The Economy Thread

WINE TALK
21

I am 3/4 of the way through a book that I find very interesting. “The ascent of Money”.

I have NO background in economy or any of its many family members. But what I see is that ALL wealth is based on bubbles. The bubble has burst, and is still bursting. A new bubble will be created. The stimulous package is, in my view, going to work to create that next bubble.

The shortest bubble ever, from what I have seen, and the one that did the least FOR the masses and did the MOST to crush the masses, was the “Lets invade Iraq” bubble. A small, select group of “people” made tons of money, while the rest of the world got nuked.

I think that the very best person “available” was elected president. I very much hope that his plans work. I have my doubts. I do believe there will be wild to almost wild swing in the stock market, and in the end, it will work very well, or fail miserably. If it fails, the world is in for a VERY VERY difficult time. For the economy, obviously, but also for social reasons that would crumble this world.

We are in the fight of our lives, and even our history. I am FOR Obama…but even if you are not, you better hope he succeeds.

YMMV

22

Dow easily fell below the psychological ‘support’ of 8000 today - 6500 is still a likely target, which is well less than half what it was before the mess started. Quite the correction, when all is said and done. Glad I went to bonds with my largest chuck of what is left of my own accounts.

Interesting article out today:

U.S. consumers cut spending for a sixth straight month in December and their incomes shrank, according to a government report on Monday that underscored the rapid deterioration in the economy.

The Commerce Department said spending decreased by 1.0 percent after falling by a revised 0.8 percent in November. That figure was previously reported as a 0.6 percent drop. Incomes fell by 0.2 percent after November’s 0.4 percent decline, previously reported as a 0.2 percent decline.

Analysts polled by Reuters had forecast spending falling by 0.9 percent and incomes slipping 0.4 percent.

For the whole of 2008, spending rose 3.6 percent, the smallest increase since 1961. Incomes increased 3.7 percent, the smallest advance since 2003.

Data last week showed the economy shrank at its fastest pace in nearly 27 years in the fourth quarter, led down by steep contractions in consumer and business spending.

The economy’s collapse is keeping inflation pressures muted. The overall personal consumption expenditures price index rose 0.6 percent on a year-over-year basis in December from 1.4 percent in November.

Excluding food and energy, the index slowed to 1.7 percent after gaining 1.9 percent in November. On a monthly basis, core prices were flat for a third straight month in December.

The deepening housing-led recession has seen household saving more money. Personal savings surged in December to 3.6 percent of disposable income from 2.8 percent in November, the largest rate since May 2008.

(that last bit is really good news - that’s what needs to happen. It shows that fear is finally sinking in a bit)

23

http://news.yahoo.com/s/ap/20090204/ap_on_go_co/bailout_executive_pay_21" onclick="window.open(this.href);return false;

Obama caps executive pay limits on companies getting Federal aid.

How many CEO’s do you think will bail since they can’t POSSIBLY live on a mere $500k/year? Their stock options as additional compensation won’t be any incentive, as they are highly leveraged, and low grade (since they have to wait until the Fed is paid back to exercise the sale).

Watch for hundreds of big name execs hitting the streets looking for jobs at firms that do NOT have government bailouts!

24

In other breaking news, Obama has also slipped a provision into the bill to allow Timothy Geithner and his Amazing Turbo Tax to prepare the tax returns for all said executives, so the after tax cut in income is not very deep. [cheers.gif]

Moo

25

If they don’t want to play by the rules they can always just re-pay the TARP money and they can do whatever they want with their compensation structure…right?

The reality is that these guys have nowhere to go to get back to the stratospheric compensation levels they once enjoyed. And I don’t feel like that environment will change any time soon.

26

Per CNN, emphasis added by me:

The rules will apply foremost to companies that receive so-called exceptional aid from the government in the future.

Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), General Motors (GM, Fortune 500) and AIG (AIG, Fortune 500) are among the firms that have received exceptional aid in recent months, though the new rules won’t apply retroactively.

But the new rules will also cover the supposedly healthy firms that have received money under the Treasury’s Troubled Asset Relief Program capital purchase plan, unless the firms take action to be exempted.

Under Obama’s plan, some healthy firms that wish to receive TARP funds may still be able to pay executives more than the $500,000 cap. To do so, however, these companies must fully disclose their pay practices and, in some cases, submit to a shareholder “say on pay” vote, which would give investors a chance to vote for or against proposed executive pay levels.

Ah, the details. Moe details (so to speak) can be found at Obama talks tough on CEO pay - Feb. 4, 2009. A very poorly written article IMO, as are most newspaper articles. The devil is always in the details.

To drift a bit, it lists many bonuses paid during 2007, which was well before the mess became public. In addition, the article talks extensively about bonuses PAID during 2008. For bonuses paid in 2008, usually (though not always, especially in the case of fiscal year ends) bonuses are paid in 2008 based on results for 2007. That is a big difference compared to bonuses paid in 2008 or 2009 based on 2008 results, a distinction the article does not make and most people will miss.

Now, for those that received bonuses after the mess came to light, hang 'em.

Moo

27

So essentially, this is just a PR message, with no real meat, as there seems to be PLENTY of loopholes…

Lovely. Just as I was starting to be impressed with his actions…

28

Another perspective on the Pork Plan:

http://campaignspot.nationalreview.com/post/?q=ZjYzMzg0ZWI5YTA0MGVhYjhmNzc0NjQ1YmE5ZDI2OTg=

Moo

29

Look out below!