bipartisanship: the poor implementation of a good idea.

I spent last week vacationing in southwestern Michigan on the shores of the fabulous Indian Lake.  On Saturday I competed in a 5k run/walk called Steve's Race and placed first in my age group surprising and delighting everyone in the family.  It called for a celebration and we headed to the retail area in Dowagiac, Michigan where the race was being held.

On our trek through the downtown we found too many storefronts closed or deserted.  While there we inquired as to the hours of the Wounded Minnow Saloon and found that they opened at 7 am each morning.  “You must serve an excellent breakfast”, I said to the barkeep.  “No, we don't serve breakfast”, she replied.  “If you don't serve breakfast, why would a bar open that early”, we countered.  “To serve the third shift or what's left of it.  They come in and drink a beer or 20”, was the reply.  She continued, “But that was before three of the four local factories closed.  Now the fourth is scheduled for closing.”

Things are tough in the heartland.  We hear from Pop Pop and Toots that huge factory operations in Kokomo, Indiana, had no cars in the parking lot, lots that were measured in acres.  They said it was spooky.  Here in Northern Virginia and the DC metropolitan area we are somewhat insulated from the massive layoffs that are occurring in other areas of the country.

What will happen when unemployment benefits that started nearly two years ago start running out in September?  We're not sure but it can't be good.

Vacation had preempted any thought of such nonsense until we reached Frederick, Maryland, on our return.  We started reception of a local radio station that was discussing the health care reform activities in congress.  That is where the definition for partisanship came to mind.

By the time everyone gets their two cents thrown in and accounted for the legislation will be weak and loopholed beyond recognition.  No wonder the Congressional Budget Office (CBO) has said that it will cost more than originally desired.  All the lobbyists are filling out their wish lists.  Guess who pays for their party?  Yes, that's right.  You and me.

It was the same for the TARP fund money.  Goldman Sachs aka Government Sachs just announced that they were setting aside more than $11 billion so far this year in compensation for its executives while shareholders get barely a third as much.

This was the same firm that suffered a near death experience along with all the other firms and banks on Wall St.  As the Daily Reckoning pointed out “the capitalists didn't have any capital”.  Until they got TARPed.

Unfortunately, the core business of the banks is getting worse.  They are making money trading using TARP funds as their ante but lending to people who can pay back their loans is getting them nothing but losses.

Of course, bankers complain of being loathed and despised now but that is typical of this part of the credit cycle.  They lend too much at precisely the wrong time – just as the boom of the credit cycle is coming to an end – the bust.  Give them boom times and they believe it will last forever.

These busts are like intelligence tests for bankers.  The dumb and greedy bankers are eliminated.  Unless the government steps in to save them.  Unfortunately, it did.

But as we have all learned the government will not step in to save us taxpayers.  So, we will have to do it together.  We will have to have our own personal bailout plan in place.

Not sure I would know what to do as a consumer without the experience I have as finance professional.  The market is just confusing!

The last real crash in America occurred 80 years ago. We never thought we have the privilege of seeing another one. Especially since nearly three generations of economists and financial authorities have been working to prevent them. They set up their safety nets and perfected their formulae... Fed monetary policy was thought to be such a finely tooled instrument that it was widely believed that the feds had mastered the business cycle - thereby eliminating the need for crashes or recessions.
                           The Daily Reckoning

If Goldman Sachs warns that their computer code could "manipulate the market in unfair ways," what does that imply about Goldman's usage of the code in the first place?

We're not bad mouthing the United States of America.  We are exercising our duty to question the establishment besides it being our right.

Bond yields broke massively lower following the 10 year bond auction on Wednesday.  We think they may go lower...

For those of you with first trusts that exceed the value of your property, hope is on the way.  No, not the Hope for Homeowners.  That's so last quarter.  No, this quarter it's the new Home Affordable & Stability Plan with the loan-to-value limit being raised from 105% to 125%.  There is still a major flaw as the program makes no accommodation for existing 2^nd trusts.  We will have more as the program becomes available.

Realtors here in Northern Virginia are complaining about the quantity and quality of the existing listing base.  Apparently, now there's not enough.  This is causing multiple purchase offers on well-priced properties.  Buyers need to be available to see new listings and have their financing in place prior to making an offer.

Inflation in the things we need and deflation in the things we want.

And many parents are letting us know about the "tuition squeeze" as many schools announce tuition increases to keep up with current needs.

California has decided to issue IOUs. Isn't that interesting? I thought we were moving away from debt.

I wonder how the Beach Boys might capture it...

(to the tune of Barbara Ann)

I, I, I, I, I O U
Went to Sacramento, looking for revenue
Got an IOU, that just won't do

or how about this?

(to the tune of California Girls)

Well, east coast debt is dropping
The unemployment rate is Lower
But the California budget crisis
Is the worse state's economy that we've heard of

Amused they aren't all Schwarzenegger's
Amused they aren't all Schwarzenegger's
Amused they aren't all Schwarzenegger's IOUs.

enough...