a fat panda

Just three months after taking the job, AIG (AIG) CEO Robert Benmosche has told the board he's ready to quit. Insiders say Benmosche feels compensation restrictions imposed by pay czar Kenneth Feinberg have left him in an impossible situation, without the ability to retain talent.

It has been 2 years of economic ruin, and the only thing that these guys know is that they are underpaid. If it weren't for the pay restrictions they would think it was 2006.

My Visit to the U.S. Treasury

"Let me try this — as the world has gone capitalist, the edge of the US has been eroded. Now we face a world where doing certain jobe should pay the same, regardless of where they are located. Wages in the US will converge with those from the rest of the world, adjusted for capital investments."

There is a component of what you say, but you are not looking at productivity.

Work isn't a commodity. I did a lot of work in IT during the boom, and we offshored a lot of work thinking that a programmer is a programmer, and wow look at the savings. The problem is that programmers (in this case) aren't commodities. We offshored work to someone who was 12 hours out of sync, forced to work US hours, changed jobs on average every 6 months, and communicated primarily via email, and expected them to complete the same amount of work. We replaced a short walk down the hall with massive change control processes in the development cycle because communication problems were causing delays.

The one thing that management(s) never could understand. The most expensive component of software is not using it. We spent quarters to save nickles. Genius.

All Bubbles Are Equal, But Some Are More Equal than Others

It is virtually impossible for a bubble to form without credit right down to the bubble in baseball cards. The bubble forms because rising prices creates rising demand. That demand has to be fueled by something,and there will always be players on the margin willing to put debt on the table to play. That debt fuels higher prices which creates more demand.

It may not be the largest bubble ever, but debt played a nice role in the baseball card bubble. Debt opened stores,and helped buy inventory. Chances are that purchases were made on credit cards. If it doesn't seem like a bubble to you, it may be because you weren't close enough to see it played. I saw a friend of mine buy his kid a Mark McGuire rookie card for his college education fund. That is a irony-bubble if I ever saw one.

All Bubbles Are Equal, But Some Are More Equal than Others

"I am ashamed that he is a professor at the business school I attended."

That is one way to cut down on those pesky calls from the alumni office for contributions.

Iceland is a classic story. You are going to hear Mr. Mishkin say that comparing Iceland and America is irrelevant because the US is more dynamic, world-power, blah, blah, blah.... He is going to say that the US is just too big to feel the effects of economic gravity.

Inflation Expectations: Exaggerated or On Track?

Inflation is not an either or discussion. You will have inflation winning in certain sectors, and deflation winning in others. Where there is pricing power there is inflation. Where there isn't there is deflation generally caused by excess capacity. As you lose excess capacity, you will see inflation bleed into the rest of the economy.

If you think you have inflation, you haven't been to the grocery store, where prices after discounts have gotten slaughtered.

Corporations Win Again - This Time It's Healthcare

Guys - when Congress solves just about anything there are no winners. There are just people who lose more than others. It ought to tell you something that the supporters are calling this historic and comparing it to Social Security and Medicare as if those programs were successes.

While Goldman CEO Lloyd Blankfein understands that "people are pissed off" with bankers, he says everybody should be happy: "Companies are looking to grow again and raise money. That's where we come in. The financial system may have led us into the crisis but it will lead us out."

" What is telling? Not a single negative thumbs down."

Archer - Excellent observation. I was seeing the same thing when I read your comment. Hours later, there are a few thumbs down, but you will note that the down-raters haven't had the courage to put up a full comment defending the absurdity of Lloyd's statement.


On Nov 08 10:42 AM Archman Investor wrote:

> I just read all the comments.
> What is telling? Not a single negative thumbs down.
> The commentators all know, unlike average Americans the real truth
> of what went on during the past 18 months.
> Which is:
> The largest tax payer heist in history was successfully accomplished
> with the help of the FED, Treasury, Congress, all to enrich a select
> few at the expense of the many.
>
> For instance here is what really happened with Goldman Sachs:
>
> They knew like many others they were in deep trouble. Paulson knew
> it, so did the Treasury. But GS wanted more. They knew that if they
> converted to a "bank" they could be saved, but they also knew that
> because of their HFT abilities, connections to Washington, etc, they
> could in essence use tax payer money, to become "to big to fail".
> Also and more importantly, make hundreds of billions of dollars using
> taxpayer money (as play money) to trade day and night and enrich
> themselves. This is exactly what happened. They were so successful
> at it (like many other firms who could suddenly, in a matter of months,
> pay back the gov't) they not only paid the gov't back but also made
> incredible amounts of money for themselves which will get paid back
> as bonuses. That and being able to "buy" H1N1 vaccines for all their
> employees.
>
> What should have happened was: GS pays back all the taxpayer money
> they were lent, and as a taxpayer thank you for just allowing them
> to survive, any monies made beyond base salaries for the employees
> of these companies who created this entire mess, should have been
> given back to the general population.
> Period.
> Instead we now have almost 20% real unemployment in this country.
>
> Another 20% already on welfare in this country.
> A country where about 15% of our children go to bed hungry each night.
>
> And we have the likes of GS, BAC, C, AIG, et al, receiving hundreds
> of billions and their executives and employees enjoying a life fewer
> than 10% of all Americans will ever enjoy.
> Not to mention of course our incredibly corrupt government who is
> in the process of mortgaging the next 3 generations wealth away all
> for their own personal gain.
>
> We are now living in what I consider to be one of the lowest points
> in American history. Where corruption even at the highest levels
> of government is accepted and welcomed, and where those people in
> government are willing to do anything of the price is right regardless
> of the consequences. You couple that with a complacent population
> who are dumbed down to levels i personally thought could never be
> achieved and you truly have the seeds planted for the slow decay
> of our nation, just like the Roman empire 2000 years ago.
>
> History does repeat itself, though most would disagree. Why agree
> when you can have more fun with your I-phones and watch American
> Idol?

Are We Becoming a Nation of Renters? Investing for the New Housing Dynamic

"I agree. However it seems to me that it will take around 20 years for this to kick in powerfully enough to get any real growth.... a haitus of 20 years in the West before growth can resume seems to me to be optimistic"

With the way we allocate capital it may take forever. I don't know what it is like where you live, but where I live TARP-funded banks are only too willing to sit on depreciating assets. So capital just sits idle while business can't get a loan.

We are talking about two different levels of innovation. I am looking at it from the entire platform. Everyone needs to do a better and faster job. Here is an example of innovation at work. Every year my car battery dies, and each time AAA sent a tank sized tow-truck to my house. Someone realized that was a waste of a tow-truck. They repriced the service, and sent a guy over in a 15 year-old Honda. The service arrived hours faster, and I was back on the road. Thank you innovation.

I don't disagree with you. I do suspect that my children will have children before the S&P is at its inflation adjusted peaks. Basically it will be a long time before we are as rich as we thought we were.


On Nov 07 01:05 PM Davewmart wrote:

> In reply to my question:
> "Just one question:
> What makes you think the economy will in fact recover within the
> next 20 years or so, and what will cause this recovery?"
>
> A fat panda replied:
>
> 'Innovation. Innovation. Innovation.
>
> Once we get leaders looking inward to produce better products for
> wider markets instead of looking outward to the hand of the government,
> our economy will recover. Our markets will reflect the improvement.
> And we will look back and say, I will never get into debt again -
> just like they did in the 30s.'
>
> I agree. However it seems to me that it will take around 20 years
> for this to kick in powerfully enough to get any real growth.
>
> Not only do debts need to be paid down, which on the personal level
> takes time, but the completely unsustainable liabilities governments
> have taken on need to be resolved somehow.
>
> To use figures which I am more familiar with, those of the UK, the
> present national debt is likely to be increased by around £1.5 trillion
> to pay for the banks cock-ups:
> www.telegraph.co.uk/fi...
>
> (Note also in this informative article that the Bank of England sees
> the banking crisis recurring if real reform is not carried out -
> a notable divergence from the Fed's stance)
>
> To this must be added around £1 trillion of unfunded public pension
> liabilities.
> The GDP of the UK is around £1.5 trillion, with a lot of that provided
> by financial services.
>
> This mess will not be sorted in less than 20 years.
>
> Although perhaps not quite as dire as the UK's position, the US is
> not far enough behind to see any easy way out.
>
> To these considerations must be added the fact that the era of cheap
> oil is over.
> We aren't suddenly going to be totally without oil, but what we get
> will be both expensive and scarce, at least if the world as a whole
> climbs out of recession at all.
> Oil prices will rocket and knock any recovery on the head.
>
> The green lobby are being entirely unrealistic in expecting renewables
> to contribute in a decisive way at any affordable cost.
>
> The desertec proposal, for instance, to get solar energy from the
> Sahara for Europe, may, it's proponents argue, be able to contribute
> maybe 15% of Europe's energy needs, for perhaps $500 billion - and
> not until around 2050.
>
> The only ways of providing the energy we need are to either continue
> to burn coal, with some contribution from on-shore wind, or to have
> a massive nuclear build.
> Since the nuclear industry has been so thoroughly disembowelled in
> the West, ramping up wil take time.
> It should be noted that China is already massively increasing it's
> nuclear build, as well as wind turbine build.
> Shifting the car fleet to use electricity rather than oil will also
> take time.
>
> We haven't even started on most of the measures needed, and unrealistic
> prospectus's abound, from renewables to lack of reform of the banking
> and health care sectors.
>
> A haitus of 20 years in the West before growth can resume seems to
> me to be optimistic.

Bailed-out banksters complain (vaguely) that restricting bonuses causes their talent to flee, but Bloomberg nails down where they're going: Nomura and Barclays. Derek Thompson feels some sympathy for the poor devils - after all, a talent exodus will hurt taxpayer-owned institutions - but figures a solution may be to make the bailed-out firms back into retail banks where the brain drain is less likely.

Bankers want protection from the market except when it comes to salary and bonuses. To show you how overpaid they are, they don't see the conflict here.

TIPS Are No Longer a Steal

"cant have inflation with so many unemployed."

Look at Zimbabwe. You can.

Inflation is a very destructive force because it embeds risk in every transaction in the system. Look at auto insurance for example, when the insurer prices his product. First it factors in the likelihood and costs of the auto wreck. Then it factors in the likelihood of the currency wreck. Inflation makes any future transaction more difficult to price.

In periods of high inflation, future pricing is almost like trading in a foreign currency. The further out you go the more hedge you have to embed in your price. If that doesn't sound like something that would create unemployment I don't know what does.


On Oct 07 05:12 PM notsosmart wrote:

> cant have inflation with so many unemployed. some will never work
> again.lets see how many retailers will close after this holiday season.most
> consumers have more than enough chinese junk.in cold climate states
> the budget will be strained by heat energy costs.if you dont go to
> work you need a lot less of clothing,gasoline & auto service,food
> costs,dry cleaning etc.the spiral is going the wrong way.

Jobs Still Disappearing, But Confidence Is Returning

First, the 1990s pretty much disprove your statement that rising productivity leads to unemployment. If the world were stagnant, higher productivity would lead to unemployment. It isn't.

Second I would question the productivity numbers he references. It is virtually impossible to have rising productivity and rising unemployment. (unless of course you exclude the unemployed) 8.1% is a government statistic that probably bears no more significance on actual productivity than the number of touchdowns LSU scores tonight.

Ask yourself : A government statistic may rise but what does the 8.1% measure. In the 90s, a time when PCs became standard in the workplace, productivity, as measured by the government, was rising 1%.

Here is an example of how much productivity rose. When I entered banking, we had a group of 30 people which supported 17,000. When I left 5 years later, the same group was processing 168,000 accounts with only 5 people. Is that really 1%. It wasn't even a stand alone group anymore.

Note : there was no unemployment in this group. People got computer skills and left to get better wages, even though the bank doubled the wages of the workers. Higher productivity leads to less unemployment.


On Nov 06 09:24 PM fwi wrote:

> I could not disagree with the author's very optimistic assessment
> more.
>
> Increased productivity? Means more unemployment.
>
> China is buying commodities hand over fist? They don't want dollars
> so they are simply warehousing the stuff.
>
> Velocity is improving? False govt stimulus programs infect the numbers
> and shift the growth from one quarter to the next.Money goes from
> the taxpayer to the government which goes to the taxpayer which then
> goes to the government.
>
> Confidence is improving? Stock market is manhandled by Goldman and
> the press swoons with excitement
>
> Inflation is low? Companies don't have pricing power and workers
> can't get a raise.
>
> Banks are profitable again? They are now simply hedge funds with
> special bank privileges
>
> Real estate prices going up? Govt stimulus is making housing more
> expensive for the buyer, which crowds out other purchasing
>
> Auto sales up? Do I even need to say?

FDIC, FHA, Fannie and Freddie Real Estate Exposure Killing Home Values in Georgia

">I for one am glad you are here and can not wait to hear what you would do and
> please" & "You are searching for a solution that will never be found.", & all of the
> others...."

Here is the answer : Innovate. I have been on this all day because of the constant drone of : "Oh help us the woe of the world is too much" . I don't know whether it is something in the water, but we are starting to sound too much like Scarlet O'hara.

The biggest problem that we face today is that we are locking up capital in the hands of people who don't innovate. They have a REO, which they are more than willing to hold because the taxpayer is footing the float. We are literally paying them to preserve the mistakes of the past. To these people, the only way to sell real estate is lower the price.

You asked for an example : Here is an example of changing the approach. It isn't going to fix the whole problem, but it is an example of innovation which will cause resources to be better spent.

seekingalpha.com/insta...


On Nov 01 08:34 AM User 432509 wrote:

> The answer would then be??? Captain obvious, what would you do to
> make things better and why have you been keeping it a secret.. Don't
> you know we all have been waiting for you "The Shell Answer Man"
> to show up and lead us out of the darkness and into the light.<br/>
>
> I for one am glad you are here and can not wait to hear what you
> would do.. and please.. Don't bore me with "Nothing the markets would
> have worked themselves out..." and where were you when Bush was shipping
> $12,000,000,000,000 a month of newly printed monies to a Country
> with 100 years in Oil reserves? Let me guess.. Bush was mis-understood
> for what he has truly achieved, history will in deed vindicate his
> genius? I guess what I am really saying is.. dont you have a church
> group to go pray for the end of America (and the world of course)
> with.. or a Palin 2012 bumper sticker to put on your car?
>
> I would explain the lobby to you but I think you are much happier
> the way you are.

Are We Becoming a Nation of Renters? Investing for the New Housing Dynamic

Box,

AHHHHHHHHH! Listen to yourself. It is a 65' GTO now. INNOVATE! INNOVATE! INNOVATE!

We are trying to sell our current house. It is configured for a family with 1 kid max. We recogfigured the office, and designed it for a 4-6 year old boy. For $2,000, we now opened an entirely new market for the same house.It now will appeal to people with 2 kids provided that one of them is under 7. Innovation isn't just Silicon Valley. It is making your products better and opening new markets.

Our country is led by people who look at the house as what it is instead of what it could be. They look at a house and see a "1965 GTO with 3 deuces.". They are willing to compete solely on price because they lack the imagination to do more.

On Nov 06 06:41 PM Boxed Merlot wrote:

> On Nov 06 07:32 AM LilBob wrote:

Jobs Still Disappearing, But Confidence Is Returning

"It's painful, and it's miserable. It's terribly unfortunate that the Obama administration dumped so much "stimulus" money down a black hole earlier this year, when cuts in marginal tax rates could have unleashed the power of the private sector instead of redistributing a trillion dollars from the haves to the have-nots."

Not to disagree, but I would like clarity. So we cut tax rates, giving Americans more money in their pocket. And hypothetically, let's also say that America is going through a deleveraging process, ie we are paying down debt. The consequence of the tax cut is this : the US Government debt goes up and private debt goes down. In this scenario, what was unleashed? All you have done is redistribute billions of dollars from grandchildren to grandparents.

What I don't understand is this. What is the difference between redistributing dollars from the haves to the have-nots and redistributing dollars from children to parents. In either case, it is just the government stealing from one group in order to bribe the voters who are silly enough to believe that we can "unleash" 500 billion dollars by cutting taxes.

Here is the problem. The government spends too damn much money. At this level of spending, cutting taxes will unleash debt. Public or private it is going to have to be paid back by someone.

The Homebuyer Credit as Economic Success Story

"As a result of their purchase the seller now makes a move up purchase of a new home helping to reduce the excess inventory and opening up the next pricing level of the market which has suffered most severely. "

If the mortgage on the sold home is in foreclosure. It opens nothing. If the house is at or near the mortgage, you open nothing as people move down market not up.

It doesn't reduce inventory. Actually you push demand forward getting people to buy houses in 2009 that they would have bought in 2010. So wait til you get to 2010 and you find that housing demand has fallen. Please don't be surprised. And don't be surprised if builders misread the suppressed inventory and start to build more homes. Then you are in a fix.

This tax credit business is exactly why few people count on the government to do anything right.


On Nov 06 11:45 AM Smalltownbanker wrote:

> One other scenario based on actual observation of what is happening
> instead of pure speculation is that the credit encourages those who
> were thinking of buying to go ahead and make a purchase despite the
> current employment situation. That buyer purchases their first home.
> They file an amended return, receive their $8,000 then go shopping
> to furnish the new home spending that stimulus money on furnishings,
> landscaping and improvements.
>
> As a result of their purchase the seller now makes a move up purchase
> of a new home helping to reduce the excess inventory and opening
> up the next pricing level of the market which has suffered most severely.
> This cycle continues until the market actually begins to improve
> accross the board. Some of the sellers will move down in housing
> but this does not hinder the equation because activity still exists
> and as long as it keeps going we have momentum.
>
> This is why I consider the FTHB tax credit to be the best use of
> stimulus funds I have seen to date. It not only provides direct stimulus
> to sales, it doesn't artifically inflate pricing because it is a
> rebate and is not received up front. It has a low administration
> cost and with proper administration fraud can easily be kept to a
> minimum. Before granting the credit you simply review the last 3
> years of tax returns, a settelment statement on the home purchased
> and process the credit on that basis.