JC09058

Obama's Job Plan Picks Up Steam

In a historical look back to the 1930's, FDR had started a number of programs up with the idea of creating jobs during a period of 25% unemployment. It failed to produce the expected results because the other half of the equation was ignored which was the banking crisis.

Spending was the key to turning the US economy around during that period and it wasn't until we started preparing for WWII, that economy started moving. The Lend Lease program and being the arms supplier to England coupled with rebuilding our military is what made our economic rebound.

This time around, we actually took care of the banking crisis first and then started looking at jobs programs during an unemployment period of 10.6%. Basically, people are thinking about limited spending now which helps the economy come out of the doldrums. Our mindset has gone from save and don't spend at all cost to there is less likelihood that I'm going to lose my job and I can afford to think about the future again.

The is a good chance that a jobs program will work this time around as long as it doesn't get out of control and Congress knows when to end the program to reduce deficit spending. The key here is Congress and sadly history has shown that Congress doesn't have the foresight to stop or reduce programs.

While I fear we are robbing Peter to pay Paul for jobs today and run away inflation tomorrow, I hope that We the People have the desire to remind the folks in Congress, that work for Us, that there is a time to end programs as well as beginning them.

Having said that, what is being done now, with the jobs program, is important and necessary but only for the short-term. Banks out of crisis mode, save the "bank's money" at all costs, coupled with improved individual and corporate spending will have a desire effect in making this job program work better than FDR's attempt back in the 1930's.

"The only thing we have to fear, is fear itself." - FDR

Berkshire Schedules Special Meeting for January 20

Thank you for the clarification on something I should have remembered myself. Obviously, I still have a way to go in perfecting my memory, LOL.

Although, I am still curious about what the ratios will be for price and voting rights. I'm sure that will be disclosed in time. I will be curious on how the BNI shareholders will react to the information as well. Exciting times ahead, I think.


On Dec 06 07:26 PM Ravi Nagarajan wrote:

> On Dec 06 05:45 PM JC09058 wrote:

Berkshire Schedules Special Meeting for January 20

Mr. Buffett has stated that he would never split the Class A stock but why is he splitting the Class B? Is it related to the tax gifting provision issue that plagued the Class A back when the Class B was created?

I would be curious to find out whether the price restriction ceiling will be adjusted accordingly or will we have a completely different pricing control in place in relation to the Class A shares? Plus, the voting right restrictions on the Class B as well?

I was thinking about buying some more of the Class B shares but now, I think it may be time to hold off until more information is available. If anyone know anything about this, I would love to hear about it.

Credit Card Legislation: An Exchange

Having been an insider myself, it's nice to know that my information matches the information that was used by reader under the UPDATE is still valid.

As a transactor (aka "freeloader" and that term was used by at least one unreputable issuer), I found that to be the only good way to use Credit Cards. Granted twice a year I would purposely leave a very small balance to roll over to the next month and pay the interest payment to keep the issuer happy. But, want was not realized by the issuer that I owned their stock and the quarterly dividend payment more than made up for any interest I paid to them by many multiples.

Of course, those issuers have cut their dividends, as of late, but no matter because the quarterly dividend still covers the interest payment I let them have. In addition, I bought into Visa, when it was down, to cover the possibility the all of the issuer's dividends stop.

So, I end up laughing all the way FROM the bank by making them pay me back for using their card in the first place and that is the answer to the moral dilemma of using credit cards in the first place.

10 Highest Paid CEOs for 2008: Unbelievable

Goodness and here I thought pirates only operated in the eastern hemisphere. Out of all of the people listed above, the only one that is truly living in a fantasy world righteously is Robert Iger of Disney. Come on guys, no one is worth that kind of money, no one.

And please don't blame the housing bubble for your mistakes, after so many bubbles in the past, this one was really no surprise in coming. It seems to be human nature, when gambling and that was what it was, to ignore risk after so many wins. So, if you gentlemen are paid so handsomely for your intelligence, why didn't you see this one coming, hummm?

Or, is it a case of the Peter Principle, where you have risen to your level of incompetence, or are you really not smart enough? Either way, you are over-paid for your skill set. Please leave so someone more capable and smarter can fix your mess.

BYD: Positioning Berkshire for the 'Chinese Century'

It is true that Warren Buffett passed on Tech companies because of his lack of understanding their potential. Granted, he is correct on the their 'moats' and easy of entry as well.

However, that oversight seems to have been corrected by who he has sitting on his board now. It seems that he applied some of his same principles on choosing a company to invest in for this board member. That is the uber-geek Bill Gates. Now, there is a person that can see and understand Tech companies and the potential they have for the future.

So, I'm not surprised the he has entered into business with BYD Company Limited because he has a techie on the board to help him understand. Plus, his and Charlie Munger 's overall ability to understand Personal Dynamics of individuals allows him to know that Wang Chuan-Fu is the right kind of individual to lead that company into a future leadership position.

Personally, I am strongly considering a position in that company as well. But, it is not because Warren Buffet is there but because the company looks to be very strongly positioned for the future worldwide dominance as a Green Industry. Further research is required on my part before entry but it's looking pretty good so far.

What Would a More Stressful Test Tell Us?

Having read the outline from the stress test and understanding the basic statistical methods being employed, I have a concern about the data collection date that was employed.

Credit utilization was one of the require items used in evaluating Credit Cards. While some institutions decreased credit lines prior to the February 2009 Data acquisition point, a larger number of credit line reductions have occurred afterward. This difference will skew the credit card data in a false positive effect than what currently exists today. In truth, credit card utilization currently has a more negative impact now.

How much more of an impact I can not say because I don't have the actual numbers. But this must be taken into consideration for it's impact on the whole.

Secondly, FICO made a major change, in 2008, in its scoring engine that is used by banks today. Knowing how the Scoring engine works at the detail level and knowing that many banks have not switch to the new scoring engine as this time, my concern here is that they are mixing apples and oranges if they do not correct for the differences between the engine types.

The key factor that I do not know is what scorecards are used by what banks and there in lies the problem. How an individual is score depends on the quality of the cardholders at each institution. So, each scorecard a bank uses is different than any other scorecard at all the rest of the institutions. Plus there are four different types of scorecards used within the scoring engine based on whether a cardholder is an excellent one ranging to the bottom of the poorest scoring cardholder.

So, FICO either had to supply the Fed another engine to create a correction factor for all of the credit card score information or apples are being compared to oranges and tangerines and pomegranates and etc.

Plus, FICO Loan scoring engine is different from the Credit card scoring engine as well because of the type of loan notes and how each individual pays those loans. It is a know fact the people in delinquent condition will favor certain credit instruments over other when paying loans or credit cards. Basically, loans will receive a more favorable payoff and reduced delinquency rate because people like sleeping in house over cars.

Lastly, no mention was made in the document stating whether FICO provided any kind of score adjustment engine or not to bring all of the scores into a baseline common alignment.

Those are my thoughts and concerns.

The Three Kings of Wall Street: Gifts of the Magi Lifted Last Week's Market

First, conspiracy theories aside, each of the three major banking CEO need any good news that they can find to buoy their share prices. They need to because their bosses, the share holders, are not pleased. Each of the CEOs will be looking for new jobs at some point because of what happened. To have any hope at all of saving their jobs, they have to recover profitability and share price as quickly as possible and be in better position than before this mess started. Unlikely.

More than likely, Citigroup actual statement was a prayerful hope to keep from ever dipping to the zero mark on its share price and to spark any kind of turnaround possible. While the Citigroup’s news is good, I don’t think it is quite as rosy and the cleanup will still be expensive to deal with. Plus, the Government is involved and anytime that happens, times get ‘interesting’.

BofA and JPMorgan are in the same boat as Citigroup and any good news is needed as well for the same reasons. Plus, seeing the reaction to Citigroup’s share price after their news release drove BofA and JPMorgan CEOs to do the same thing. Basically, Citi dipped its toe into the water and found it good, and the others were quick to follow suit for want of being left behind.

A conspiracy of bankers? Maybe but highly unlikely.

Secondly, I see the tail is trying to wag the dog again. The Premier of China, Wen Jiabao, is trying to stir things up and the timing is right on the mark too. About three months into a new sitting president, China always tests that new president to see what he will do. Usually, this is through use of their military centered around the South China Sea as is the case right now. To China, our system of government is corrupt and evil, and using our current market troubles, as a tool to stir the pot, is exactly what the Central Committee wants to use to test our president.

These are rhetoric statements and nothing more. The Central Committee, though the Premier, knows as well as we do, that the US Treasury securities will be back to the fullest. We have to. Otherwise, the dollar will have no more the value than the Peso at any period of time and you pick the country.

Any time China can use our troubles, as a propaganda tool, they will do so. They have their own troubles internally and need to show their system is better than ours, internally and externally. Yet, without us, their economy would be no better than it was in the 50’s through the early 70’s. This country drives their economy, and they know this and hate it. Plus, our troubles become their troubles and they hate that as well. They have nowhere else to go to for business because the rest of the world is in the same position economically.

So, I say to China, stop being the tail that wags to dog. Economically, the tail is too small and the dog is too big. Oh yes, to Mr. Wen and the Central Committee of China, welcome to the wonderful world of capitalism and free market societies. From the racing world, sit down, buckle up, shut up and hang on because it’s going to a wild and fun ride.

Exhaustion from the Economic Data

Economic data is important and a necessary indicator (historically speaking) for gauging future economic activity. During normal times, it is worth paying attention to. These are not normal times and I really consider the validity of the news that is presented each and every day about how bad things are. Look at the view point of seven months ago when a lot of the current situation started breaking. At the tail end of July, after reading a number of historical documents about the state of the economy in 1928 through 1933, I had realized that the current situation was going to follow a similar path and that what was to come had to be endured. Mostly, when all I started seeing, for current news, were the same stories being rewritten day in and day out.

So, I started thinking about things my father had talked about living through the Great Depression. Along with that I also tried to remember what my grandparents had to say about that period in time as well. While in this case, I am not saying we are headed into a depression, I think their words about what they did carry great weight for today situation as well.

One thing that they always said is that the news will be always bad now and for a long time to come. Therefore, do NOT worry about the panic written into the article but look for the little things that are showing improvement. During the downward period, every little ray of sunshine in the news will be horribly crushed, by the writers of the news (Doom and Gloom), as aberrations and should be ignored. Sadly, papers sell on Doom and Gloom, and telling you how unhappy you are supposed to be because they say it is so. If you give into them, you personally will be needlessly be depressed and therefore miss opportunities out in the market.

Second, no matter how bad things are and how everyone is affected by this, there are good companies out there and it is those companies that WILL recover first before all others. Stock prices are depressed right now and that should be making you VERY happy. Now, while the market is going down, you need to look for the good companies. Find them now because when they start recovering, their share price will climb through the roof and will do so quickly.

Third, cut back on personal spending. I said cut back and not stop!! Don’t buy because you are depressed but start saving that money, NOW. You may not be able to save a lot but those share prices are cheap! Save that money while the market is going down but spend a little on yourself to feel a little better. Otherwise, no SUVs or third homes please. My grandfather stated that he made his best money ever by buying good companies when they got cheap for him and kept buying as long as they stayed cheap. I guess he should know because he retired very comfortably.

But, then my father listened to him as well because he did the same thing during various recessions and burst bubbles with the same results. Hummm, maybe, I should listen to this advice as well because being poor sucks. Tried it, didn’t like it. Seriously, no handouts from my folks. If I want it, I have to earn it and the only way was to make it myself. Then, if I do well enough, they will pass some on because I really did learn the value of a dollar. You may think that it is bad of them but then these are depression era folks and I think they are right on this.

My Grandfather and father both had the same viewpoint concerning people who wrote the financial news. When all you read is bad news, it is a wonderful thing. So, in more modern terms, if some bad news is good, more is better, then too much is just right. So, bring it on. Please continue to depress the market even more because you are helping my family to be a little bit richer. Am I being greedy by saying this? Maybe. But, market news has been and will be a great driver of share price and nothing has a greater impact good or bad other than earnings and debt load. Therefore, financial news is one of the tools I use to make money for my family.

So, in this topsy-turvy financial market, bad does equal good and a little does equal a lot. Please, I do care about my fellow man for those of you that think otherwise but opportunity does knock, I’m opening that door and making my best of a bad situation. I hope others will stop and think about this, and the words of my grandfather and father. They proved themselves right and I listened.

Four Key Points from Visa's FQ109 Conference Call

I love this company and I think Debit/Gift cards are a great idea. Back in the 90's Visa and Mastercard came to the conclusion that removing cash from customers wallets was the was to build their business. It was advertised as convenience and it is all about convenience too.

Merchants bought into this for the same reason because it meant less actual cash in the till in case of theft and yet greater cash flow because of convenience. This is true for the customer as well. Consider the 'bad old days' when you HAD to carry around very large amounts of cash when you go shopping. Or worse, when you ran out of cash and the banks were closed.

Visa and Mastercard business is about those transaction fees they get every time a credit/debit/gift card is swiped. From 1/2% to 1 1/2% each and every time. The lets not forget the amount of the purchase as well. Visa and Mastercard get a little bit more when the transaction is above a set value as well.

Plus there is the fees they get for the Point-of-Sales machines you must have as a merchant. As well as yearly fees to maintenance those machines and the connection too. Lastly, They don't loan money out. None at all.

As long as plastic in the new money then these companies will make money, even during a recession or depression. Remember this every time you use that small bit of plastic to buy a candy bar, coffee or a meal. That's more money to them and money to me as well.

Why? Because, I own their stock, the share price reflects it's continuing growth and I like getting paid to own their stock through a dividend. So, my personal thanks to everyone that uses plastic money. Thank you!