COUNTERCOLUMN: All Your Bias Are Belong to Us

In case you missed it, the there was a great big blowup recently in the women’s health charity world. The big breast cancer and fundraising organization, Susan G. Komen for the Cure – the marketing geniuses who came up with the pink ribbon idea for breast cancer awareness, and who engage in a lot of marketing and fundraising for causes related to breast cancer. Whatever they don’t need for operations and overhead, they dispense to hundreds of different breast-cancer related organizations, funding education and awareness activities, screenings, mammograms, and research toward preventing and curing the terrible disease.

Susan G. Komen for the Cure sparked a controversy when they announced they were pulling their $600,000 annual grant to Planned Parenthood, claiming that a new internal rule adopted by the Komen board stated they can’t fund organizations that are currently under a congressional investigation. Planned Parenthood was the only charity currently receiving funds that fell into that category, so they felt singled out and objected – claiming that the Komen foundation’s decision was politically motivated and that the real issue was – que’lle surprise! – abortion.

Hilarity ensued.

Planned Parenthood supporters furiously accused Susan G. Komen for the Cure of making a principled stand. Meanwhile, fueled by Facebook, Twitter, blogs, other social media, Komen’s fundraising more than doubled in the days following the announcement, in what the media described as a severe anti-Komen backlash.
At stake, of course, was more than 0.6 percent of Planned Parenthood’s budget for the year. Planned Parenthood executives announced that without this funding, either they would have to collect another $1.75 for every abortion performed, or women would be denied mammograms.
Naturally, they were leaning towards getting out of the mammogram business. Which – of course, it turned out they already were: A pro-life activist recently called up 30 different Planned Parenthood facilities around the country, recording the results. All 30 facilities informed her that Planned Parenthood didn’t do mammograms.

Not to worry: Planned Parenthood supporters rode to the rescue – led by New York City Mayor Michael Bloomberg. As a billionaire himself, and founder of the Bloomberg media empire, Mayor Bloomberg – a ferocious 2nd amendment opponent and the man who thinks government should be free to dictate your choice in French fries, pledged to donate $250,000 to demonstrate his commitment to a woman’s right to choose.

For its part, Susan G. Komen for the Cure was stung by the allegation that its decision to withdraw funding from Planned Parenthood may have secretly been rooted in principle. So about 48 hours after making the announcement that they would no longer provide funding to Planned Parenthood, the female-dominated leadership at Susan G. Komen for the Cure announced that they had changed their mind.

The decision was reversed, and Komen announced its commitment to continuing their “treasured relationship” with Planned Parenthood. So Susan G. Komen donors, regardless of their feelings on abortion, will still send $600,000 per year to an organization that doesn’t even do mammograms.

Labels: Abortion, cancer, charities, finance, health care, Politics, women

A year after Washington rescued the banks considered too big to fail, the ones deemed too small to save are approaching a grim milestone: the 100th bank failure of 2009.


There are now a number of companies... private insurers... who have more in cash reserves backing their own promises than the FDIC has available to back the banking system...

While the parade of failures still represents a mere fraction of America’s small banks, it underscores a growing divide between them and large institutions like Goldman Sachs, JPMorgan Chase and U.S. Bancorp, which are slowly growing stronger as the economy improves.

Leave it to the New York Times to fall for the 'rich get richer' divide. I mean, they already went for "grim milestone." Why not go whole hog for the stupidity? News flash for the Times: It's called "consolidation." Solid banks get a chance to purchase distressed assets of failing banks at a discount and thank God they do! It's good for everyone, and is saving the system from collapse right now.

Burdened by worsening commercial real estate loans, many small banks’ troubles are just beginning. Many analysts say that the now-toxic loans could sink hundreds of small lenders over the next few years and place a significant drag on the economy.

Already, the bank failures are placing enormous strain on the F.D.I.C. and its fund, which keeps depositors whole. Flush with more than $50 billion only two years ago, the fund recently fell into the red.

The prospect of more failures has led the F.D.I.C. to seek new ways to replenish the fund with higher and earlier payments by healthy banks, even after setting aside reserves for future losses.

Those commercial loans aren't turning around yet, either. And there's a new wave of ARMs due to reset soon, which should trigger a new round of foreclosures.

Yippee.

The initial wave of failures has also unsettled some communities, even though most of the troubled institutions have been bought by other banks rather than shuttered. While deposits are safe thanks to federal insurance, the new buyers often do not have the same ties to local businesses as the former owners.

More stupidity. Deposits are safe? Only deposits up to $250,000. And that's not really sustainable, because we upped the limit from 100k to 250k without a supporting increase in premiums. Oh, and what's this "federal insurance?" Kemosabe?

In some cases, they tighten lending and make it harder for longtime customers to obtain loans or favorable terms. In other cases, managers of the new bank make other changes, like ending offers for high-interest certificates of deposit and calling in certain lines of credit. In the longer term, some new owners are likely to close branches of the bank they have acquired in order to cut costs.

Ok, time to hit the Times reporter over the head with a clue-bat: Larger banks don't pull back on CD rates because they're out of touch with local businesses, moron. They do it because they aren't desperate and stupid. There's a reason banks offer above-market CD rates. Think about it: They are trying to raise cash in a hurry, to stave off a short-term crisis. Often it doesn't work, and the bank fails. Sometimes, the smart money sees their bank offer a significantly above-market CD rate, and they yank their money, and the bank fails as a result of what amounts to a large-depositor run on the bank. (Small depositors tend to be lazier.)

Once the bank is acquired by a healthier bank, the crisis is past, and banks no longer have a reason to offer CD rates significantly above market.

(Here's another clue: If you are looking for a good deal on a loan, don't go to the bank offering crazy-good CD rates! They're not looking to lend, and will be very picky and jack up rates to exceed their new higher cost of capital.

This calls for a song!

Labels: banking, economy, finance, New York Times

I wrote earlier this year that the FDIC promise is paper thin.

It's getting thinner.

The Federal Deposit Insurance Corp. may take the unprecedented step of ordering banks to prepay about $36 billion in premiums to replenish the deposit insurance fund that has been severely depleted by a rash of bank failures.
The FDIC board likely will call for "prepaid" bank insurance premiums at its public meeting Tuesday to discuss the issue, three industry executives and a government official said. The banking industry prefers that option over a special emergency fee — which would be the second this year. The executives and the official spoke on condition of anonymity because the decision has yet to be made public.

It would be the first time the FDIC has required prepaid insurance fees. Under the plan, banks would have to pay in advance their insurance premiums for 2010-2012, bringing in about $12 billion for each of the three years, two of the executives said. That is the normal amount of insurance fees, though it could vary somewhat according to growth in total insured deposits — the basis for determining the fees.

Labels: banking, economy, FDIC, finance, I told you so

There's a bipartisan effort afoot in Congress to pry open and audit the Fed's books.

I say, beware the law of unintended consequences.

One of the reasons the federal reserve's discount window operations are effective in preventing bank runs and collapses when member banks encounter short-term liquidity problems is because discount window operations are confidential. If we blow this, we take away an important arrow in the Fed's quiver.

Large depositors are very careful with their investors' money - and are not protected by FDIC. They maintain a watchful eye on bank strength and solvency.

If discount window transactions are not confidential, then the mere act of seeking much-needed assistance at the fed discount window is likely to create a run on the banks, thereby creating the liquidity disaster that the fed discount window was designed to prevent.

Congress is playing with fire, and not more than a handful of them know how big that fire is, or even that they've got matches in their hands.

Splash, out

Jason

Labels: banking, Congress, Economics, economy, finance, investing, The Federal Reserve

There were 31 dollars worth of insider stock sales last month for every dollar's worth of insider buys.

I'd like to know if that's accompanied by a spike in volume or not. And I'd expect there to be some profit-taking after this. I'm advising clients that tax rate increases are coming - as are most financial advisors, I'd imagine, and so some of this might be an attempt to realize capital gains this year, rather than give the revenue-desperate Congress a chance to hike capital gains taxes effective Jan 1.

But still, not a bullish sign at all.

Splash, out

Jason

Labels: economy, finance, investing

These contracts are abortions, and I'd like to personally adjust the actuarial outlook for any of these Wall Street scumwads trying to push these.

After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.

The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

Why? Well, we have insurable interest laws for a reason. Do you really want a sociopath like Bernie Madoff owning a substantial interest in wanting you dead?

But let's put aside the obvious perversity in granting Wall Street a windfall when they kill you. Let's just look at the math- the math the New York Times misses:

The primary purpose of life insurance is death benefits. DEATH BENEFITS. Why? To protect widows, orphans, and business partners. That's it.

When an insurance company sets its premiums on a block of business, they have to take into account the expected lapse rate. A certain percentage of all life insurance contracts will never pay a death benefit - because they either lapse or get cashed in well prior to the death benefit. Indeed, term insurance is DESIGNED to lapse without paying a claim. This is part of why term is so cheap... the premiums are well below the expected mortality for any given age group. Because of lapse rates. This is part of why young families and small businesses can afford the protection they need.

When you have third parties buying up life insurance... parties whose primary interest in the insured is identical to that of a corpse-eating zombie - they will keep policies in force that would otherwise have lapsed or surrendered. Lapse rates will fall. Premiums will rise. Life insurance will become less affordable. And families and small business will have to make do with less protection. Dividends fall on par whole life contracts. further raising premiums neccessary for a given level of protection. Seniors will have to pay longer before dividends offset premiums. Some won't be able to. And we will have forgotten why we have life insurance to begin with: To protect future widows, orphans, and dependents of small business owners from unexpected financial catastrophe due to death.

This is one asset class we can definitely do without.

Splash, out

Jason

Labels: Crime, finance, insurance, investing

If Obama and his Administration gave a good god-damn about retirement security, they could start by reigning in obscene spending so we won't have to inflate American's retirement savings into oblivion, or tax the bejeezus out of distributions from 401(k)s, 403(b)s IRAs, SEPs, and annuities, in order to have a prayer of paying off our debt.

Instead, our Dear Spender proposes replacing cash refunds with taking on even MORE government debt.

If he really wanted to help people, he would push for waiving the 10% withdrawal penalty on 401ks and IRAs for people under 59 1/2 who are unemployed, or for the purpose of starting a new business (and hiring!). All that's needed is to expand the definition of qualified hardship withdrawals to include unemployment income.

But he won't.

Instead, he screws around the edges. Unused vacation pay?? Sounds like an idea only someone who's had his head so far up the Union's ass for years would love.

He wants to put long term retirement savings in government savings bonds, of all places? With interest rates at historic lows???? If he were in private practice, he'd get sued nine ways from Sunday.

And then, Dear Leader wants to send the paper savings bonds directly to the workers? So they can stuff them in a drawer somewhere? No third party administration? No transfer agent to keep track of beneficiaries? This sounds like a banana republic plan.

I'm all for having a default 'opt-in' for retirement plan participation. That's been a good idea for a long time - though there are a lot of details to work out, including figuring out a reasonable 'safe-harbor' solution for plan sponsors who don't want liability for taking either too much risk or too little risk with the money. There are ERISA headaches when a plan sponsor's executive class gets a 6% return over years because of a reasonable allocation to equities, while the worker bees get 2% returns because the worker bee assets were deposited into money markets. Lots of companies have declined to offer retirement plans precisely BECAUSE of this kind of ERISA liability.

(Incidentally, an automatic opt-in provision helps executives, who can't max out their own plans, under "top hat" rules, unless they meet participation requirements among the rank and file.)

The plan to issue savings bonds instead of tax refunds? It's a massive screwing of the working and middle class. With interest rates low, massive spending and inflationary expectations, such a deal is a very bad one for workers (and a great one for the IRS!).

It's also a massive redirection of spending power from main street USA to K Street, Washington. All it does is ensure government bureaucrats once again take the first cut of any tax refund checks.

(What gets me is that libtards will, if pressed, and in the same breath, argue at once that we need increased participation in 401(k)s but we shouldn't partially privatize Social Security because equities are too risky to rely on for retirement savings.)

All in all, I'm thoroughly unimpressed with Obama's proposal.

Why the Hell is he wasting bandwidth on this garbage, anyway? He ought to be pressing the case for his abortion of a health care reform package, or mustering up public sentiment to fight and win in Afghanistan. (That's the one he thought was important, remember?)

Instead, he's blowing political capital on these distractions, impaling himself against the Republican pikes over health care reform, and letting the Afghanistan war effort shrivel and die for lack of rhetorical oxygen and leadership from the President.

The likely result is that Obama will fail at all three initiatives.

I want him to fail on health care reform. Utterly. I do NOT want him to fail to win in Afghanistan.

Splash, out

Jason

Labels: Afghanistan, finance, investing, Obama, Politics, retirement

This is pretty cool!

The Internet has taken a lot of the paperwork out of banking, but there is no avoiding paper when someone gives you a check. Now one bank wants to let customers deposit checks immediately — through their phones.

USAA, a privately held bank and insurance company, plans to update its iPhone application this week to introduce the check deposit feature, which requires a customer to photograph both sides of the check with the phone’s camera.

“We’re essentially taking an image of the check, and once you hit the send button, that image is going into our deposit-taking system as any other check would,” said Wayne Peacock, a USAA executive vice president.

Customers will not have to mail the check to the bank later; the deposit will be handled entirely electronically, and the bank suggests voiding the check and filing or discarding it. But to reduce the potential for fraud, only customers who are eligible for credit and have some type of insurance through USAA will be permitted to use the deposit feature. Mr. Peacock said that about 60 percent of the bank’s customers qualify.

Innovation is a good thing! I wasn't too impressed with New York Times's line: "USAA is an unlikely innovator."

What the hell does THAT mean? USAA isn't from New York, Connecticut or California? Just why IS USAA an unlikely innovator, in the eyes of the NY Times?

No word on what the fee is, if any. It would seem that this would be much cheaper than processing a paper check.

Splash, out

Jason

Labels: banking, finance, insurance, soldiers' issues, USAA

...And like shit through a goose, the irony is totally lost on our spender-in-chief and his dimwit team of speechwiters.

Labels: Africa, business, Economics, finance, foreign policy, Obama, taxes

Comedy gold.

Then again, if Obama's intent was to orchestrate a wholesale theft of wealth from the productive for the benefit of the connected, undermine the rule of law, and lay waste to best practices of accountability and transparency, while propping up key northern democrat constituencies while placing children tens of thousands of dollars in debt before they graduate fifth grade, then I guess he may be right.

Labels: Economics, economy, finance, Obama, stimulus

It's no mystery to me why Palin resigned. She was right to resign. It was a no brainer. Had she not resigned, she would be doing irreparable financial harm to her family.

Here's why.

Sarah Palin and her husband have five children and one grandchild. All of them, with the possible exception of Track, who's in the Army, are going to need a lot of help. Bristol's a teenage mom who's baby-daddy is useless. Levi's parents aren't going to be much help. The burden of bringing up that child is going to fall mostly on the Palin family, and Bristol herself has exremely limited means. Piper is six or seven. Just starting school. her expensive teenage years ahead pf her, and she'll need a college fund. Bristol may need some help finishing her education.

Retirement? Palin will have a modest pension, but she hasn't spent THAT long as a State of Alaska employee. Todd? He's done ok, but with five children? He's gonna have to scramble to fund his own retirement on top of everything else.

But get this the minute they found out that Trig had Down Syndrome, the financial planning picture changes. Why? Because the Palins insurance needs changed radically.

Trig will likely never be able to work or live independently, and will be dependent upon assistance his whole life. The Palins are confronted with a number of simultaneous financial challenges:

1.) Meet the college/education needs of at least three children and one grandchild. (Track will have the GI Bill, and possibly an ROTC scholarship if he wants it, so he's less of a worry, though still may need some help when he gets out of the Army.

2.) Help Bristol with her own day-to-day expenses and those of her baby.

3.) Provide for the day-to-day needs of Trig, who's going to have some pretty serious special needs and will require more and more time and attention as he gets older and becomes self-propelled.

3.) Provide enough life insurance protection to provide for her family's substantial needs if she got on the wrong airplane or got shot by a rabid libtard.

And here's the rub: Many middle class families opt for cheap term insurance, on the theory that their need for life insurance goes down substantially when the kids are out of school and no longer dependent.

That is not the case here. In the Palin's case, Trig's need for life insurance protection doesn't end when he gets a college diploma and moves out on his own. His need is permanent. The Palins must, on their limited incomes, provide for everything above, AND provide enough money for an endowment to support Trig Palin... probably for decades.

Financial planning for children with special needs is a little different than planning for most families. And it takes quite a bit more cash flow to provide for them. Cash flow the Palin's don't have on a Governor's salary and Todd's pay.

If Palin didn't quit, they could get through the next couple of years in decent shape. But then their options would deteriorate sharply if Palin's star faded. At 48/49 years old, it would be extremely difficult to recover.

The Palins very likely need a substantial amount of permanent life insurance. Not term. Set aside for Trig. If they wanted to be equitable to all their children, they would need a lot more permanent insurance, as opposed to term.

It's a lot more expensive, in terms of cash flow and monthly required premium, to buy that insurance in her late 40s than it would have been if she were in her 20s or 30s. And there's not as much time to build it up, either. Had Palin tried to stick it out on the Governor's salary, it would have been almost impossible.

But quitting, and getting a book out there, and hitting the lecture/fundraiser circuit in the next few years, would allow her to do all that. She can take care of her family, provide a legacy for her other children, spend some time with the kids, create something that creates residual income (book royalties), and STILL have a shot at running for president or senator.

Most importantly, if she doesn't provide for Trig, her critics sure as hell won't. No one else can do it but her.

Maybe she didn't explain it too well. And maybe it's none of our business anyway. But in my view, she did the right thing.

Best of luck, Governor Palin and family.

Splash, out

Jason

Labels: Alsaska, Bristol, finance, money, Palin, special needs, The Left, Track, Trig

And who is getting IOUs?

Hint: Public employee pensions are getting cash. The legislators are paying themselves cash.

The mentally handicapped? IOUs.


Bastards.

Splash, out

Jason

Labels: California, economy, finance, mental health, Politics, taxes

Apparently, women who teach child yoga classes for a living are having a hard time making ends meet.

Surely the end times are upon us.

When Feuer started teaching yoga four and a half years ago, when she was 38, it seemed like the perfect entree to a life of free agency. Feuer spent most of her 30s working for her husband’s goth record label doing publicity and promotion. When they divorced in 2005, she wanted a job that gave her some of the same independence that he had. “I’d watched my husband go into business for himself, and I felt like I could do it, too,” she said.

Yoga gave her the same pure, elated feeling as dance, which she had done professionally in her 20s. She spent $4,000 on a 200-hour yoga training course — paid for with a home-equity loan — and then more to specialize in prenatal, mommy-baby and kids classes. Many of her prenatal students came back to thank her after giving birth. She could pick up classes from a half-dozen studios, gyms and schools, and she could arrange her schedule around the needs of her son, Sasha, who is almost 7. Since Feuer did not work full time for any employer, no one gave her health insurance or other benefits. But she earned between $35 and $65 a class, and students paid more for private sessions.

This part's just precious:

Feuer’s ex-husband pays one-third of her rent, and she had been counting on the money from the after-school classes to pay her share for July and August. “I don’t know how I will make it through the summer,” she said in an e-mail message. The bottom of the note read, “Sent from my iPhone.” The call of semidesperation via a high-tech status symbol is an emblem of the gap between the past and the present for many of urban America’s self-employed.

Wow. Looks like a reject from the Overwriters' Anonymous meeting. George Will, Call your office!

Freelancers still have the trappings of middle-class entrepreneurship. But the downturn is eating away at their livelihoods and the identity they thought they chose when they decided to work for themselves.

Most businesses fail. She is fortunate, in that she only has a few grand in capital investment in the business. I talked to several retail business owners this week who aren't sure how they'll make it through the summer, and each of them are sitting on inventory worth upwards of six figures.

Some, I think, will pull through, with a little luck, assuming their loans don't get called in a hurry. Others need to be put out of their misery before they destroy their owners' lives even more.

Speaking as a former freelance writer, I can relate, and I love folks who do this kind of independent work. But they aren't really entrepreneurs - which is why so few freelance writers can write articles that real entrepreneurs - the kind who understand capital investment, intrinsic value, leverage, asset protection, insurance, liability and exit plans can understand.

Oh, geez... of course! The writer is Emily Bazelon! A well-known liberal! No wonder she doesn't understand!

A freelance writer has a lot of freedom. But with just a few exceptions, they have jobs, not businesses. Your occupation pays you only so long as you work in it. Once you quit, you have nothing to show for it but a thick portfolio that no no one will pay you for. No exit value, no useable book to sell, no residual income, no way for a successor to pick up where you left off.

They create jobs, not businessess. So these are freelance workers, not really independent business owners. THey have some of the BENEFITS of owning one's own business - the freedom to control one's hours and working environment. And potentially they may gain some tax advantages (but at lower income levels, those aren't REALLY worth that much). But for all their efforts and freedoms, they aren't really creating anything of lasting value for themselves.

Every freelance writer, graphic designer, programmer, or artist should read a book called the E-Myth.

Chris Jagers notices the same confusion I did.

The instability of freelancing isn’t new. Lawrence Katz, a Harvard economist, points out that the share of workers who have standard full-time jobs with benefits has been shrinking since the 1980s. But in the past, temporary and on-call workers — everyone from data-entry employees to construction workers — were hit hardest by downturns.

Well, yes. As a freelance commercial writer with a strong financial industry specialty, I billed out significantly higher on an hourly basis or per-word basis than I did on staff. Why do you think people hire staff writers??? When work slows down, I was way more expensive than a staff writer, so I didn't get the call. Them's the breaks. And all the freedom I had to work at Starbucks or from a lawn chair at the beach (and yes, I did both!) comes with a trade-off.

You can always tell a libtard because their underlying assumption is that tradeoffs like this don't exist in a real economy - and so when the tradeoffs actually DO rear their ugly head, they get smacked in the face by the surprise, and then they write articles for the New York Times magazine describing the tradeoffs that are immediately and intuitively obvious to all right-thinking individuals from the very beginning, thinking they have some magnificent insight.

Meanwhile, everyone who's ever even THOUGHT seriously about making a payroll skips right past their drivel.

Meanwhile, unemployment insurance is still largely structured as it was when the system was instituted during the Depression. “Unemployment insurance was designed in 1935 to give temporary support to the classic male laid-off worker,” Katz says. “It’s not set up for the circumstances we see today, with a lot of people freelancing.”

Good God, Katz! Why on earth would it be? You COULDN'T set up such a system if you tried. The adverse selection would be off the charts! These independent contractors are SOLELY responsible for their own employment and their own business development. If it were possible to construct some kind of unemployment insurance for these people, the New York Freelancer's Union has the economy of scale to do it. Let them try. Jeebus. Will someone whack these libtards with a clue bat already!?

At the Freelancers Union, Sara Horowitz is pushing for a new kind of unemployment protection fund that would cover the self-employed by helping them put away money that they could draw on in times of need.

Brilliant. Let's make a name for it. I suggest we call it "savings."

You know, I have a theory - that any conservative needs to have 30 IQ points on a liberal in order to land an equivalent job. Take Megan McArdle, for instance. Megan's not perfect, and I've seen her screw up in print. But she's easily got 20 or 30 IQ points on 90 percent of the other blogger/journalists who write in her space - and has a much stronger background. But she's not a reflexive liberal. If she had the same views she has now, but wrote with the same sloppiness as the liberals there (and everywhere else)[*cough cough* SULLIVAN!!! *cough cough*], she would have been given her walking papers.

I see the same thing with journalism all over the place... Conservatives have to play major league level ball to get the same bylines and gigs as intellectually-slovenly liberals who have next to no experience outside of college.

If this 31 year old kid now responsible for GM were a conservative, he'd be grunting it out proofreading documents for a law firm in DC and fetching coffee for the partners. But he's a liberal, so he gets whisked up to the stratosphere.

But back to our regularly scheduled train wreck:

In April, Lisa Feuer sent me another message from her iPhone: “I’m at the food-stamp office now, waiting.” For months, she had been putting off this trip. Feuer’s grandparents were Jews who immigrated to the United States from Vienna in 1939. She grew up in a small town in Illinois, where her parents taught public school. She has an undergraduate degree, having majored in sociology as well as Russian and Eastern European studies, and a master’s in multimedia arts.

I think I'm beginning to see the problem!

Venkatesh is picking up this kind of unexpected neediness in his research. He has four welfare caseworkers around the city who keep track of the clients who come in to ask about public assistance. “I wanted to understand whether ‘nontraditional’ welfare clients started to file paperwork,” Venkatesh wrote in an e-mail message. “Nontraditional means white, for Manhattan.” In 2005, the caseworkers reported that 5 percent of those who came to their offices were white. This year, the percentage has jumped to 26 percent.

Now THAT is a fine statistic, and some fine reporting by Miss Bazelon! More like this, please! You'll make any editor proud.

Bottom line, though ... If you're on food stamps, and you live in New York, and you have a baby girl, and you're on track to make 15,000 this year, and last year, you only made 30% more than that... how on earth did you think you could afford an iPhone?

Ah. All your friends had one. It's part of the the independent contractors/creative workers' uniform.

Maybe I should send this woman a copy of the E-Myth, and a copy of The Millionaire Next Door. Or send them to Emily Bazelon.

I wonder if she'd read them?

I wonder if she's ready to understand them?

Splash, out

Jason

Labels: Arts, bloggers, Economics, economy, Emily Bazelon, finance, labor, The Left

I get bragging rights: I called it precisely.

Here's what I wrote more than a year and a half ago:

The problem isn't that Mozilo cashed out a lot of stock options. That's entirely legitimate, and no one is alleging that he failed to disclose his trading in accordance with company policy and the law.

This is the most widely predicted and predictable bubble in a generation. Mozilo would be a fool not to have lightened up (though he still should have maintained a significant long position out of principle. My issue is that as far as I can tell, he has no long position.)

The real problem is that even as Mozilo was quietly unloading his own shares, Countrywide was loading up the company with debt to buy by back millions of shares at prices management obviously thought were inflated (around 40 bucks).

Actually, that buyback program was initiated almost exactly at the same time that Mozilo began selling.

Oh, and you also read it here on Countercolumn.


I am not long Countrywide, except via Weitz Value.

It's tempting. It trades at 5x official earnings (I mentally adjust that to more like 8 to 9 times "real world" earnings, and trades at 20 to 30 percent off book value. It is less than 10% into subprimes. It is about 40% into adjustables, but those adjustables are spread across the United States, and not concentrated in California (in contrast to someone like Wells, which is a western franchise, and even Washington Mutual, which is overexposed to California, which surprised me to learn.)

Countrywide also recently executed a large buyback of shares around the 40 dollar mark last year. Shares are now trading at around 18.

It's very tempting - with a nice dividend in the meantime to pay me for waiting for a recovery.

But I look at their CEO, and he is selling shares as fast as his options vest. He doesn't seem to be retaining any of them personally, and therefore I distrust him as an owner-manager.

I know. Please. Try not to gush.

What's more, it is this seeming mismatch between the CEO's own trading actions and the COMPANY BUYBACK ITSELF that will expose Mozilo and the directors to legal liability. The buyback is a key option, because it's the buyback, not the insider sales, that arguably represent a violation of fiduciary duty to shareholders.

Here's the headline today:

SEC charges ex-Countrywide CEO Mozilo with fraud and insider trading

From the story:

Mr. Mozilo set up four executive stock sales plans for himself in the last three months of 2006, all the while aware of the company’s fate and that of its loan portfolio, the SEC charged.

Between November of that year and August 2007, he exercised more than 5.1 million stock options, raking in about $140 million, bailing himself out while Countrywide and its investors crashed and burned, according to the charges.

Aside from the fraud charges, the SEC also wants the three men to pay up their ill-gotten gains, plus financial penalties, and for the trio to be barred from becoming officers or directors at publicly held companies.

Richard H. Moore, former state treasurer of North Carolina, wrote a letter in 2007 to then-SEC chairman Christopher Cox, asking him to investigate stock sales that Mr. Mozilo had made.

Ben Graham, you magnificent bastard, I read your book!!!

Splash, out

Jason

Labels: Countrywide, finance, investing, mortgages, personal

Gas prices seem to be forecasting a recovery - and so long as the Persian Gulf remains as stable as it usually is (HA!), I see seasonally-adjusted increases in energy prices as good news, rather than bad, for the exact same reason I viewed the abrupt decline in gas prices a negative sign last summer, rather than a good sign.

But lookie here: Institutional buyers of consumer debt are not pricing in a recovery. Far from it - they're pricing in a further collapse in the economy!

An executive from a fund that buys "distressed assets" held a luncheon audience spellbound Monday as he talked about what his firm thinks assets such as consumer debt are really worth.

The holders of delinquent credit card debt are valuing the paper at about 14 cents to 15 cents on the dollar on their books, and they are willing to sell the debt for 2 cents to 5 cents on the dollar, Timothy Clark, a senior partner at CarVal Investors, Minneapolis, said at an insurance industry conference organized by Standard & Poor’s, New York.

If the bears are wrong, the bulls will make a mint, buying consumer debt at a nickel on the buck.

Because the U.S. population is aging, Americans need to increase their savings rate to about 8%, from 1.8%, over the next decade simply to fund their retirement. That alone could cut U.S. consumer spending about $800 billion per year, Clark said.

Yes, and it's about the only thing supporting bond prices right now! With the mint printing money like it's going out of style and Congress slopping out spendulus without regard to our children's ability to shoulder this debt burden, and with Geithner's lip-service to "a strong dollar" turning our Treasury Secretary into a laughing stock in China, the only thing left to support bond prices is going to be rapid inflation, coupled with a massive increase in the savings rate.

I fell in to the same trap too, some years ago: I was among those who resented the tendency of libtards to use America's relatively low savings rate compared to Europe's to bash America with. I argued that unlike Europeans, who could fall back on a cushy safety net on the government dime in their golden years, Americans had to be more entrepreneurial with their capital. I argued that Americans were FAR more likely to hold equities in 401(k)s than Europeans, and more likely to own home equity, which could be converted into retirement income later. (I did not consider cash value life insurance at the time, but only because I was a rank noob. I should have.)

I see now that we had substantially underpriced the risk in the equity and real estate markets, of course.

But holy crap... consumer debt at less than a nickel on the dollar!!!! Geez!

Splash, out

Jason

Labels: banking, Economics, economy, finance

Via Megan McArdle comes this illustration of Obama's 100 Million Dollar Joke.

Labels: budget, Economics, finance, Government, Obama

So it seems that the Obama Administration is presiding over the attempted mass rape of GM bondholders in favor of the auto workers.

Pennywise and pound foolish. But then, that's par for the course for a libtard. Minus the pennywise part, anyway.

Bondholders, writ large, will exact a stiff penalty for nonpayment. If bondholders - the owners of our nation's capital - are not respected, things get ugly very fast. Bondholders will simply stop lending money. It ain't hard to figure out.

Look. Bondholders understand that in a global economy, shit happens. They understand business risk. They understand currency risk. They understand the risk of natural disasters, market risk, systematic risk, nonsystematic risk, Milton Bradley Risk, management risk, and all kinds of other risks, and have, in theory, priced accordingly.

What they didn't price in - well, until now - is a President and Congress that was willing - even eager - to poke them in the eye just to buy votes from unprofitable laborers in swing states. Yes, they were always a constituency. But when push came to shove, until now, the bondholder was, if not venerated, at least respected. Not in the streets of Detroit, but in the halls of congress and in our bankruptcy laws.

There is a sea change going on, and it's going to lead to a massive repricing of risk. It already has.
If they don't extract their fair cut from GM, they will extract it from the rest of the economy as a whole.

Here's a vignette to help clarify how things work:



Stewie = bondholders.
Brian the Dog = global economy.

Any questions?

Splash, out

Jason

Labels: cartoons, Economics, finance, Humor, Television

So asks Megan McArdle.

I'll tell you why. Because, by and large, our financial media sucks.

Here's my comment, crossposted from her blog.

Tanta. She was doing the heavy lifting for our intellectually bankrupt financial press when it counted. Too bad all of you guys were too busy playing stenographer for your sources to notice when it could have counted.

But financial journalism as a whole is pretty useless.

They flopped on the S&L scandal until it was too late.
They whored themselves out hawking Internet stocks and funds at the worst possible time. Check out The Fortune Tellers for details.

They elevate chronic money-losers like Jim Cramer and idiotic concepts like Mad Money. Ed Slott should have Cramer's show. But he won't.

They promote self-promoting mental midgets like Suze Orman, who couldn't plan her way to Starbucks for a cup of coffee, rather than real planners.

They sat approvingly on the sidelines while Dave Ramsey insisted growth stock mutual funds average a return of 12% per year while leading hapless investors out of their guaranteed contracts, whole life insurance, fixed annuities, bonds, and EIAs like the the Pied Piper leading children to oblivion, and fell all over themselves quoting how much good he's done, when taking his advice was devastating to families in 1999 and devastating in 2007-2008, and never once called him on it.

You pay lip service to 'buy and hold' investing, but every cover on the big-circ glossies screams '10 mutual funds to buy now'

Your covers feature flights to safety AFTER the market crashes, and feature aggressive investments AFTER large rises in the market.

The financial media is the reason real-life, real-world investors only realize less than a quarter of actual market gains (I'm citing DALBAR here.).

Elaine Garzarelli makes one lucky call in 1987, and you idiots are still calling her for market predictions, 22 years later. How did that work out last time, when Smart Money called her? In their December 2007 issue, She recommended Lehman Brothers, Bear Stearns, Merrill Lynch and predicted Dow 16,000.

I guarantee you she'll still be getting calls from drooling reporters 5 years from now, if she's still working, and hasn't been shot by a client.

Smart money regards the financial media as a contrary indicator. The media is always the second dumbest guy at the poker table. The only dumber guy at the poker table is the guy who reads them.

They're asleep at the switch, by and large, while our pension crisis continues to build. They're asleep at the switch even now, while unrealistic GMIB riders threaten to cut the legs out from under major, major insurance companies, while there isn't close to enough capital in reserve at state insurance funds to make up the shortfall.

The financial media doesn't deserve Pulitizers. It deserves a kick in the nuts by an outraged public.

Splash, out

Jason

Labels: bloggers, economy, finance, journalism, McCardle, Media, public relations, The media

Alright, troops, listen up!

Been deployed to a hostile fire zone for part of the last year? Did you qualify for the combat zone income tax exclusion?

If so, then check out the W-2 you get from Uncle Sam. You can do that on MyPay. Chances are pretty good your adjusted gross income is artificially low. Yeah, you got paid for the duty. But your TAXABLE wages are artificially low for being in a combat zone.

That being the case, you may be able to qualify for the Saver's Credit.

That means the government will give you free money (in the form of a tax credit) for saving for retirement.

From the IRS's Web site:

The saver’s credit can be claimed by:

Married couples filing jointly with incomes up to $53,000 in 2008 or $55,500 in 2009;
Heads of Household with incomes up to $39,750 in 2008 or $41,625 in 2009; and
Married individuals filing separately and singles with incomes up to $26,500 in 2008 or $27,750 in 2009.

Restrictions:

You gotta be 18.
You can't be a full-time student.
You can't be a dependent on someone else's tax return.

How do you claim it? Follow the instructions on IRS Form 8880

Yes, the Thrift Savings Program qualifies, as do Roth IRAs, IRAs, SIMPLEs, 401(k)s and 403(b)s.

Of these, I would usually steer troops toward the Roth IRA for this purpose. Why? Because the other plans are all tax-DEFERRED. But with the combat zone income tax exclusion, you're effectively contributing with pre-tax dollars anyway. But the Roth IRA grows tax-FREE, with TAX FREE distributions in retirement, and none of those pesky Required Minimum Distributions the government requires you to take when you get older. (Yeah, most of you aren't worried about those now, but trust me. You will be, and you will hate them.)

With a Roth IRA (or a Roth 401(k) if your employer offers one), you get the FULL benefit of the combat zone tax exclusion, thus contributing with tax-free dollars. Your money compounds tax free. Tax-free income in retirement. (The government thinks you paid taxes on money going in. But since you were in a combat zone, you didn't.)

Combat veterans thus have the opportunity to take advantage of the most tax-advantaged retirement program the tax code allows. And the Savers' Credit just sweetens the deal with some free money from Uncle Sam.

(Aww. the gang at Military.com hasn't picked up on the story yet. Kids, don't try this at home.)

(Caveat: If your employer matches your contribution in a SIMPLE or 401(k), you may want to contribute enough to snag the free matching money. Plans vary, so your mileage may vary as well.)

Now, to kick the whole thing into overdrive: Do you own a small business? Follow the instructions on IRS Form 8881. The Government will give you free money - in the form of a tax credit of up to $500 dollars, tp start up a qualified retirement plan (provided it also covers at least one non-highly compensated employee.

Splash, out

Jason

Labels: finance, investing, soldiers' issues, taxes

Things look ugly.

It's even uglier when you consider that the drooling ignoramuses who point to the large Social Security trust fund think they can simply liquidate the trust fund and the whole thing is funded with magic pony pellets from some source other than new taxes and the general revenue.

I'm convinced that any moderately informed person who can cooly claim that a Social Security system going cash-flow-negative does not mean that the system is in crisis can only be a pathological liar.

Look for a sharp increase in means-testing, a substantial increase in the taxable wage base, and the raising of the retirement age in the very near future. Taxes will go up. Whether the FICA rate will go up, or whether the costs will be buried in income rates matters little now.

Further, without an operating surplus, the window for a partial privatization is snapping shut.

But at least Obama wants to let terrorists roam free in Peoria.

So that's something to look forward to.

Splash, out

Jason

Labels: economy, finance, Social Security, stupid