could these executives concoct such a brilliant subterfuge? I want to think that they can. But then I wake up.

Brer Bear, he's thinking about what to do, and while he's thinking, Brer Rabbit's already out-thunk him. Brer Rabbit says, "Do anything you want! You can do anything! You can throw me in the water. You can throw me off the cliff. But please don't throw me in the briar patch!"

Brer Bear's thinking, "He sure don't want to get thrown in that briar patch. Maybe that's what I should do."

So Brer Bear takes him, holds on careful not to hold onto that tar. He holds onto that rabbit, and he slings him in the briar patch! -- From Tales of Uncle Remus, "Br'er Rabbit and the Tarbaby"

That Ol' Black Magic

A correspondent on a financial blog this morning wrote,

“Last Friday’s equity market trading reminded us of this old Wall Street saying, 'The market bottom is defined when it stops going down on bad news.'”

Hmmm... the old Wall Street saying I remember is,

"The market bottom is defined when it fails to rally on good news."

The logic is that when even good news can't raise buying interest, we have exhaustion which confirms the capitulation. There is a wide-spread misconception about the meaning of capitulation. Many people and pundits think it is when we have a large downdraft in stocks, and indexes find new lows.

That is a necessary occurrence, but not a sufficient one for a complete capitulation.

From Merriam-Webster's Online Dictionary:

ca·pit·u·la·tion: The act of surrendering.

Capitulation occurs during and after the downdraft, when the majority of market participants just throw up their hands in dismay, throw in the towel, and say, "I'm done!" After capitulation, the market languishes and even good news can't make it smile.

Yes, stocks are rising and all looks rosy. But don’t be deceived. A major missing ingredient in today’s rally is the “wall of worry.” Until we have a real capitulation, until we truly have exhaustion, and until we start climbing that wall, this rally is not only suspect, but can be considered malevolent. It will end badly.

The current generation of investors has been conditioned, thanks in large part to the Internet, (and also to a pervasive herd-mentality of short-term thinking) to believe that things always happen in Internet time, and that events have the longevity of a sound-bite. "OK, the market has bottomed, we can check that off the list. Now we will rally."

The "real world," however, (as opposed to the virtual world that has become the new shibboleth) does not operate like that. We are currently in a bear-market rally, and we have not yet seen the capitulation. Those who feel strongly that we have, will soon be parted from their money.

The economy is getting palpably worse every day, every hour! Do you really think that the companies you are investing in are going to prosper near term? Massive layoffs have been announced and more will come soon. Retail is in the doldrums. Manufacturing has all but ground to a halt. International trade simply is not happening. Foreclosures are causing even safe and sane mortgage borrowers to be upside-down in their homes.

All of the recessions and downturns in recent memory have been "bailed out" by consumer spending. Today’s' circumstances are far worse than any of those others until you go back to the Great Depression. The outcome to this recession will be much worse and it will last much longer because (I hate to break it to you, but...) the mythical consumer will not be carrying the economy on his back this time.

Too many consumers have lost, and will lose, their jobs. Too many consumers are already mired in debt while consumer credit is drying up. Too many consumers have witnessed a major loss in their retirement portfolio. Too many consumers have seen their home equity evaporate.

A report on NPR this morning detailed the problems that a large wholesale clothing distributor in NY is having. They have a warehouse crammed full of top line suits, shirts, slacks, and other apparel that they can't move. They normally supply major retailers with this merchandise, but within the last three weeks, four of their seven largest customers have cancelled all orders for the next season.

Do you really think that we can spend our way to prosperity this time? What fairy tale events are going to magically produce profits for companies that are retrenching and not conducting business?

He that lives upon hope will die fasting. -- Benjamin Franklin

Dead Man Walking

It is, indeed, interesting that the market is showing signs of life. But don't put too much faith in any proclamation that the market has bottomed. It seems very likely to me that the DJIA will close out the year below 8000, and probably below 7400.

There is a popular notion that the market is ruled by greed and fear. As greed increases, the bulls gain control and the market rises. As fear dominates, the bears are out in force and the market falls. There are a couple of other parameters to this equation, however.

If you break the market into two distinct sectors, institutional investors and individual investors, it becomes apparent that the institutional part of the market is ruled by greed and caution, and the individual sector is controlled by hope and fear. The institutions, being in greater control by virtue of size and amount of capital, also are also privy to more information than the average individual. They therefore are not as susceptible to fear. They are greedy on the upside, and cautious, not fearful, on the downside.

Individuals are a very optimistic and hopeful lot. Their investment decisions are motivated more by hope and a belief that the "natural" state of affairs is a rising market. When the market falters and breaks down, their hope gives way to fear. Unlike the institutions which are very pragmatic in their decisions, individuals are more emotional, and in a down market they become paralyzed by fear. That is why so many 401ks get wiped out in a market such as the one we have been experiencing.

What does all of this have to do with my feeling that the market is destined to be much lower at year end? My prediction is based on a belief that the recent rally in the market has been driven not by a lot of buying interest, but rather a lack of selling interest. The ever-hopeful individual investor still wants to believe in this rally, while the greedy institutions are quite willing to oblige this fantasy - for a short while longer.

When you realize that the institutions, whose market commitments will always determine the market direction, are faced with a lot of "forced" selling between now an January, they have a vested interest in seeing the stock prices rise as much as possible before they put in their sell orders.

A simple way to accomplish this is to sit on the sidelines and let the small-money, the hopeful money, the imprudent money drive the market higher. By postponing their massive sales as much as possible, they are engineering a significantly higher market from which to extract as much as possible, and they are decoying the individuals into a belief that a real rally is under way. After a few more days of inaction, they will begin to put in their sell orders.

Since the institutions know when they are going to pull the trigger on their exodus, they might even be doing some buying in this bear market rally to capture some short term profits before the collapse. They are well positioned to fleece the small money on the way up before they shear them on the way down.

If this scenario plays out the way I think it will, we will rally the first part of this week. Then you will see a market that goes sideways for a few days, and then a decline will become obvious. At first it will seem like normal profit taking. After all, the pundits will say, it is perfectly normal in a rally for investors to claim some of their profits and take a look at new opportunities -- new stocks and sectors which may being showing leadership, etc.

Then the selling will ramp up to the point that it overwhelms the buyers, and we will see another precipitous decline, with the Dow undercutting 8000, and perhaps going much lower than that.

There are at least three reasons why heavy selling is in the cards for December:

1. The hedge funds have a lot more redemptions coming before January. The hedges are not anywhere near normalization yet. In the interest of disclosure, I have to state that this assertion is more hypothesis than fact. I do not have any figures on what reclamations are lurking. My gut feel is there are still quite a lot.

2. The mutual funds need to get their losers off of their prospectuses before the end of the year. And they have been holding lots of losers! It is a particularly cynical practice in the industry to hide a losing year or quarter by showing a raft of good stocks in their stable when a snapshot is taken of their holdings. Never mind that most of the quarter they were in losing positions, as long as the snapshot doesn't show these losers, they can actually look like they are well on their way to making money for their investors.

3. Year-end tax selling by many investors, large and small. There are many investors who have lost a lot of money this year, and the only way they can deduct those losses on their income taxes is to actually realize the losses. In other words they will be highly motivated to sell their big losers to establish their losses. When the year-end selling hits, the hopeful individuals will be caught off guard again. Their hope will diminish and fear will again dominate. They are being groomed right now to grow the market so that it can be more profitably harvested by those in control of the market.

At some point we will see a true capitulation (we haven't seen it yet). When we do see it, it will be unmistakable. There won't be anyone asking "Is this the capitulation?" because it will declare itself loud and clear. The year-end selling will cause the markets to collapse, and the worsening economy will almost guarantee that climbing up from the capitulated bottom will be long and arduous.

Hope is the denial of reality. It is the carrot dangled before the draft horse to keep him plodding along in a vain attempt to reach it. --Margaret Weis, Dragons of Winter Night

The Meltdown is Far From Over... A New Mortgage Crisis Looms

The Associated Press published an article this morning stating that we are about to enter a new round of the economic crisis:

"Analysts said the next economic crisis might involve malls, hotels and other businesses affected by the mortgage crunch.

Malls from Michigan to Georgia are entering foreclosure, victims of the same crisis that's affected the housing market. Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages. That pace is expected to quicken."

During the last economic downturn after the Internet bubble burst in 2001, the economy was born up by inveterate (and incorrigible) consumer spending. Unfortunately, that will not save us this time. The terrible retail sales of late, and the consumer's unwillingness to spend or take on new debt is weighing heavily on the fragile remnants of our economy.

The individual serves the industrial system not by supplying it with savings and the resulting capital; he serves it by consuming its products. -- John Kenneth Galbraith, The New Industrial State [1967]

Maybe I'm Simpleminded

In my simple way of looking at the economic crisis, it is easy for me to get lost in all of the machinations the government is undertaking to stop the bleeding. I do not have a degree in economics and so my simple way of looking at things keeps me from comprehending the true enormity of the crisis, and the cosmic complexity of the bailouts. But when the NY Times proclaims that the current total of all bailouts either already in place, or soon to be in place, is equal to half of the total annual Gross Domestic Product (GDP) of the United States, I get a very visceral sense of the desperation that Paulson, Bernanke, et al must be feeling.

The NY Times yesterday gave a tally of all of the bailout monies that Paulson, Bernanke, and pals have pledged to solve our economic woes. Here is a brief breakdown:

• October 3: $700 billion allocated for the TARP program
• October 14: FDIC pledged $1.4 trillion to guarantee bank-to-bank loans
• October 27: The Federal Reserve started a program to buy as much as $2.4 trillion in corporate commercial paper (short-term notes)
• $29 billion to engineer the takeover of Bear Stearns
• $122.8 billion to bailout AIG
• $306 billion of government guarantees for Citigroup's troubled mortgages and toxic assets
• November 25: The Fed commits up to $800 billion to unfreeze credit for home buyers, consumers and small businesses

The magnitude of the government's largess begs the fundamental question: Where is all this money going to come from?

As you can see from the list above, the $700 billion TARP program -- the program that the public identifies with the bailout -- is really only a small piece of the complete bailout. From Bloomberg:

Bernanke’s Fed is responsible for $4.74 trillion of pledges, or 61 percent of the total commitment of $7.76 trillion, based on data compiled by Bloomberg concerning U.S. bailout steps started a year ago.

"Too often the public is focused on the wrong piece of that number, the $700 billion that Congress approved," said J.D. Foster, a former staff member of the Council of Economic Advisers who is now a senior fellow at the Heritage Foundation in Washington. "The other areas are quite a bit larger.”

The situation is so precarious that a noted economist, Nouriel Roubini, wrote an article entitled, Can Central Banks Go Broke? The tenor of the article makes it clear that Mr. Roubini feels that there is a very real possibility that our government has bitten off more than it can chew.

All of this, to my simple way of thinking, makes me very nervous. The $7.76 trillion of taxpayer money currently at risk, according to Bloomberg, "is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages."

Recall that Henry Paulson's original plan was a bold request to make himself the most powerful man in America. He wanted to be given $700 billion to do with as he saw fit, with no government oversight or accountability. He basically said, "Trust me. I know what needs to be done." Fortunately that proposal didn't sit well with congress and they modified it so that we weren't saddled with the curse of "King Henry."

Congress was right to reign in his desire of the autocratic rule of the U.S. financial services because only a few weeks later Paulson did a 180-degree reversal. Somehow, a few weeks later Paulson had determined that his original plan to buy toxic assets was not a good idea. Hmmmmm. Why doesn't this surprise me? The flailing and floundering of the the government's financial wizards engenders very little confidence that they actually have a plan.

Here we sit, in the midst of the worst financial crisis since the great depression, house prices are falling, people are losing their jobs, retail sales are in the pits, and, according to Bloomberg, "the worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the world’s companies."

Worst of all, the people in charge of fixing the problem are just winging it! This seems crazy!

But, maybe I'm just simpleminded.

Was there ever such an autumn? And yet there was never such a panic and hard times in the commercial world. The merchants and banks are suspending and failing all the country over, but not the sandbanks, solid and warm, and streaked with bloody blackberry vines. You may run upon them as much as you please--even as the crickets do, and find their account in it. They are the stockholders in these banks, and I hear them creaking their content. -- Henry David Thoreau in his journal, October 14, 1857

Paulson's Bailout Shenanigans (Quote of the Day)

"For those that may not know, Hank Paulson made all of his hundreds of millions while running Goldman Sachs (GS). That was his job before being anointed as Treasury Secretary; the next brain from Goldman that would save us all.

What people should know - what everyone should know - is that Goldman was one of the major players in the creation of most of the derivatives being blamed for our debt implosion and severe recession, namely credit default swaps." -- Kip Herriage, in a blog post, Fire Hank paulson Now

Fewer companies willing to pay for green

As noted in a previous post, the worsening economic conditions pose a very real risk to the green movement. Now, this article from the Austin Business Journal seems to validate my concern:

"Companies are demanding green buildings but are less willing to pay for environmentally friendly office space compared to last year, according to a new survey from CoreNet Global and Jones Lang LaSalle.

Despite the fact that corporate real estate executives support the idea of energy efficient and sustainable buildings, only 42 percent of those surveyed said they were willing to pay a premium to lease green space"

We're so engaged in doing things to achieve purposes of outer value that we forget that the inner value, the rapture that is associated with being alive, is what it's all about. - Joseph Campbell

Quote of the Day

“We do not believe it is likely that these adverse economic conditions, and their effect on the automotive industry, will improve significantly in the near term, notwithstanding the unprecedented intervention by the U.S. and other governments in the global banking and financial systems.” --from the General Motors 10-Q filing, November 10, 2008

Quote of the Day

"Bailing out Wall Street or the auto industry or the insurance industry or the housing industry may at most help satisfy creditors for a time and put off the day of reckoning, but industry bailouts won't reverse the downward cycle of job losses.

The real problem is on the demand side of the economy.

Consumers won't or can't borrow because they're at the end of their ropes. Their incomes are dropping (one of the most sobering statistics in Friday's jobs report was the continued erosion of real median earnings), they're deeply in debt, and they're afraid of losing their jobs.

Introductory economic courses explain that aggregate demand is made up of four things, expressed as C+I+G+exports. C is consumers. Consumers are cutting back on everything other than necessities. Because their spending accounts for 70 percent of the nation's economic activity and is the flywheel for the rest of the economy, the precipitous drop in consumer spending is causing the rest of the economy to shut down."

-- Robert Reich, Former Secretary of Labor and a professor at the University of California at Berkeley. His latest book is "Supercapitalism."

Quote of the Day

"I remain of the view that the current recession, which was initially dismissed by the many, will have a shelf life unlike prior recessions in both scope and duration. It seems very unlikely to this observer that third-quarter economic statistics are a template for future growth and economic conditions." -- Doug Kass, Market Analyst at The Street.com

Quote of the Day

''My forecast is I don't see any economic growth through 2009. The credit crisis reached up and grabbed the throat of the global economy and choked off economic growth.'' -- Richard Fisher, Dallas Fed President

Jack Be Nimble, Jack Be Quick...

The stock market looks very tempting right now. You can hardly look at any of the financial press without finding someone declaring that the market has hit bottom; or that we are in a bear market rally and you should take advantage of the buying opportunities which can be found everywhere.

Stocks are cheap! Don't miss out on this once in a lifetime buying opportunity!

Yes, it is very tempting... if you believe the hype. The trouble is, you shouldn't.

We Know It's Bad...

We are no longer debating whether or not we are in a recession. Instead we are debating how bad it will be and whether or not it will become a depression. If you bother to do just a little digging beneath the surface of the headlines and hype, you will find plenty of intelligent commentary expressing the reasons why this recession is just getting started, and why it is in real danger of becoming much worse.

Perfect Storm

Just consider the unprecedented confluence of calamities we have encountered in the last three months. Can you apprehend that and really believe that the worst is behind us?

Consider the fact that 1 out of 5 homeowners owes more on their house than it's worth; that consumer confidence is at an historically low level; that the financial underpinnings of our economy have collapsed and are near complete failure; that major titans of the financial services industry have completely vanished - either through bankruptcy or "bailout"; that economic activity in the US manufacturing sector is grinding to a halt; that bank lending has already all but ground to a halt; that credit card defaults are rising; that the US auto industry is on the verge of total annihilation; that the US housing industry will take years to work off the glut of new houses in inventory; that unemployment is rising and forecast to get much higher; that many foreign economies are in worse shape than our own; that the massive deleveraging and CDS (credit default swap) valuation (devaluation) has the mass and weight to destroy an already weakened financial system; that the looming crisis in the private equity markets just might be the proverbial straw on the back of our economic camel? Considering all of that, can you possibly think that this perfect storm won't wreak havoc?

Cassandra or Pollyanna?

So, do you look at everything with rose-colored glasses? Is wishful thinking all you need to make your investment decisions? If you can truly ignore all that's brewing in the global economy right now, then, yes, it is time to buy stocks. If current valuations and PE ratios are the only parameters which inspire your investment strategies, then how can you not buy stocks at these levels?

Are you as Nimble and Quick as Jack?

I am a wishful thinker, too, but a very pragmatic one. I, too, see a lot of attractive prices in the market. But I also see a world economy which is very fragile. I can almost guarantee that we have not seen the worst of this recession yet, and that the recent surge in the stock market is only a bear market rally. Do you really want to enter a long position on any security knowing that it could, and probably will, be wiped out by a certain resumption of the bear market? Can you be nimble and quick enough to get out of your positions when (not if) we have another huge market downdraft?

Cash Is King

We are facing a very real possibility of spiralling deflation. If that comes to pass, you definitely do not want to have your money tied up in the stock market. The only way to survive deflation is to have a lot of cash. Perhaps you think that inflation is the focus of Ben Bernanke and the regulatory bodies. Disabuse yourself of that notion right now. The Fed recently reduced interest rates to 1%. If inflation were the worry, rates would be raised, not lowered.

You Can Lead a Bank to Liquidity, But You Can't Make it Lend

The fact that many of the banks which have received government bailout money are reluctant to loan means that, so far, the government bailout of the banks has yet to get traction. The banks are hoarding cash. Perhaps you should, too.

You Can't Go Below Zero

The specter of spiralling deflation is every bit as fearsome as hyper-inflation, and right now, monetary policy is geared toward preventing deflation. The problem is that the Fed needs to be able to govern policy with a very fine precision. If they don't do enough, we will fall into the deflationary abyss. If they do too much, they will likely put us into the opposite and equally ominous prospect of hyper-inflation. With interest rates at 1%, they are running out of anti-deflationary ammunition. As rates approach zero, that avenue gets cut off, and the only strategy left would be to put the monetary printing presses into overdrive.

Pull the Trigger?

Whether you believe all of this doom and gloom talk or not, you would be doing yourself a disservice not to consider the possibilities (none of them good) presented by the current economic situation. If you can seriously look at these admittedly worst-case scenarios and still believe that worst is behind us, then by all means pull the trigger on those stock purchases you are looking at. I wish you the best.

Advice is what we ask for when we already know the answer but wish we didn't. -Erica Jong

Quote of the Day

Joseph Stiglitz on the collapse of structured finance:

"Securitization was based on the premise that a fool was born every minute. Globalization meant that there was a global landscape on which they could search for those fools - and they found them everywhere."

Collateral Damage

The impending recession, perhaps depression, has Americans scared, and rightly so. However, I'm afraid that as their focus shifts more acutely toward survival, other worthy causes like environmentalism will be relegated to a back seat. How will greenness garner public interest when unemployment is rising and 401ks are disappearing?

"To cherish what remains of the Earth and to foster its renewal is our only legitimate hope of survival." -- Wendell Berry

Why Play the Fool's Game of Buy and Hold?

The conventional "wisdom" has been, for years, to buy stocks and hold them for the long term, i.e. until retirement. That advice has caused untold millions of American retirement accounts to evaporate. The latest incarnation of this advice has manifested itself in parroting "don't let this downturn spook you into selling" by many in the mainstream Media.

One recent example of this mantra born of specious reasoning appeared in a posting on MarketWatch yesterday:

"Don't get mad, get even: That sentiment could be a powerful motivator for shellacked shareholders who are reeling from the stock market's collapse.

Spooked investors may be tempted to sell into periodic rallies at this point, in an effort to at least recoup some losses. But that hopeful strategy is full of flaws. Selling into a rally is for traders, not investors. It shreds long-term plans and puts you on a hair-trigger defense."

How can anyone pretend to justify letting a portfolio of, say, $100,000 fall to a value of $60,000 just to maintain a "buy-and-hold" philosophy. They rationalize that to leave this market before seeing the last vestiges of value disappear would violate some hallowed principle of investing. Are you primarily interested in maintaining tradition at all costs, or in maintaining your retirement account?

They say, "You don't want to miss the market turnaround by being in cash when it happens." Utter poppycock!

Let's take that hypothetical $100,000 portfolio and suppose that, instead of hanging on out of sheer, stubborn, defiance of the market, we sold everything when it was down 15%, at $85,000. Now while other lemmings of absurd reasoning watch their holdings disappear, we are safe and can wait until the market rebounds to reinvest. We only have to see our $85,000 appreciate by 17.5% to get back to where we were, while those who held on until they were down to $60,000 have to get a whopping 67% appreciation just to get back to even.

Now, either prospect is disappointing. But the wise investor who rode out the downturn in cash, is years ahead of the one who stubbornly held on to his buy-and-hold philosophy without paying homage to reality.

The wise investor has other advantages over the false-adviser's puppets.

When he gets ready to redeploy his cash, he can put it to work in fresh, newly favored companies and industries. The buy-and-hold bulldog, on the other hand, is still in the same, potentially stale instruments he was in before. It is highly likely that new leadership will have emerged in the markets over the interim, and with cash in hand, our wise investor will be able to leverage that market trend.

The holder of cash, also can pick his moment to pull the trigger. He can wait until a confirmed and strong rally is underway before jumping back in. The unfortunate media disciple has no such choices on his horizon. His fortune will bob like flotsam on the waves, totally at the mercy of a fickle market.

Why play the fool's game? Why not use a little intelligence and logic to save your retirement? Whereas I am not advocating that you develop a trader's mentality and run from every slight downturn or chase every upturn, I do think it is important to not get married to your holdings just to satisfy some nefarious guru's antiquated and impotent theory.

Pick a tolerance level at which you wish to get into cash and then let that be a guide (not a dictate). Perhaps you can only tolerate a 7% loss as advocated by Investor Business Daily's CANSLIM approach. Perhaps you are OK with a 15% decline.

Regardless of your tolerance for risk, start thinking about maintaining value rather than maintaining tradition. Is it better to stick with the failed program or to prosper? The choice is obvious.

No enemy is worse than bad advice. -- Sophocles

Quote of the Day (Mine)

"As long as the pundits keep declaring that the market has hit bottom, it hasn't." -- RCA

Capitulation

Many pundits are saying that we have already seen the capitulation that signals the bottoming of the market. I believe we will not only see capitulation, but a series of capitulations due to the perfect storm of a slowing economy, a lack of public confidence, the credit crunch and liquidity crisis, real estate values plummeting, poor retail sales figures, foreclosures, fear, and government ineptitude. The DOW will be below 8000 (and possibly below 7600) before there is a true bottoming out of the market. Look out below!

Quote of the Day

"A government that is big enough to give you all you want is big enough to take it all away” – Barry Goldwater

Noteworthy Comments on the Bailout

Here are a few exquisitely penned quotes from the financial blogs this morning regarding the government's latest bailout chapter:

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"This is still, at the core, very much like having a burst water pipe in the basement and the government's solution is to keep buying more paper towels to soak up the water. The water keeps coming and the government keeps buying more towels, which is not enough to keep the furniture from being destroyed. After a while, the basement becomes full of soaking wet paper towels and the leak is still going and the foundations are rotting - at which point the government announces they are out of paper towels and you are on your own. Right about then, someone may suggest calling a plumber to stop the leak but, unfortunately, all the money was spent on paper towels so a plumber is no longer a viable option!" - Options Trader: Outlook for Turnaround Tuesday

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"Read the stitches on the fast ball. Goldman Sachs transforms itself into a bank holding company during talks with the treasury. The treasury convinces Congress to give it $700 billion to buy bad assets from banks. The treasury decides not to buy bad assets but preferred stock in banks. Goldman Sachs, Henry Paulson's former employer, just happens to be a bank now. After the stock jumps by 87%, the treasury decides it is time to buy. The tax payers are on the line to bailout Henry Paulson's buddies." – comment by Yes Man at Preview of the Bank Buy-In

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"But that one-size-fits-all approach, especially when it's combined with the present bank management which got us all into this mess to begin with, is a recipe for hail-Mary passes and other forms of counterproductive risk taking.

If you're running an insolvent bank, and you get a slug of equity from Treasury, your shareholders will thank you if you use that equity to take some very large risks. If they pay off and you make lots of money, then their shares are really worth something; if they fail and you lose even more money, well, there was never really any money for them to begin with anyway…

There's no sure way to prevent such risk-taking altogether. But if you go the UK route and insist on board seats and the ouster of failed executives, it helps. That's what Treasury did with AIG, and they should do the same with the banks they're rescuing. If they don't, they're basically getting all of the downside of nationalization with none of the upside." – The Weakness of the Treasury's New Bailout Plan

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"To stimulate lending, the bailout plan will attempt to recapitalize banks. The method of recapitalization is best described as robbing Taxpayer Pete to pay Wall Street Paul. In essence, money is taken from the poor (via taxes, printing, and weakening of the dollar) and given to the wealthy so the wealthy supposedly will have enough money to lend back (at interest) to those who have just been robbed." - The Main Problem with the Office of Financial Stability Is Needing It in the First Place

"The genius of our ruling class is that it has kept a majority of the people from ever questioning the inequity of a system where most people drudge along, paying heavy taxes for which they get nothing in return." -Gore Vidal

Are We Up To The Challenge?

I have been reading a lot of commentary about the economic bailout plan over the last few days. I have seen some well-reasoned analysis and some good suggestions to make for a better proposal. But mostly I have seen a lot of negativism and anger about the perpetrators of this crisis.

We can whine and lament 'till we are blue in the face. We can curse the thieves and liars and play the blame game (I, too, can see a lot of malfeasance and corruption, and don't mind calling a spade a spade). But, at the end of the day (most likely this one!) we have to roll up our sleeves, do what we ought to do as Americans, and start bailing out this sinking boat.

It is not going to be fun and it is not going to be pleasant. It is going to be anything but fair and neither is it going to be easy. But unless we get our priorities straight (salvation instead of damnation) we are headed for economic meltdown and possibly anarchy.

Markets need to be as free as possible, but a little oversight is a good thing. It’s like the US doctrine during the cold war: Trust! (But verify). Our markets over the last decade could have benefitted by some appropriate oversight. But they had little, and now we are in a crisis.

I have been a republican all of my life (borderline libertarian!) but I also realize that the undeniable and inescapable consequence of absolute libertarianism is anarchy. At this juncture I'm not ready to face that, and I am betting that, nihilists notwithstanding, I am in the majority.

Complaints are dime a dozen and totally worthless unless they engender a motivation to fix the problem. Discontent is a natural human reaction to dire circumstance, but discontent without a commitment to action and sacrifice is useless at best, and cowardly at worst.

The America I grew up in and the America I love was created out of discontent, but was built by courageous men of action, not whiners.

I'm not suggesting that the many bright people who have offered intelligent rebuttals to Paulson' plan are in that latter category. Quite the contrary. The more well-reasoned alternatives to the Paulson bailout that can be proffered to the national debate, the better our chances at avoiding catastrophe.

We truly are at a watershed moment in American history. We can rise to the challenge and work at salvation of our economic system. Or we can degenerate into whining malcontents and work toward the damnation of the perpetrators. That latter course would certainly be morally satisfying. But the satisfaction would be short-lived as we find ourselves rushing into economic destruction and the mother of all depressions.

America, we are about to see what you are made of. Will you whimper and whine, shrinking away from hard choices into self-destruction? Or will you dig down deep into the inner core of commitment and fortitude that has been our hallmark at every critical juncture up until now?

Challenges are what make life interesting; overcoming them is what makes life meaningful. -Joshua J. Marine

Simple Wisdom

Perhaps your mother told you (as my mother told me) that you should be honest and always tell the truth. Perhaps, also, she admonished you that if you lied, it would eventually be found out and you would have to reap the consequences (and you'd best believe that those consequences would not be pleasant). Mothers everywhere over the years have been dispensing such simple wisdom, but apparently few in power today listened to their mothers.

Business leaders have been playing a shell game with honesty, and the moral consequences have most decidedly caught up with them. The shells have been overturned and the house of cards is tumbling. Just like the Wizard of Oz, they have had the curtain pulled back and their bogus sorcery revealed. Unlike the Wizard of Oz, however, they are anything but benevolent. The kind hearted, but bumbling, Wizard of Oz meant only to do good. The financial industry wizards responsible for the perilous state of the economy have had anything but goodness in mind.

The simple reason that our economy is in crisis is that our society is morally bankrupt. Honesty is eschewed in favor of expediency. Half-truths and outright lies in business and government have become commonplace, and we simple, powerless souls have tolerated the misdeeds because we saw no alternatives or recourse.

Few of our business leaders are motivated to create public value. Few of our elected officials are motivated by altruism. In business and government, self-aggrandizement is the mantra. Greed is the guiding principle. Greed camouflaged by lies and half-truths is the primary modus operandi in the American brand of capitalism.

The Golden Rule has no utility in our "me first" society. Its morally uplifting guidance has degenerated to a vicious rationale: "Do unto others... before they know what hit them."

Until we insist on honesty in business and idealism in government, we will continue to flounder as a nation. Until we impugn the rascals and scoundrels and decry their vandalism of our ideals, we will continue to suffer economic indignations. Only when we run the knaves out of town and replace them with knights of unimpeachable integrity will we be able to resume our world leadership, reclaim our moral authority, and restore belief in the American Dream.

There is, however, a fundamental problem with materializing this vision. Honest men and women of integrity seem nowhere to be found. Oh, they exist, alright. But they are in short supply, and they have learned that honorable, benevolent service is rendered impotent by the slime and slurry of avarice that pervades American society.

The American Spirit is lifeless. The national conversation is vapid. Should we despair, or should we embrace the challenge?

Voters must take back the reins of government. Stockholders must insist on principled transactions, conducted with transparency. Ordinary lay citizens must eliminate the "me first" mentality. And everyone must decide to accept the maternal wisdom imparted to us at an early age.

It's a simple recipe, but it will work.

There is something wrong in a government where they who do the most have the least. There is something wrong when honesty wears a rag, and rascality a robe; when the loving, the tender, eat a crust, while the infamous sit at banquets. --Robert G. Ingersoll

This Time, It's Different

I am seldom given to hyperbole of this sort, but this time it's different.

We are at a watershed moment. Future historians will no doubt consider the events that unfold this week to be the defining events of the twenty-first century (and perhaps of capitalism).

Already we have seen the financial system deteriorate into the worst shape it has been in since the 1927 stock market crash and the Great Depression that followed. Many journalists are glibly reporting the demise of the financial services industry, but few seem to realize the epic proportions of this crisis.

We are currently balancing on a pivot-point which has our economy and the American lifestyle teetering between letting the banks go under, or destroying the free markets. Nothing good can come from either of those prospects.

If the banks go under and are not bailed out by the government, the fallout would be devastating to our financial system. Credit would dry up. Many fortune 500 firms, as well as most small businesses, would go belly-up and we would see a depression, the likes of which has never before been seen in this country.

On the other hand, if congress adopts Treasury Secretary Paulson's plan to bailout the financial industry, we will have kissed free markets goodbye and anointed Paulson the King of America.

Paulson and his cronies created this financial mess (he was a partner at Goldman Sachs before becoming Treasury Secretary). They got rich off of the games they played with financial instruments, and now Paulson wants the U.S. taxpayers to subsidize that folly. The crooks will retain their ill-gotten wealth and the taxpayer will foot the bill.

If Paulson's proposal gets approved as it was submitted, he will become, arguably, the most powerful person (elected or not) in America! Section 8 of his proposal reads (italics mine):

Sec. 8. Review. Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

You'd better read that again. It is unbelievable! This act would give Paulson absolute authority over the entire US Financial Services industry, a $700 billion budget, and furthermore put him above the law! Under this proposal, there could be no review of anything he does by the courts or by the administration!

Goodbye free markets. Goodbye capitalism as we now know it.

What kind of society isn't structured on greed? The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system. -Milton Friedman, economist.

Image is licensed under the Creative Commons Attribution ShareAlike 2.5 License. In short: you are free to share and make derivative works of the file under the conditions that you appropriately attribute it, and that you distribute it only under a license identical to this one.

Aggregation

I have noticed, lately, a polarization over environmental issues. There seems to be a sharp divide between those who understand how important it is to change our way of life and embrace environmentally responsible practices, and those who either don't believe it is necessary, or don't believe that they can make a difference.

This is the greatest challenge that environmentalists face today - getting the reluctant and disbelieving masses to overcome their skepticism and their inertia. It is made even more challenging by the fact that today's world is overwhelming. We are all working long hours and are victimized by information overload. Too much is coming at us too fast. It is hard to get someone's attention, let alone make a convincing argument which compels them to change their habits.

My neighbor, who is a very intelligent man, has a hard time getting his brain wrapped around the changes he needs to make in order to do his part to save the planet. Not only that, but he is put off by buzzwords and slogans. I have to admit that often the media latches on to words like 'green' and 'sustainability', and phrases like "carbon footprint," and uses them with abandon. Its as if every journalist is shouting, "Me, too! I'm hip!"

I understand how someone (particularly someone who has not yet been convinced of the immediacy and urgency of the issue) can get a little tired of having every article they read, and every conversation they have, peppered with these buzzwords. Pepper is nice, but a good chef knows that it must be used judiciously. Use too much and it can leave a bad taste in your mouth. Use it too often and it soon ceases to have the desired effect.

So it is with some reluctance that I tender a new buzzword. But I have a strong belief that it can make a difference.

***

Epiphanies don't come often and they don't come easily. But I would be willing to bet that they occur often enough and to a wide enough audience that they can be considered part of the universal human experience.

It is an interesting and reliable phenomenon that when one has an epiphany, it is hard to understand why others just "don't get it." It is equally hard to keep from feeling superior because of newly won wisdom. But suppressing that tendency is important if you want to help others see the light.

So I must offer my new shibboleth with sincere humility.

***

I have a keen understanding of the dire consequences of mankind continuing down the same profligate path which has been followed for centuries. I also understand that it would be very easy to succumb to this fate. We all have a tendency to despair at complex, abstract problems - to shrink from enormous issues. It is easy to feel overwhelmed, and it is very hard to make meaningful changes in our lives. But perhaps one more touchstone might help.

In discussions with my neighbor and others I have noticed that there is a palpable tenor of helplessness and hopelessness. There is often an admission, sometimes tacit, sometimes reluctant, that perhaps the environment is in trouble. But along with these realizations there usually is the resignation of inevitability. The changes we need to make seem hard and the benefits hard to quantify. Why make an effort which most likely will entail some sacrifice if there is no assurance that it will make any difference?

That is why I need to interject a new byword into the environmental lexicon. It is because of a simple mathematical proposition that I am convinced that individual efforts do matter and individuals can make a real difference in the environment. I know it.

***

It is true, a priori, that the changes that I make and the changes that you make to use fewer resources and to preserve environmental integrity do not, by themselves, make much difference. But it is equally true that when many, many people take these same measures it makes a huge difference. It is the aggregation of small steps and small effects into huge steps and huge effects that will truly make a measurable difference to our planet.

The thing that we need to keep foremost in our consciousness is that individuals who come together with a like-minded focus and a unified purpose can overcome large obstacles. That is why, in addition to being green and reducing our carbon footprint, we also need to realize that aggregation is what will lead us to success.

I hereby propose 'aggregation' as the new environmental battle cry.

By remembering that our aggregation will allow a serendipitous accumulation of benefits, we can overcome our despair and our apathy. When we realize that we are part of a great effort which is propelled by great energy, we can resist succumbing to feelings of hopelessness. In our aggregation we will succeed.

Motivation is everything. You can do the work of two people, but you can't be two people. Instead, you have to inspire the next guy down the line and get him to inspire his people. -- Lee Iacocca

While We're on the Subject of Annoying Advertising...

I have to point out that junk mail marketing is particularly egregious because it is so devastating to the environment - millions of trees harvested simply to fill the landfill with unwanted mail. A response rate on mail campaigns is considered good if it is 2% - 3%. When you think about that, it leads to the undeniable conclusion that about 97% of all mail marketing pieces are pure junk, in the fullest sense of the word!

That unwanted mail just goes straight to the landfill, much of it never even opened! Yes, I understand that between the forest and the landfill a lot of jobs are created by this pipeline. Yes, I understand that responsible marketing is necessary to let people know about the purchasing choices they have. However, I submit that mail marketing is anything but responsible!

We would all be better served by a pipeline that actually produces something desirable, rather than this extremely wasteful, annoying, and environmentally irresponsible system. Don't tell the telemarketers (it'll be our little secret) but I actually prefer phone calls to junk mail because phone calls don't ravage the environment or fill up the landfills!

Many a small thing has been made large by the right kind of advertising. -- Mark Twain (A Connecticut Yankee in King Arthur's Court)

Telephone Spam

Perhaps you have noticed (as I have) a recent increase in the number of marketing solicitations that are coming into the house via the telephone jack. My original speculation about why this might be so was that perhaps my federal do-not-call registration had expired. A quick perusal of the registration web site, however, produced this notice:

Your registration will not expire. Telephone numbers placed on the National Do Not Call Registry will remain on it permanently due to the Do-Not-Call Improvement Act of 2007, which became law in February 2008. Read more about it at http://www.ftc.gov/opa/2008/04/dncfyi.shtm.

I then came up with this hypothesis: hard economic times may have produced more unscrupulous marketers who don't care whether you are on a do-not-call list or not. When I think back over the last few telemarketing calls I have received, I see signs that this, indeed, may be the case.

What can be done? For starters confirm the do-not-call status of your number(s). If your do-not-call status is not what you think it is, sign up or renew your do-not-call registration. Remember, though, that this registration does not shield you from calls made by:

• Anyone with whom you have conducted business in the past


• Charities, charitable organizations, and those that call on behalf of such organizations


• Unscrupulous marketers

OK. We can protect ourselves from legitimate marketers, although charities and their agents have a free pass. But what can be done about the unethical annoyances? I'm afraid that there is not much that one can do, other than letting the answering machine answer all calls.

A recent unscrupulous (and downright illegal) marketing campaign concerns your "expired vehicle warranty." (See this report at KEYE TV). If you have a home phone (or workplace phone, or even a cell phone - yes, their insidious lack of ethics allows them this latitude) you have no doubt received a recorded call which apprises you of the dire situation: your vehicle warranty has expired. You are asked to respond so that this problem can be "fixed."

Upon responding, you will be told that you can remedy your untenable position by buying an extended warranty. Never mind the fact that if you ask which vehicle has an expired warranty they can't tell you. Never mind the fact that you may not even own a vehicle.

These calls have been reported in virtually every state and they are going to every phone number, listed or not. There has been no effort to pre-qualify the call list to ensure that it only goes to people who own vehicles, let alone those that actually have an expired warranty. And it does no good to ask to be taken off of the call list because there is no call list. The automatic dialers call a number, dispense a message, then hang up and dial the next number in sequence (previous number + one).

This telephone scam has been reported to local police, to the Better Business Bureau, and even the FBI. Yet the calls continue. The operator of this scheme has hired many work-at-home operators who are set up with automatic dialing systems and recorded messages. The poor economic conditions have engendered an environment which makes it easy to find and hire such operators, and there are too many heads on this snake to be able to kill it.

What to do? I'm afraid that, short of deliberately sending each of the callers down a blind alley with a fictitious purchase order for a car warranty (non-existent car, fake credentials, etc.) not much can be done. I am not advocating that anyone actually do this. It would raise new ethical and legal questions. And if you are annoyed because this unsolicited call has wasted your time, why waste even more of it in a blind pursuit?

If I were king of the world, I would totally outlaw telephone marketing. But, alas, I am not king. I am not even president - though I will accept a write-in campaign on my behalf.

I see no silver bullet for this problem. Do we all need to just resign ourselves to suffer the annoyance of all of the unsolicited, undesired attempts to get into our wallets, while wasting our time?

What's your opinion?

Advertising is a valuable economic factor because it is the cheapest way of selling goods, particularly if the goods are worthless. -- Sinclair Lewis

On The Other Hand...

It has often been said that statistics can be made to prove any hypothesis. It all depends on how they are presented. It also depends on which set of statistics you look at. Every complex issue is multidimensional and if you focus on only one of those dimensions, you can get a view that is diametrically opposed to what you would see if you focused on a different dimension.

Small Businesses Don't Know if They are Coming or Going

Today I noticed two news stories which illustrate this principle. Inc magazine had an article, Small-Business Hiring Picks Up, dated August 5, 2008 which stated:

Small-business employment surged in July at the sharpest rate this year, even as larger companies continued to cut jobs to offset weaker earnings, national payroll data shows.

Then I came across an August 15th article, Small-business owners' outlook bleak, at CNN Money, which offered the following analysis:

Soft sales, job cuts and weak capital-spending plans have owners hunkering down for continuing economic pain.

Who's right? Are small businesses hiring more even though they are experiencing "soft sales, job cuts, and weak capital-spending?" It doesn't seem likely. I think this is simply a demonstration of journalistic license and semantic selectivity. Which poll you look at and how you define "small business" could have a dramatic influence on whether small businesses are hiring or cutting jobs.

Employers Can't Find Workers, Graduates Can't Find Work

Here's another example. On August 1st, Reuters ran a story, Workers less willing to move or switch jobs, in which it was observed:

Workers have in recent months become less willing to move, and more of them are considering how long it takes to get to work when deciding whether to accept a position, say executives in the staffing industry.

The trend, if it becomes widespread, could mean U.S. employers will have a harder time filling positions -- especially those requiring specialized skills -- raising their labor costs.

And I found this story, Graduates having hard time getting foot in the door, in the August 7 issue of the Nashua Telegraph which proclaimed:

During robust economic times, college students in undergraduate and graduate school programs would easily get multiple offers. As the economy teeters on the edge of recession, college graduates this year face a tough job market, leaving many without work in their fields or doing jobs that people without college degrees can do, career center officials said.

Hmmmmm... If US employers are having such a hard time filling positions, as the Reuters article purports, then why don't they look at hiring recent college grads who, according to the Nashua Telegraph, are having a hard time finding employment? That seems to be a no-brainer. I would be happy to serve as a middleman between the unfortunate employers and the hapless job seekers for a small fee.

Ahhh... if it were only that simple.

The lesson here, is that journalists include only the information which supports their thesis. We would be wise to take a skeptic's critical view at everything we read. An important factor in analyzing an issue, it seems, is the viewpoint held prior to doing the research. Selectively choosing one dimension of the full picture to support a foregone conclusion is common, and journalists (and bloggers) are very good at it.

There are three kinds of lies: lies, damned lies, and statistics. -- attributed to Benjamin Disraeli by Mark Twain

Practical Environmentalism

I have long suspected that the only way to accomplish environmental goals was to compromise with business interests rather than fight them. A previous post, Compromise and Win, explored this hypothesis.

Now in an article in the July 29, 2008 edition of USA Today, Environmentalists, businesses reach compromise, there is evidence that some significant progress is being made in that direction. The two sides are working together to create win-win projects.

Governmental inaction is prompting environmental groups and big business to cut unprecedented deals to promote energy exploration and other development in return for major conservation initiatives.

The agreements preserve large amounts of undeveloped land, impose stricter environmental practices than required by law and generate big investments in alternative energy. The deals also clear the way for oil drilling, new power plants and large residential developments.

The article points out that not all environmentalists, nor all business interests, think that compromise is a good thing. But as more deals are being struck which offer real benefits for the environment without shutting down business, I believe that non-belivers will be converted.

Progress comes in small increments and thank goodness we have some trail-blazers willing to try a new approach! The increments will aggregate to the benefit of all.

Lasting change is a series of compromises. And compromise is all right, as long your values don't change. -- Jane Goodall

A New Twist on Ethanol

The USA Today had an interesting article about sorghum being used as a feedstock for a new ethanol plant in Florida in the July 30, 2008 edition. This bodes well for the environment. Although ethanol is not a panacea for eliminating the usage of fossil fuels, it does help remediate the situation.

Ethanol from any source still has issues with water consumption and a very low energy payback (it takes a sizeable amount of energy to produce). But by using alternate sources like sorghum, silage, kudzu, or sawmill waste as is being proposed for a new East Texas ethanol plant, the competition for food products such as corn will be mitigated.

In a previous post I chronicled some of the research being done to eliminate corn as a source for ethanol production. There is little reason why corn should be used for ethanol since there are a variety of alternatives. Sorghum is a step in the right direction.

Never discourage anyone...who continually makes progress, no matter how slow. -- Plato

Burying CO2... What?!

From the Kiplinger Letter, July 18,2008...

Greenhouse gas tombs will open by 2015, courtesy of new EPA rules due out next year. Likely candidate locations: W.Va., Colo., Utah and Wyo.

Burying carbon dioxide thousands of feet underground will help power companies, steelmakers and heavy industry meet coming CO2 limits. By 2025...200 repositories.

Burying CO2 will be less costly than having to buy carbon credits.

Sometimes I am embarassed to be part of the human race. Can anyone truly believe that burying CO2 does anything but postpone a serious problem? Mankind has proven to be very, very good at mortgaging the future (and the planet our children will inherit) for present rewards.

This idea is insane! The buried CO2 will find its way to the earth's surface. The only question is "when?"

The future ain't what it used to be. -- Yogi Berra

Thinking Is Required

If you are following the crowd and going green, good for you... but you might want to utilize your grey matter before proceeding blindly toward the light. Yes we want to replace bad environmental habits with ecologically sensitive ones. But this can be accomplished without needless sacrifice.

One of the things that makes it hard to overcome our non-green inertia is the sacrifices that must be made. Don't shoot yourself in the foot by making it more difficult and expensive than it needs to be. Come to grips with the wasteful habits of the past, decide not to continue them, and move on greenly. But do it smartly. Gradual immersion into the cold, green water is much easier to take than jumping in with abandon.

If you have decided that you need to start conserving energy and you must replace your incandescent light bulbs with energy-efficient compact flourescent bulbs (CFLs), you might want to wait until your current supply of incandescents is used up. The environment needs you to make the switch, but it can wait until the proper time. Don't waste your money by throwing away perfectly good light bulbs in order to jump on the green bandwagon. Your investment in incandescents represents a sunk cost and you might as well utilize them. On the other hand, the CFLs will save you a lot of money in the long run, so factor this into your decision.

Another way to help save the planet is to avoid the purchase of paper products when permanent, reusable ones will suffice. But don't throw out all of your paper plates in a misguided effort to promote using china or other permanent dishware. Don't throw out your paper towels so that you can start using cloth ones instead. Those paper products that you have in your pantry are a liability for our forests and our landfills, but sending them to the landfill prematurely does no one any good. Resign yourself to the fact that they will eventually end up in the city dump, but go ahead and get your money's worth out of them first.

The less painful it is to go green, the more sustainable it will be. The more thoughtful you are about new choices, the more likely they will become new habits.

Thinking in its lower grades is comparable to paper money, and in its higher forms it is a kind of poetry. -Havelock Ellis, The Dance of Life, 1923