Paulson Changes Course, Again

Yesterday, Hank Paulson, the Treasury Secretary, announced that the US government is no longer planning to buy toxic assets from trouble financial institutions, and instead, the money allocated to the TARP will only be used for the re-capitalization of various firms.  This move basically amounts to a decision only to treat symptoms of the disease rather than to cure the underlying ailment.  The market realized this and reacted on Wednesday.  Although equities rebounded today, problems will persist into the future.  The key issue here is that regulators need to take an approach that recognizes both short-term and long-term risks, which is what they were doing until Wednesday's announcement.  

While the banking system is still in desperate need of liquidity, there will come a time when these bad loans need to be taken off the books.  Otherwise, the long-term solvency of many firms will remain in doubt, and banks realize this danger: the gradual decline in LIBOR rates over the past 23 days has reversed itself as institutions realized that they may now need to raise greater amounts of capital in order to insure against yet another round of write-downs now that the implicit floor on these assets has been removed.  Paulson's original plan was by no means perfect, but it was beginning to work.  It was also starting to reassure lenders because they had slowly regained confidence that they could continue making loans without threatening their capital-asset ratios.  This unexpected announcement has engendered another round of uncertainty that will likely have continued negative effects in credit markets.  Clearly, we have not seen the end of this downturn, but in order to reverse it we need to see steady and clear signals from government leaders.  Sudden changes in course will only increase confusion and economic pain.     

$50 vs $500 Oil

With news coming out today that US oil consumption is expected to decline more than at any time since 1980, I can't help but expect the price of oil to drop to around $45 - 50 over the next few months (it closed around $56 today). That is great news for many Americans who are struggling to make ends meet or who have just lost their jobs. Then I read articles like this one by Matt Simmons, Co-founder of Simmons and Co, and suddenly I can't help but hope that the Obama administration is willing to invest in alternative energy, despite the sudden low cost of oil.

It is probably worth noting that this is the same man who predicted oil would top $100 back in 2005 when it was at the low price of $58 per barrel. Now he sees recent declines in oil prices as nothing more than a mask for the real underlying problems. Here's his latest prediction:

Now he sees it climbing to $200, $300, or higher. "There really is no roof on oil prices at this point," he says.

While demand growth in the United States has slowed recently due to higher prices, the EIA projects that China and India will more than pick up the slack. And the IEA recently warned that high prices won't slow demand growth in emerging economies. If demand wants to go north of 100 million barrels a day and supply can't break 90 million (or drops below 80 million, as Simmons believes will happen within five years), it will be a price squeeze felt around the world. The peak-oil crowd will be able to declare victory - but nobody will be celebrating.

Obviously market conditions have worsened significantly since September when this article was written (when oil was ~$120), Mr. Simmons' reasoning that growth would be slowed due to high prices should be changed to include the global recession. However he and many other energy experts seem to think that oil will reach new highs once we've exited this tumultuous time. So in other words, once the markets have recovered from the credit crisis, we may see oil prices hit $200+ / barrell.

The good news is that the Chevy Volt hits dealerships near you in 2010.

The Job Market 2009

This video hits a little too close to home:

Financial Doom.....Made Easy!!!!!

Michael Lewis has made a career out of penning books that explore deep into cultures which have their finer details shrouded in mystery.

In The Blind Side, Lewis explores the recruitment of left tackle Michael Oher to Ole Miss (currently plays there and will be a high NFL draft pick). The odd thing about his recruitment is that some prominent Ole Miss boosters took this kid in after he was kicked to the curb by his family. The heart of the book expresses the difficulty in outsiders believing that Oher was welcomed into the booster's home in an act of altruism, or due to dreams of one day being able to sway him to play football at Ole Miss.

In Moneyball, Lewis explores the process in which Billy Beane, GM of the Oakland Athletics, is able to use statistics that he calls Sabermetrics to field a consistent playoff contender despite having near the lowest payroll year in and year out.

However, Lewis' opus is likely Liar's Poker, a look inside the subculture of Wall Street in the 1980's that previously had not left the walls of 85 Broad St. (GS) or 1585 Broadway (MS). This masterfully written article is somewhat of an update to that book, as well as a look at how America's financial institutions have fallen like houses of cards throughout the course of this year. It might take you a half hour, but I can assure you it will be the most well written piece you will read all month.

Enjoy.

Sarah Palin Has Entered the Tyson Zone

Did you hear the one about Sarah Palin not knowing that Africa is a continent? What about the one that Trig is really Bristol's child? Or the one about her being pregnant again?


OK the second one was a rumor in the liberal blogosphere and I made that last one up, but if you believed any of the above statements it's because Sarah Palin has officially entered the “Tyson Zone” (a phrase describing the point at which the public will believe any information about a person as the gospel truth, coined by Bill Simmons about the time when you'd believe absolutely everything written about Mike Tyson).


To counter act this effect, the “good” folks over at RedState have begun a red-scare of their own known as “Operation Leper” with the sole intent of exposing and tracking any rogue McCain campaign staffers who dare speak ill of the dead Sarah Palin (referred to as “classless cowards” by Michelle Malkin). Apparently the video below is what sparked the controversy:



This whole thing reeks of CYA on the part of McCain staffers, but the unfortunate truth is that if any of it is true, it says more about John McCain than Sarah Palin. Plus, no matter what you believe about Sarah Palin (my thoughts here), it may be worth noting that she is currently the #1 conservative choice for the Presidency in 2012 and that if she is still the governor of Alaska in four years, she will have more likely than not crossed the experience threshold that she (unlike Obama) was unable to cross in the eyes of the public this year.


So with all that in mind, let me be the first to officially ask the question, do you think Sarah Palin will be on the Presidential ticket in 2012?

Where Were You When...?

Just in case you didn't have enough time to grab a copy of your local newspaper yesterday, click on the picture for a site which conveniently compiled all the headlines from newspapers all over the country (downloading the headline from your own local paper is the greener way to remember Obama's victory). Also, here are some of the headlines from around the world.

No matter what your political inclinations are, we all witnessed a truly historic moment on Tuesday. Inevitably we will disagree with each other about where Barack H. Obama's Presidency took our nation, but let's at least take a few moments to appreciate how far we've come as a nation.

How Obama Won

Pretty simple really:

Election Day Shenanigans

Ezra Klein takes a hilarious look at the nerd vote:




McSweeney's uncovers a few rejected Robocalls:

"Hello. I'm calling for John McCain and the RNC because you need to know that Barack Obama always Super-Sizes at McDonald's but then orders—get this—a Diet Coke. Who do you think you're kidding, Barack? Cutting calories in one part of your meal doesn't cut the calories for all of it. Just like your tax plan. Washington's spending has gotten obese with earmarks, and one Diet Coke isn't going to fix it. Barack the wealth spender is washing down his Big Macs with some 'pinko' Kool-Aid. Not the leader America needs."

Here's one explanation for why Obama may still be trailing John McCain by such a wide margin in Texas; 23% of us still think he is a Muslim (and by "us" I am of course referring to all Texans).


And finally, no matter who wins tonight Susan Nielson thinks we should all (for the sake of unity) take a minute and privately admit to ourselves that we may have in fact been wrong about our choice for President. Why? Because an Obama Presidency will inevitably fail to live up to all the hype and a McCain victory will almost certainly not be just four more years of George W Bush.

You may disagree with me on this, but I tend to think that there are entirely too many issues used each election cycle to pit us against each other and score political points rather than reflect a candidate's intent or ability to garner support around a specific platform. This is not to say that there aren't legitimate concerns regarding both candidates policies (there are), however I adamantly believe that no matter which side of the proverbial aisle you may find yourself on, today represents one of the greatest expressions of a free society, and is an example of how great, despite all our many flaws, this nation truly is.

Thanks and God Bless.

Guess Who's Getting Married

Saw this engagement announcement in the Sunday edition of the Dallas Morning News , and thought I'd pass it along. Pretty good looking couple if you ask me.

“This is not Vietnam, this is [blogging]. There are rules!”

If someone actually wrote down the rules of blogging, I’m sure “Think before you type” would probably be rule #2, right behind “be funny” or “be controversial”. Though I've only been at this since July, you would think that I would have learned the basics of blogging by now and that these rules would act as a quality filter of sorts between the thoughts that enter my brain and what finds its way out onto the net. However you'd be wrong.

It turns out that sometimes rule #2 still eludes me, though I have no doubt that many of you would say I still haven’t learned rule #1 either.

What Happened?

Justin, a fellow blogger, Aggie, and acquaintance, linked to a Rush Limbaugh video clip last week that has stirred up quite an impassioned debate amongst his loyal readership (of which I include myself). In what I can only describe as a rushed (mistake #1) attempt at sarcasm (#2), I stepped in to act as a referee (#3) in a conservative vs. liberal debate about the election via the comment section of the post (#4).

With this many mistakes, I rightly received a bit of blowback (things get interesting near the bottom)...

Lesson Learned

To paraphrase the quote for which this site was named, "we are all blinded by our own inadequacies." Therefore the majority of what finds its way onto this site is nothing more than an attempt at better understanding various issues that are important to me. Part of that process will inevitably lead to a flawed understanding of the truth, which is why I originally wrote that opinions are very overrated (i.e. even mine). Rightly or wrongly, you can almost always expect that an opinion will be forcefully defended against an attack, and are at least somewhat suspect to scrutiny. I am as guilty of this as anybody, which is why occasionally I'll be forced to write about my own flaws here on this site.

To quote Red Auberbach, "The only correct actions are those that demand no explanation and no apology." Consider it a lesson learned.