patrick.net

I got some critical insights from this thread which will be lifelong learning:

1. Wall street pigmen depends on continued high valuation of assets like home. Low valuation means low bonus for wall street pigmen.

2. Wall street pigmen needs a continuous supply of "buy and hold" suckers so that they can drain wealth from warm bodies generating wealth from their physical and intellectual labor.

3. baby boomers will continue intergenerational wealth transfer via tax policies and bailouts. Barrack Obama and Alan Greenspan are baby boomers.

by Lee Adler

There are 2 points I’d like to make about today’s economic data. The Bureau of Labor BS released the official unemployment rate this morning. It was 7.6%, which is bad enough. The first point I want to make is that what they don’t emphasize is that the real unemployment rate is 15.4%. This rate includes discouraged workers and those working part time because they cannot find full time work.

Click to enlarge
This is a statistic that the Bureau of Labor BS has kept since 1994. Only recently, since the economy has begun to tank and bloggers and non-mainstream publishers like yours truly have been featuring this data point, has the mainstream media picked up on this number. It’s usually down around the 4th paragraph of page 2 of the article. This is by far the worst reading in this indicator since they began tabulating it in 1994. The next worst reading was 12.8% at the inception of the data in January 1994. January is always the weakest month of the year, but this month’s increase of 1.9% was by far the worst on record.

Approaching 65, got in an IO loan and HELOC'd out, obviously she doesn't have a brain for entrepreneurship.

A alleged startup VC fund partner doesn't even have enough money to buy her home free and clear? That sounds very fishy to me. It seems like she is providing marketing consultancy service, man, that will scare away enough clients. And she is a PhD.

PHD=Permanent Head Damage, I am glad I escaped that program early enough to avoid a permanent damage.

http://earth911.com/blog/author/fhardaway/

has a picture of Francine Hardaway

Francine Hardaway

Working with startup technology companies, entrepreneurs, and social causes. Angel investor, business coach, mom, yoga practitioner, blogger, golden retriever fan, social media junkie. Connected woman.

http://earth911.com/team/content-and-public-relations/

Francine Hardaway, Ph.D.
Social Media Editor
Francine is an experienced technology marketing strategist, a former Entrepreneurial Fellow at the Berger Center of the Eller School of Business, University of Arizona and a former Advisory Board of the Medical Informatics Program at Arizona School of Health Sciences. She is currently a partner in Stealthmode Partners, and previously built the largest marketing/public relations firm in Phoenix. Before starting Stealthmode Partners, Francine was VP of Marketing for Innovative Environmental Products.

Francine’s interest in the environment goes back to the ’70s when she built a geodesic dome home with solar heating, cooked in a solar oven and grew an organic garden. She is in charge of all social media outreach for Earth911.com, and also uses her experience writing and blogging to provide content for Earth911.com.

I guess I should be impressed by her credentials, as my own can't possibly compare. Then again, I have an OK sense of judgment, and didn't act like an Utter Tool and buy into this mess. What's her excuse?

@TOB lmao...she should go back to flipping husbands.

PHD=Permanent Head Damage, I am glad I escaped that program early enough to avoid a permanent damage.

OO, congrats!

Shes also got all the ideological accessories: environmentalism, 3rd world adoption (like Madonna!), and my favorite: YOGA Expert! God this woman is the spokesperson for BITCH.

You know, I despise New Age Smugism. ;)

@TOB,
Right--it's a complete mindf*ck, but I see other people "get it" too. A lot of their Yuppie spawn are the same way--good luck pointing out their self-delusion. I hope reality hits hard with these types and their "credentials". If one could compare their real contributions over the past few decades, I'm sure it's fraught with self-serving assumptions and poor strategy. Any wonder why our economy circles the drain? I'm sure they played their part. Anyway, I've just heard too much crap from them.

"I happen to practice non-attachment to material things"
Oh good--may you get your wish.

OO,

supposedly Mark Twain said something like "don't let school interfere with your education", but I didn't find that quote attributed to him on Google. Did find this one, though:

"Education consists mainly in what we have unlearned"

Housing is the biggest expense in nearly everyone’s life

I thought that would be tax! :(

Another gem from Francine Hardaway:

...
Howard Lindzon can’t get a bank charter, and neither can I. We were both part of separate groups of investors trying to start new community banks last year. But the government has frozen the startup bank process in Arizona, one of the worst state economies in the nation. Both Howard and I work with entrepreneurs, not real estate people, and we’re not dumb. We know that now’s the best time to start a bank. But we can’t.
....

(emphasis added)

401K SCAM ALERT : Target Date Fund

Target-date retirement funds were supposed to be the greatest thing since sliced bread. Then 2008 happened. And all of the 264 target-date funds sold by the 39 mutual fund firms that market them performed poorly and contrary to expectations.

Indeed, the most conservative target-date retirement funds - those designed to produce income - fell on average 17% in 2008 and the riskiest target date retirement funds - designed for those retiring in 2055 - fell on average a whopping 39.8%, according to a recent report from Ibbotson Associates, a Morningstar company.

Not a single target-date fund had a positive return, according to Tom Idzorek, Ibbotson's director of research and author of the report.

Not much has been heard from Phil Gramm since he called us a "nation of whiners" about seven months ago. That is, before the National Bureau of Economic Research determined that our collective "mental recession" had some physical properties as well.

The "see no evil" days of prominent Republicans like Gramm seem to be over now that the Dems are in power. They can go back to talking about small government, reducing federal spending, and fighting pork. If only they actually believed it!

I've even heard that Fox is starting to do some actual reporting again. Rush Limbaugh and Newt Gingrich have drastically changed their views regarding the scope of the crisis. As far as admitting that the American economy is somehow less than absolute perfection, a green light was apparently issued sometime around January 20th. If they play their cards right, the GOP could easily take the White House again in 2012, at which time they can feel comfortable about complete abandonment of their stated principles once again, switching their attention to 24/7 damage control.

Ain't the two party system grand?

Perma, I agree. The inherent structural deficiencies of the 2-party system is a large part of the reason that US politics has always been a mess.

This woman is complaining that she cannot get a charter approved to start a BANK! I shudder at the prospect.

The market rallied principally because the government is about to transfer one trillion dollars from the taxpayers to corporate America. Additionally, it rallied because it is becoming obvious that no bankers will lose bonuses, let alone go to jail.

You want a real rally? Just have the government hand over fifty trillion dollars to each company on the S&P 500. Wow! That would rally make the index go up.

Kristin Munday from Kentwood Place (1203 Water Lily Way / San Jose, CA 95129), (408) 973-1326 called me today and offered free closing (about $10,500) if I commit to book Phase One. I am concerned that after purchasing this 850K townhouse, we will be ZONED OUT of Monta Vista High School (which will be a disaster).

Another reason why schools should be privatized. I doubt school choices can ever be guaranteed.

BTW, private schools are better simply because:

1) they can expel bad students
2) they can teach religions

MediaNews Group Inc., which previously asked workers at 50 California newspapers including the San Jose Mercury News to take one-week unpaid leaves, is now putting employees on furlough at its papers in at least five more states.

Unpaid leaves announced or agreed to Friday apply to newspapers in Texas, New Mexico, Minnesota, Massachusetts and New Hampshire. In most cases, the furloughs are to be taken by the end of March.

"There's been a deeper recession than what we've ever seen," said Andrew Mick, president of New England Newspapers Inc., a MediaNews unit that ordered unpaid leaves Friday. "We found it necessary to do something in the short term to go through our toughest months of the year, which are January through March."

Silicon Valley Community Foundation lays off 14 percent of its workforce
By Sandra Gonzales, Mercury News

Hit by the economic crisis, Silicon Valley Community Foundation is laying off 14 percent of its workforce and closing its San Jose office.

"This was an extremely difficult decision, necessitated by the unprecedented economic environment," said Emmett D. Carson, chief executive officer of the foundation. "At the same time, we regret the impact this action will have on our colleagues and their families."

A statement on the foundation's website said the cuts were necessary due to a 22 percent drop in its total assets from $1.9 billion to $1.5 billion in the past 12 months, a decline triggered by the stock market plunge. In addition, although the foundation raised $190 million in donations, that represented a 36 percent drop from the previous year.

The foundation, which has 100 employees, will keep an office in San Mateo and remained headquartered in Mountain View.

The announcement comes two years after the merger of the Community Foundation Silicon Valley and the Peninsula Community Foundation.

Despite the cuts, Carson said the foundation plans to issue $8 million in grants from its endowments this year, in addition to the grants provided by the donors. In 2007, the foundation issued $174 million through donor advised funds and $8 million from its endowments

The statement noted that the foundation already had tried to soften the economic blow by freezing salaries and new hires, slashing retirement benefits in half, and asking staff to pay higher medical insurance costs.

This tax credit is being compared to the 1975 tax credit for homebuyers. However in 1975 the tax credit was for new homes only, and was intended to reduce the inventory of new homes, and help put residential construction workers back to work.
…
In this case the tax credit is for both existing and new homes. This is more of an incentive to get people to move as opposed to putting people back to work. Whereas there were few excess units in 1975 (except excess new home inventory), there are far too many excess units today.

The sponsors and supporters of this tax credit believe this will support house prices - a mistake because this will mostly just shuffle homeowners between homes, and not reduce the excess supply.
…
The key problem for housing is prices are too high. How does this tax credit help reduce prices? Why are we trying to artificially increase the turnover rate? And why are we targeting a tax credit at higher income individuals?

This tax credit seems ill-conceived, and probably should be removed from the stimulus package. No one has adequately explained how this helps “fix housing first”.

PermaRenter,

Monte Vista is Monte VIsta.
A 850K townhome in San Jose is 850K townhome in San Jose.

If you wanna buy your kids' way into MonteVista, you can do that by securing a rental in the "zone". If the "zone" is rezoned, then you can just move into a different rental.

If instead to have a place to reside you wanna lockin a 850K townhome in the municipality of San Jose, with all the immobility and financial risk,
go for it.

Or if you wanna speculate its a good opportunity for capital preservation or even asset appreciation, even with the HOA fees and property taxes, go for it.

But if you're gonna worry all the time about the zones this, zones that, well it's not the only way to buy your way into that high school.

Probably Monte Vista is a Basic Aid jurisdiction, meaning that they'll be more on their own than other jurisdictions as state funding is reduced. That means school boards will have to look carefully at the enrollments and will probably exercise wide discretion about how to maintain their programs. School boards are elected by voters (citizens); you might want to get very involved in local politics.

Target-date retirement funds were supposed to be the greatest thing since sliced bread

When are people going to wake up? Amazing how so many otherwise intelligent people are so eager to put their savings into financial instruments whose primary purpose is to generate fees, loads, and sales related charges to enrich the seller. Why can't people see that if you give X per month for two years, and the balance after that two years is less than 24X, they have lost money? Or if the CD rates for 24 months average 5% APR while you instead put $10k in someone's "fund," you need to have a balance of at least net $11k at the end of two years to beat the insured CD? (Actually, slightly more, but I'm keeping the math simple).

People must think that telling the babe at the cocktail party that you have an "IRA at Vanguard," rather than "I have my IRA in laddered CD's at various Credit Unions," gives a guy a better chance of getting his glans in the crevice. It certainly ain't the math.

Deflation: When low prices buy high anxiety
In a weak economy, prices may drop, but so do wages and job security.
By David Pierson, February 8, 2009

Wedding photographer Pogos Kuregyan has lowered his prices.

FedEx aircraft inspector Dan Wallace is dealing with a salary cut and a retirement fund that's lost half its value.

Though prices are down for food, housing, energy and clothing, they can't buy much, because they're living on less.

After years of worrying about inflation, some economists fear the opposite could soon happen: deflation, an extended period of falling prices that indicates the economy is in a backward spiral.

Millions of Americans have less money coming in than before the recession, and their net worth has also shrunk. That means less to spend on food, clothes, gasoline, cars and shelter. And despite discounts at the store and the car dealership, a lowering of rents and a near-historic drop in the price of houses, people just aren't buying much.

For Kuregyan, owner of Unique Digital Media, a photography studio in Glendale, the trouble started when he noticed rivals advertising online packages hundreds of dollars cheaper than his.

His business began to slow. At first, Kuregyan did what many business owners have done in this economy: He offered discounts and extra services instead of formally lowering his prices.

But that didn't work.

Then he realized that he would need to borrow money from friends to make his December rent payment. Desperate for customers, Kuregyan caved and reduced the cost of his packages by $200 to bring him more in line with his competitors.

"It's extremely dangerous," the 24-year-old proprietor said. "If I start dropping prices and they do it too, then I do it again, then it all becomes fruitless."

The pain of Kuregyan's diminishing income is spreading to other businesses in the community.

It hurts the neighboring restaurants on Brand Boulevard where he often took his girlfriend out to dinner but can no longer afford to.

It means a sale lost for the electronics store where Kuregyan was going to buy a flat-screen television to display his photographs in his storefront window.

And it results in shelved plans to spend thousands of dollars to advertise with local TV stations and in the Pacific Theatres at the nearby Americana mall.

Deflation debate

This is the kind of downward spiral that worries policymakers.

Trying to get credit flowing more freely, the Federal Reserve has dropped interest rates to historic lows. President Obama has been emphasizing the urgency of a massive stimulus package to get consumers and businesses spending again.

But economists and politicians alike are divided about what to do. Taken as a whole, prices in the U.S. economy increased last year, but only a tiny bit. Inflation registered only 0.1% in 2008, the smallest increase in prices since 1954.

Consumer spending declined in December for a record sixth straight month and rose 3.6% for the year, its lowest annual gain since 1961. The economy lost 3.6 million jobs since the recession started in December 2007.

Yet experts debate whether all this indicates that the economy will slide into full-blown deflation, defined as a prolonged period of falling prices.

Skeptics say the federal government will inject enough money into the economy to prevent it. They say deflation has largely been relegated to apparel and energy prices. Therefore it's not wides- pread enough to raise great concern.

"It's a serious situation but we're a long way from that," said Christopher Rupkey, an economist at Bank of Tokyo-Mitsubishi in New York. "Seeing reduction in wages is good anecdotal evidence, but everyone would have to experience reduction in wages before we're in deflation."

But others argue that today's declines could spread -- and stay with us.

"Deflation will become more pervasive as we make our way through the year," said Mark Zandi, chief economist at Moody's Economy.com. "The downturn is intensifying, and businesses are under increasing pressure to cut prices to maintain some sales."

The fear about this recession rests on the severity of the real estate crash and credit crunch, which translates into pain for any homeowner who sank savings into a house only to see property values plummet. Those people are facing a cash crunch of their own.

There may even be signs that -- as they did during and after the Great Depression of the 1930s -- consumers will change the way they manage money, saving more and spending considerably less. Although few would argue that this is not a more conservative and ultimately safer way for American families to live, it could push deflationary trends in the economy even further.

Similar conditions contributed to Japan's deflationary period in the 1990s, known as the Lost Decade.

Initially, lower prices might seem like a boon to consumers. But price reductions can lead to layoffs, leaving more people without money to spend.

Scared to spend

Newlyweds Evan and Beth Lewis were surprised recently to see so many sales at the Grove shopping center in the Fairfax District. The two headed into Sur la Table, where there were items up to 75% off, and picked out pots and pans for their new apartment.

But they're not going all out in furnishing the place, just the bare essentials until they can save enough to buy more.

The pair work at box offices in separate theaters -- jobs they worry could be eliminated as customers continue to reduce discretionary spending. In a roundabout way, they said, their security won't improve until they see prices rebound.

"It's bad to see so many sales after Christmas because it means the economy is very poor," Evan said. "You know it's not a long-term solution."

Dan Wallace has a job, but his pay was slashed as his employer cut costs.

"After 23 years of sweat on the job, I moved up and got to that point where I thought I could have a comfortable pension, and then it all turned south," said Wallace, an aircraft inspector for FedEx Corp. The company cut wages 5% for 36,000 salaried employees in December, Wallace among them.

Future's less bright

Wallace, 51, said the pay cut, coupled with the loss of yearly bonuses handed out when the company made sizable profits, took about $8,000 out of his annual income. His wife, an executive with Bank of America Corp., fears her job is in jeopardy. If she were laid off, Wallace said, the Santa Clarita couple could not make their mortgage payments.

They expect to have less to spend in retirement as well. Thanks to the stock market crash, the value of Wallace's 401(k) has decreased by half. His wife has seen hers drop 40%. Instead of retiring with a $1-million nest egg, the pair now expect their savings to be worth $400,000.

As the Wallaces learn to live with fewer resources, they, like so many others, will have to cut back. They'll be spending less on necessities such as food and home repairs, as well as discretionary items such as vacations and dinners out.

That means less money coming into the businesses they usually patronize, which will in turn have to rethink their budgets.

For Kuregyan, the photographer, even a coffee at Starbucks has become a luxury.

He treats himself to an espresso only about once a week. He'll often wait until he collects enough coins from customers paying with cash as a self-imposed saving method.

"I'm hoping to last as long as I can," Kuregyan said. "But it feels more like a hobby than a job because I'm not making enough money.

"The economy is just too tough."

"In the long run, we are all dead," John Maynard Keynes once quipped. An influential British economist, Keynes used the line to dodge the problematic long-term implications of his policy proposals. His analysis of the Great Depression redefined economics in the 1930s and asserted that increased government spending during a downturn could revive the economy.

President Barack Obama and congressional Democrats (very few of whom likely have read Keynes's 1936 book "The General Theory of Employment, Interest and Money") have dug up the dead economist's convenient justification for deficit spending in defense of their bloated stimulus legislation. But none ask the most important question: Was Keynes right?

Permarenter,

Of course Keynes is right we're all dead in the long run.

But he never had any kids (or grandkids) to worry over the futures of (nor to figure how to buy-in-to Monta Vista).

Madoff victim in Cupertino

DAGNY BORGLUM TRUSTEE FOR THE G DONALD & DAGNY BORGLUM SURVIVORS TRUST UAD 5/6/87 23500 CRISTO REY DR APT 115D CUPERTINO, CA 95014

LORRAINE JOHNSON 11650 UPLAND WAY CUPERTINO, CA 95014 05152

For a list of Madoff victims visit www.coloradoan.com/madofflist

You Try to Live on 500K in This Town
http://www.nytimes.com/2009/02/08/fashion/08halfmill.html?_r=2&ref=business

Did anyone read about John Robbins, the Baskin-Robbins heir in Santa Cruz are who lost 90% of his net worth on Madoff? He wrote an appeal that was published in the local papers for donations. Now this is a guy who owns 18 acres in Soquel for his house/organic farm. One wonders if he's ever done actual work?

Santa Cruz Victims:

CLIFFORD A BERNIE TRUSTEE OF THE CLIFFORD A BERNIE IRREVOCABLE TST DTD 12/9/2002 205 SHERMAN STREET SANTA CRUZ, CA 95060

MICHAEL JACOBS 413 WESTERN DRIVE #2 SANTA CRUZ, CA 95060 03080

MICHAEL M JACOBS 413 WESTERN DRIVE #2 SANTA CRUZ, CA 95060

MITCHELL GOLDSTEIN AND CARROLL LAFLEUR TSTEES UNIVERSAL TST DTD 1/04/01 250 DUFOUR STREET SANTA CRUZ, CA 95060

Apparently John Robbins wrote a pretty good book called the food revolution.

I have not read it, but if I like it, I may donate.

http://www.rediff.com/money/2009/feb/06senators-seek-h-1b-hiring-ban.htm

Too bad they do not know that the TARP bangers have recruited Indian Bodyshops who have unlimited supply of L1 (forget H1) and their wives can work without any approval as well on L2. Who needs H1 - go ahead ban it. The Indian bodyshops will still load L1 and L2 holders in there, which is a piece of cake.

Perhaps Robbins wrote a good book, so maybe he's smart enough. If I were about to hand off $1M+ to a broker with a "special" investment scheme, I just might:
1. Look beyond the sales pitch and wonder why their investment promises higher than average returns.
2. Get third party's advice from somebody who is a good independent expert.
or...
3. Simply buy into the hype and throw my money at them.

I guess this is why I don't have much sympathy for the Madoff "victims". They're frickin' adults, so they should have done their work. I forget the guy's name, but he started warning the SEC on Madoff a decade ago. When he looked at Madoff's scheme, he said it took him all of 5 minutes to determine it was bogus. But nobody listened to this guy--why?

I am not generally sympathetic towards Madoff victims. If I donate because I like someone's book or movie or something, I am just sympathetic towards his specific circumstances because his words touched me. Other than that, I think most Madoff victims are just not careful, I won't say that they deserve it because nobody deserves a scumbag, but shit happens.

I see Patrick has posted a news link today which discusses "hungover country". Does that mean the US is now divided between hungover country and flyover country? ;)

Does that mean the US is now divided between hungover country and flyover country?

I guess so. At least the "flyover" country gets a good laugh. People in bubblicious areas are getting real headache.

Phx is both flyover and hungover

PHX has direct international flights to LHR. Is it really flyover? :)

But nobody listened to this guy–why?

I'm actually somewhat sympathetic to the SEC's position; which is that they don't regulate hedge funds much because they feel that would legitimize them.

What everyone (especially the stupid rich) seems to have forgotten is that hedge funds have the potential to be very, very risky. As in total losses risky. Ergo, its a case of caveat emptor.

A friend that works for a big financial services company in NYC told me that his organization refused to allow clients to invest with Madoff. Too many red flags. So I'm doubly-unsympathetic as apparently everyone knew he was up to no good.

Personally; given his status as a market-maker; I think many were fooled into thinking he was front-running and wanted in on it. Unfortunately they were right it was a con; but wrong about which one!

Loved this article:

http://www.bloomberg.com/apps/news?pid=20601088&sid=a8mdg7z0u7Dw

...but can anyone spot the error in this paragraph?

"By the time the crash ends, Talbott predicts, homeowners will have lost as much as $10 trillion, with investors and banks worldwide losing almost $2 trillion. And just as the U.S. starts getting over a prolonged recession, the first big wave of baby boomers will retire, depriving the economy of their productivity (and high consumption), he says."