Crude Under 37 Dollars a Barrel... Expected?

Alright people, regardless of what anyone else has told you, after the economy began to worsen precipitously in September, there was no doubt that crude would fall as our economy did. As Global Markets have been hit extremely hard by a virtual worldwide recession, the demand for crude has dropped, while supply has not dropped to anywhere near the same extent. 

Another thing that some of you may be thinking about, is when prices will go up again, since they surely will. After the world is able to get past these rough times, then developing countries, along with America, due to their own seemingly insatiable thirst for petrol, will begin consuming the same massive amounts of crude as before, probably more.

 As I said last month, the steps Obama plans to take in order to lessen our dependence on foreign oil will thwart any future time where an oil supply shock will occur, increasing inflation, and moving us away from our potential GDP. 

Chrysler Closes Plants... A Company That Has a Brain

Yes! Chrysler's management can think! They finally feel compelled to do something productive about production, haha. This is exactly what Ford and GM should do. Closing its plants for a month is exactly what it'll take to get inventories under control, and impede any further product gluts from occurring. Although I'm unsure as to whether the autoworkers will continue to be paid, yet knowing their contracts they must be, at the very least a storied and old company such as Chrysler will be able to stay afloat for the time being. For once, I can actually compliment a move made by the Big Three for the first time in a long time.  

Apple Sales and the Target Rate

Seeing news of falling sales for Apple inc. appeared to have been a major alarm for Apple investors, sending the stock price down today after-hours, yet what else would people expect? The economy is currently and utter mess, and many are much less likely to go out and drop 1200, 1400, 1600+ dollars on a new computer. Falling sales during this time period do not prove anything about Apple, other than that its sales are also subject to the ebbs and flows of the business cycle. Furthermore, many are alarmed that Steve Jobs will not be giving a keynote address at the next MacWorld conference, something which leads many to believe that Jobs is sick and unable to give such a presentation. I believe most people are overreacting and need to realize that all of this speculation about Jobs' health isn't confirmed at all, and that even without him Apple still has many other bright individuals who can lead the company in the right path.

On another note, the Fed cut it's target rate to the lowest it has ever been, with many saying that the Fed has run out of ammunition. This is probably true, yet eventually with such lax monetary policy the economy will get going again, especially if our friends at Obama and company can ensure the passage of a stimulus package at the beginning of his term. 

Auto Bailout Passed in the House.. Will it Survive the Senate??

Yes, the the bailout plan for our Detroit automakers has made it through the House, yet the bill is a bit stripped down from what some legislators originally wanted. Apparently, a measure was removed from the bill which would bar the automakers from challenging state laws regulating greenhouse gas emissions, the removal of such seems absurd to me, and appears to be one provision worth keeping, since it's worthless to bailout these companies just to finance lawsuits against states. 

Furthermore, there is some conflict in the Senate, specifically with the GOP, whether this new position of "car czar", basically the person overseeing this plan, has enough power to force concessions. This seems like a legitimate worry, and such power should be ensured so that he or she is able to enforce what's necessary in order for this plan to work, especially since all of these companies already ran their companies into the ground, we don't want them doing it again on taxpayer dollars. 

Check out this youtube video, just in time for christmas and perfect for the economic times.

I found this a couple of months ago, and it's extremely hilarious, even though I believe the bailout is at least partially working. 

It goes well with my today's post, and I hope you all enjoy it!

The TARP Oversight Panel

According to a WSJ article, an oversight panel is prepared to report on the Troubled Asset Relief Program(TARP) which is infamously utilizing the $700 bln dollar package that came out of this economic mess. The article contained much criticism toward the Program, with House Financial Services Committee Chairman Barney Frank (Mass., D) saying that more money should be used to prevent foreclosures.

In short, the panel's reports seems to be a denouncement of the plan on the grounds that the Treasury hasn't specified the program as a "fair-deal" or a "giveaway." This sounds a tad absurd to me, that this panel seems more concerned with whether these companies really "deserve" this money as opposed to the effectiveness of the program.  This is utterly ludicrous, and nearly farcical considering the members of this panel, including the Associate General Counsel of The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), a law professor from Harvard, the superintendent of NY Banks, along with various House bureaucrats.

Now, upon hearing this list of names, it makes me think about these choices. Of these people, who really knows about Economics enough to make an intelligent decision as to the performance of this plan. Furthermore, the AFL-CIO counsel will only advocate more in favor or labor unions, especially now that the Big Three are getting caught up in the bailout mess. It seems blatantly obvious that people educated specifically in the field of economics needed to be utilized in order to get an accurate view of whether this plan is working. 

Once again, I am absolutely impressed with the outstanding ability of our government to allow important matters to be overseen by the wrong people. 

533,000 Jobs Lost In November... Yet Some Believe We Are Understating Our Unemployment... Are We?

 First, I would like to apologize to for my lack of consistent posting this week. It's been a bit hectic and haven't had  much of a chance to get some posts in... I promise this is a rarity

Alright, let's get down to business. As expected the employment (or the lack thereof) statistics were dismal. This is what we expected, and no one should be alarmed. So this "news" really isn't news, at least in my mind. Yet it does confirm our worst fears that employment is in a slide, and I don't see a recovery in the near future, thus this "news" may be a portent of things to come, along with the other numbers that have been coming up alerting us of the current economic turmoil.

One thing that I will not take from the media and it's unintelligent thoughts on the economy. Save for Bloomberg, WSJ, and other legitimate sources of economic news, the rest are undoubtedly odious, and make the most asinine comments I have ever seen. My favorite can be found here http://economix.blogs.nytimes.com/2008/12/05/workers-give-up/. David Leonhardt, the author, sufficiently insults the Bureau of Labor Statistics' (BLS) method of finding the unemployment of our nation, by claiming that discouraged workers, workers that are unemployed that aren't looking for work, deserve to be included in our unemployment, since currently they are not. Well Mr. Leonhardt, these people aren't even looking for jobs, and are being, in short, lazy bums that aren't helping themselves. People who are counted as  unemployed, those looking for work yet unable to find some, deserve to be counted seeing as they really can't find work, therefore showing a true loss of an ability to get a job, while discouraged workers only prove to the laziness that effects the relatively small group of people who aren't trying to find themselves a job. 

So David Leonhardt, don't blame the unemployment statistics for understating our labor market's situation. If you want to go out and figure out David Leonhardt's own statistic, go ahead. I won't listen, and most knowledgeable people won't. 

The prosecution rests. Have a good weekend everyone!

Ford, Bailout, Pay, and Volvo

With a half-expected Auto Bailout plan in the works, many are speculating as to the exact terms, the executive pay, or the lack thereof involved and other conditions that will have to be mad in order to secure US aid. Ford is saying that it will put greater emphasis on smaller cars, and more efficient cars, along with drastic cuts in executive pay. Upon reading this, I almost burst out of my seat, with the burning question in mind as to why they haven't tried this before? Nearly everyone and their mother could tell Ford they need cars for the 21st Century that are more in line with the Toyota principles of efficiency and compactness. 

Moreover, Ford has considered selling its Volvo unit to help sure up its finances, although currently it has fair liquidity especially considering the current situation. If Ford sells off Volvo, i believe they deserve the first hack at a Federal Bailout, considering that GM is crying about bankruptcy, and won't even accept severely cut executive pay in order to receive aid. 

In conclusion, I think Congress has to be frank with these horrendously run companies, and lay down the law in terms of what they must do in order to receive aid. The failure of these companies occurred due to despicable management, and nothing short of new management or reduced pay until greater performance of the company will help the company. These companies must be required to make better cars, and cut expenses, specifically lavish executive compensation. 

Be Thankful For... The Bailout?

I know I have questioned aspects of bailouts within this blog, but as I ate my thanksgiving dinner, I thought about what I had to be thankful for. Then my mind, naturally, turned to the status-quo of our economy. What does the economy have to be thankful for? Well, although there are still many problems, I wholeheartedly agree that the bailouts have saved tens of thousands, if not, hundreds of thousands from unemployment. And even though those who would've become unemployed without such measures but don't realize it, should also be thankful for this bailout. 

The Obama Stimulus

With two months until his inauguration, Barack Obama appears to be a man with a plan. A huge economic stimulus package appears to be his plan to jump-start the economy out of this mess. The biggest question for many is whether such spending will ultimately return our economy to a period of expansion, or will it be wasted spending. 

Although there is much opposition by some Republicans, I think Obama's stimulus is a superb idea. By increased government expenditures, the actual GDP will surpass the potential GDP that would occur without such action. Furthermore, the plan will sure up consumer confidence, and help businesses push through tough times. And with more and more citizens getting laid off, this stimulus plan is sure to gain support in coming months. 

Citigroup Bailout... When Does it End?

While reading yet another article on a newly created bailout for another failing company, it forces me to think about when these bailouts will end, or whether they can even end shortly. Such talk is sure to make most people nervous, since we can't go on bailing out companies forever. According to Keynesian theories, one could argue that such spending through the bailout should raise our actual GDP far above what it actually would be. 

I just hope that these companies are able to recover, and that job losses will be minimized. 

Yes, Yes Sub-Prime Mortgages Were Risky...

As I was reading a New York Times article today about the plight of Citigroup's stock price because of their huge losses incurred by mortgage related securities, the usual left-wing Times  found the need to attack the profit hunger of Citigroup by saying, "Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses," referring to a meeting where the CEO took the word of Thomas G. Maheras, who oversaw trading, on the safety of the risks Citigroup was taking through its holdings of real estate securities. 

Furthermore, the article continues to blame top executives for the current downfall of the company, whether it be through its stock price or its earnings, by saying that the executives only cared about reaping higher profits and greatly overlooked the risks of the company's actions.

Well, I'd like to say that for one, the Times is talking about something that might have interested people back in September, but at this point I'm sick of hearing the media bash top executives in their quest for profits. When these men were hired, they were hired for their ability to make a company more profitable, and increase value of the company, not to eliminate risk and leave the company in stagnation. It appalls me that critics are stilling holding the drive for profit as harmful to the economy, when in reality such a motive is what drives the gears of the economy, and without it innovation would not occur. 

Moreover, I believe that very few people on Wall Street realized the magnitude of the risk that the companies were taking, thereby creating an environment where mortgage related securities were becoming the "hot asset" to own. Without so many defaults in these loans, perhaps all of these bets would've paid off, and our economy would continue growth, but for some reason or another this didn't occur, and now we're in a recession. Should we lay utter blame on the management of these companies? No, but I do recognize that perhaps they should have better seen what was coming with their holdings. 

GM Considers Bankruptcy... Boo hoo...

After pleading frenetically with the U.S. government for aid, the WSJ reports that the GM board has bankruptcy as an option. Much conjecture has put a GM bankruptcy as an absolute end to the company, since some speculate that people will be much less likely to buy a GM car, because with a bankruptcy filing the company will be much more apt to fully liquidate and close, thereby making service and parts for a GM car next to impossible.

While I realize this threat to GM, this is BS Free Economics, therefore I'm obligated to tell GM to get a grip on themselves, and not cry to the federal government for help. Economics aside, whatever happened to accountability? Since the GM managers have run the company into the ground, why should the expect to get specialized treatment to avoid bankruptcy and save the company? The executives and board of GM need to declare bankruptcy, since in these dire straits it's, what I believe, their most viable option.

And side-stepping consumer doubts that a bankruptcy will most likely cause? How about making good cars for a change, that people like, and sell them effectively using skillfully created marketing campaigns that cause consumers to exercise sovereignty with their wallets to decide whether GM stays in business or not. 

I believe that with better management, GM could survive a Chapter 11 Bankruptcy filing, and thrive once again, but it will take much work, and change in leadership and strategies. 

Gasoline Prices Under Two Dollars...

With Gasoline prices falling near two dollars for the first time since March 2005, and with prices not falling as fast in the past thirty years, I think we actually may have a problem. While gas was peaking out, many truly began to realize how important cutting down gasoline consumption is for ourselves, and how if we didn't, we would all go bankrupt do to its high price.

Now that prices are so low, I think people have probably forgotten the horrors of absurdly high gas prices. This is quite faulty, since prices are bound to go up again sometime in next 12-24 months, due to the dramatic increase in demand for the resource in developing nations, along with our own surging population in America. With such obvious problems on the horizon, I'm happy men like Obama realize the need for investment in alternative energies. Furthermore, with such investment, we can stop giving unreasonable amounts of power to OPEC, which, in my opinion, couldn't careless about us. I say let's go out and invest in alternative energies, and innovate as Americans have been doing for the past 230 sum odd years. 

We, as a nation, must realize the elasticity of gas prices, especially upward, and with this knowledge we must take initiative to protect our nation from spikes in such prices that will hurt our economy, our citizens, and our nation. 

Citigroup to Cut 50,000 Jobs and the Exceedingly Useful G-20 (not)

I redact any comments that state that our economy is fine. With Citigroup cutting so many jobs, we must be heading into the next Great Depression! I'm definitely NOT serious. Ha! I crack myself up sometimes.

In all candor, this is yet another confirmation that we are, in fact, in an economic recession. No reason to bury your head in periodicals and glue your eyes to every nerdy economist that talks nervously on Bloomberg, because I will declare (actually declaring) that we are, unquestionably, in a recession. While I'm claiming this is a lone indicator of a recession, but clearly such a massive layoff shows more proof that we are in a recession.

Aside from that, I was also glad to see that the 20 heads of state were able to see what I'm seeing, and unanimously agree that the global economy is underperforming. However, I would have liked to see more promises of legitimate actions in order to improve the situation. After reading the statement, it sounded as if the leaders all sat around and said, "Well clearly the world isn't doing well economically, let's pinky swear to make it better." The majority of the statement basically said that measures must be taken, but nothing specific enough to really convince me that they actually accomplished something substantial. 

We can't really expect that from world leaders, can we?

Goldman Executives Turn Down Bonuses... What?

As a picked up the Wall Street Journal this morning, I was met with a headline that appeared utterly ridiculous, and farcical in my eyes. "Goldman Chiefs Give Up Bonuses," under it also stating,  "Seven Top Executives to Forgo Millions in 2008; Move Could Pressure Other Firms." I nearly fell out of my seat reading such a headline. After I peeked outside of my kitchen window, seeing if pigs were flying, I began to ponder about what I had just read. With such economic turmoil occurring in our nation, I guess that it was a magnanimous thing for them to do. I mean as hundreds of thousands of people lose their jobs, it's quite refreshing to see big-whig executives turning down bonuses, which I have historically been quite wanted.

However, they are in no way obligated to do such a thing, and regardless of what is occurring in the grand scheme of things, it seems as if they are simply trying to help their company through hard times, by helping cut down on expenditures, even if it means they will feel it immediately through their paychecks. Moreover, without their bonuses, perhaps Goldman Sachs will be able to better utilize that cash in the future, and increase their bottom-line, thus propelling the company speedily out of this rough patch. With this, they could arguably make even more money, while also helping the company. 

In short, I can truly say that I'm much more apt to purchase Goldman stock with such an announcement, with such great gentlemen at the top of the firm. 

Is it a Recession? If it looks like a duck, and it sounds like a duck...

I have been watching Bloomberg TV quite a bit recently, and it makes me laugh hysterically when I see some nerdy-looking guy with glasses come on from the recession-dating committee, NBER (National Bureau of Economic Research) and he says they haven't officially declared yet that the country is in a recession. One member of the committee, econmist Jeff Frankel, has said that he personally believes that there is one, but that the committee hasn't agreed upon when it has started, thus disallowing them from offically calling it a recession.

Well, with all of this conjecture, it just makes me sit here and think what has this world come to? Everyone needs to pull their heads out of their a***s and think for a second. Some people think that there surely isn't a recession, while others believe we're beginning the second Great Depression. Neither of these are true in my opinion, since the precipitous drop off of the stock market, coupled with many other weak numbers, whether it's unemployment, construction or what not, undoubtedly show a recession in our nation. Moreover, I am unequivocally sure that our country hasn't hit a second Great Depression for a number of reasons. The first being that while our current unemployment is quite dismal at 6.5%, unemployment during the Great Depression reached 25%. Additionally, with these government bailout plans, regardless of my personal feelings toward them , allow companies to stay a tad more afloat, thus thwarting any possibility of anything close to the magnitude of the Great Depression from occurring.

In summary, I recommend all of you not to get sucked into all of this asinine talk of determing the beginning of the recession in order to call it a recession, and realize that although we are not in the best of times, this unquestionably isn't the worst it has been economically speaking.

Bank Bailout, Auto Bailout, What Next?

After hearing about the decision by Treasury Department to bailout Detroit, I began to ponder the results of such an action. Awarding companies, who I believe, have managed their companies terribly, and "awarding" them with taxpayer dollars doesn't seem sensible. Although I do see how this does in fact benefit the multitude of workers who would have lost their jobs otherwise, I doubt the correctness of such an action.

For years, the world has witnessed Toyota, Honda and other Asian auto manufacturers gain the upper hand over their American counterparts, yet GM, Ford, and Chrysler failed to alter change their business models. With gasoline prices steadily on the rise for some time now, one must have expected Detroit to have responded to such pressures by making a better effort to make more fuel efficient cars, and dramatically cut production of so-called "gas guzzlers." Shockingly, or not, this didn't occur, and due to this, Detroit has been going bankrupt. 

Additionally, most American car brands, in my opinion, have a less exotic, less desirable, less reliable image than those of foreign manufacturers, and have needed an image boost for a while. They needed, and are still in need of better marketing, and manufacturing practices in order to fix this troubles, in order to improve the marketability of their cars. 

As Detroit receives this bailout plan, I truly hope they put this "second-chance" to good use, as Obama is calling for more environmentally friendliness in the auto industry, and better emissions standards, along with more desirable cars that people ACTUALLY want to buy. 

Moreover, what other bailout plans does our federal government wish to enact? Only so many dollars can be used until it's too much. Of course the U.S. Government can't go bankrupt, through easily obtained capital by the means of savings bonds, there is a point where our government must learn to cut back, and begin to chip away at the national debt, in case a large amount of capital is needed to deal with whatever the future may hold.